It’s been a difficult quarter for the biotech sector, with economies struggling to recover from high inflation making for a small appetite for risk.
The ASX 300 Pharmaceuticals & Biotechnology took a pounding this quarter, falling from 70,077 points at the end of July (having already fallen from February highs of 86,157) to 69,974 points in late October.
The sharp retreat can mostly be attributed to the current state of markets – biotech stocks are considered one of the riskier sectors after all.
The CEO of the ASX and Nasdaq-listed immune-oncology house Immutep, Dr Marc Voigt, says the valuation decline of both the tech and biotech sectors looks like a “typical reaction” to increasing inflation, uncertainties and the geopolitical situation.
“However, in some cases, the valuation of some biotechs might have been (significantly) too high and were more financially driven than fundamentally driven,” he says.
“So overall it is a mix of different reasons.”
Some investors are seeing opportunity, however, amongst the bloodletting.
"I think it's time to start entertaining the idea that small and mid-cap stocks may be leaders in the next cycle,” Veteran US stock trader Mark Minervini said.
“The mega cap past leaders will bounce from beaten-down levels, but for the most part, they are morphing into stalwarts.
"If you wait until the popular indexes bottom you could be missing key leaders at proper buy points.”
According to Grand View Research, the global biotechnology market size was valued at US$1.37 trillion in 2022, set to grow at a compounding annual growth rate (CAGR) of 13.96% from 2023 to 2030.
Small caps making moves in Q3
AdAlta
AdAlta Ltd (ASX:1AD) reported promising efficacy data for its intravenous (IV) AD-214 therapy in treating fibrotic diseases, such as Idiopathic Pulmonary Fibrosis (IPF), part of its proprietary i-body® platform.
The company also initiated a Phase I extension study, with AD-214 exhibiting a favourable safety profile at doses anticipated for Phase II trials.
Additionally, AdAlta unveiled potential pathways for a next-generation subcutaneous (SC) product and achieved substantial progress in partnership endeavours with the potential to make a high impact in the near term.
AdAlta is now working on three targets under its i-CAR-T collaboration with Carina Biotech and continues to collaborate with GE Healthcare to develop i-body enabled granzyme B PET imaging agents for use in immuno-oncology.
CEO and managing director Tim Oldham emphasised the new AD-214 data as a significant milestone that substantially lowers investment risk and strengthens the company's position for partnering discussions.
Oldham said AdAlta would pursue out-licensing and co-development collaborations aimed at advancing AD-214 into Phase II clinical trials, with potential high-impact financial returns for the company in the foreseeable future.
The company's cash position stood at A$3.57 million at the quarter's end, reflecting a decrease from A$4.79 million reported on June 30, 2023, with the Victorian Government extending the terms of the R&D Cash Flow Loan Facility.
Anteris Technologies
Anteris Technologies Ltd (ASX:AVR, OTC:AMEUF) achieved multiple clinical advancements in the quarter, including the completion of enrolment for the US Food and Drug Administration (FDA) approved Early Feasibility Study (EFS) of its DurAVR™ Transcatheter Heart Valve (THV) system.
Health Canada also approved the first valve-in-valve (ViV) procedure under the Compassionate Use Program.
Operationally, seven patients received DurAVR™ implants during the quarter, with the full initial enrolment of 15 patients completed by October.
This adds to the 39 patients treated since the first successful implantation in Tbilisi, Georgia, in November 2021.
Published 12-month data from the Tbilisi cohort has shown DurAVR™ THV's superior performance compared to competitors.
Anteris has also initiated a Level 1 American Depository Receipt (ADR) program in the United States to facilitate investment by US investors.
The company continued its partnership with LeMaitre Vascular, Inc., agreeing to extend the Transition Services Agreement for the supply of CardioCel™ and VascuCel™ products through January 2025.
Financially, Anteris reported a cash balance of A$7.2 million and a net cash outflow of A$13 million for the quarter.
Research and development expenses were up, reflecting the company's investment in the DurAVR™ THV's clinical development and the commencement of the FDA-approved Early Feasibility Study (EFS).
Staff costs increased slightly due to the expansion of the research and development team and US manufacturing capabilities. Meanwhile, administration and corporate costs decreased, and customer receipts from tissue product sales improved.
The quarter concluded with CEO Wayne Paterson presenting at the Cantor Fitzgerald Global Health Conference.
Emyria
Emyria Ltd (ASX:EMD) increased clinical billings and advanced its treatment and research programs in the quarter, with clinical billings surpassing A$1 million, a marked increase of 250% from the previous period – mostly due to the effects of the Pax Centre acquisition.
Financially, Emyria fortified its cash reserves through a A$2 million placement and an additional A$1.15 million rights issue.
In the realm of treatment and research, Emyria launched its ethics-approved MDMA-assisted therapy program, enrolling the first patient and ensuring a consistent local supply of MDMA for treatment.
Inspired by recent findings, Emyria also developed a ketamine-assisted therapy model to address depression symptoms.
Progress continues with the MDMA analogue program, undergoing candidate screening at the National Institutes of Health (NIH) and the University of Sydney.
Moreover, high-dose Ultra-Pure CBD studies are advancing through NIH preclinical stages, focusing on resolving batch-to-batch variations in their low-dose CBD candidate (EMD-RX5).
Strategic appointments were also made to Emyria's board and advisory teams, with the addition of Dr Mohit Kaushal, bringing his expertise in tech-supported clinical services from the US, and Dr Ben Sessa, a UK-based leading figure in psychedelic-assisted therapy research.
Genetic Technologies
Key highlights of the quarter for Genetic Technologies Ltd – a leader in guideline-driven genomics-based testing in health, wellness and serious diseases – include a pivotal partnership with Gold Coast Private Hospital, part of Healthscope, to establish a Precision Medicine Clinic.
The initiative is designed to enhance the hospital's capability in delivering personalised medical solutions.
Additionally, the GeneType Multi-Test received approval in Australia for Pancreatic Cancer, Melanoma and Atrial Fibrillation, marking a significant expansion in the company's testing portfolio.
In a major collaborative effort, the Medical Research Future Fund (MRFF) named Genetic Technologies as the sole industry partner for a trial aimed at assessing multi-cancer genetic risk in general practice settings.
This partnership underscores the company's commitment to integrating genetic testing into routine healthcare.
Financially, the company maintained steady customer receipts of A$2 million, consistent with the previous quarter and the corresponding period.
The company's research efforts were bolstered by a peer-reviewed paper validating the effectiveness of geneType’s Pancreatic Cancer risk test.
The study highlighted a near 50% improvement over traditional clinical risk scores in identifying high-risk patients for pancreatic cancer.
Additionally, Genetic Technologies has commenced its Environmental, Social, and Governance (ESG) reporting, developing a baseline report that aligns with the 21 core metrics set by the World Economic Forum (WEF).
Island Pharmaceuticals
Island Pharmaceuticals Ltd (ASX:ILA) achieved a critical milestone with the appointment of Scientia Clinical Research as the clinical trial site and Beyond Drug Development as the Contract Research Organisation (CRO) for the ISLA-101 study.
This strategic decision aligns with the company's commitment to leveraging Australia's Research & Development Tax Incentive scheme, as Scientia Clinical Research is based in Sydney, Australia.
The ISLA-101 study drug product, shipped from the United States, has been safely received at the trial site. With the pending receipt of human ethics approval, the company is poised to commence the study, expecting final data readouts in early 2024.
Island also announced on July 7, 2023, that it had secured grant research support for the planned ISLA-101 Phase 2a human clinical trial (PEACH study) in dengue fever.
The grant was awarded to The Research Foundation for the State University of New York (SUNY) at Upstate Medical University in Syracuse, New York. The institution is partnering with Island to further the development of ISLA-101.
In September, the company was also granted a key patent by the United States Patent and Trademark Office (USPTO).
The patent covers methods of preventing or delaying the onset of symptoms of dengue fever, a significant step in the company's quest to combat this disease.
Island Pharmaceuticals concluded the quarter with a cash position of A$1.410 million, indicating a solid financial foundation.
Orthocell
Orthocell Limited achieved an increase in its total revenue for the first quarter of the 2024 financial year, with total revenue growing to A$1.77 million, a 71% increase from A$1.03 million in the same period last year (Q1 FY23).
The increase in total revenue is primarily attributed to a 14% growth in product revenue, which rose to A$1.43 million in Q1 FY24 from A$1.25 million in the previous quarter (Q4 FY23).
This marks a 46% increase from the previous year (Q1 FY22), where product revenue stood at A$979,000.
Orthocell's product revenue has consistently grown, averaging a 12% compounded increase over the last three quarters. This growth trajectory follows the successful launches of Striate+™ in the US and Remplir™ in Australia in the second quarter of FY23.
In a significant expansion of its US market presence, Orthocell's second US distributor, ACE Southern, a subsidiary of Henry Schein (NASDAQ:HSIC), has commenced actively marketing and selling Striate+ under the private label brand perFORM.
Launched at the American Association of Oral and Maxillofacial Surgeons (AAOMS) meeting in San Diego, California, ACE Southern will leverage its extensive network of dental service organisations (DSOs) to broaden Striate+'s reach in the US dental market.
Orthocell remains on track with its nerve repair study, aimed at supporting US regulatory approval.
The study, set to complete in the first quarter of the 2024 calendar year, will provide critical information on the mechanism of action, enhancing product marketing initiatives and supporting international regulatory approval and reimbursement strategies.
Additionally, the pivotal tendon repair study is progressing as planned, with data readout expected in the fourth quarter of 2023.
This randomised clinical trial compares Orthocell's cell therapy for tendon repair to traditional surgery in treating lateral epicondylitis.
The data from this study is critical for an application to the Therapeutic Goods Administration (TGA) for inclusion on the Australian Register of Therapeutic Goods (ARTG).
Orthocell's financial position remains robust, with a strong balance sheet reflecting A$22.3 million in cash at the bank at the end of the quarter.
Recce Pharmaceuticals
Recce Pharmaceuticals Ltd (ASX:RCE, OTC:RECEF) advanced its clinical trials and intellectual property portfolio in the quarter, as well as completing a capital raise.
The company raised A$10.7 million in capital, with a shortfall of approximately A$300,000 fulfilled by Recce directors and additional investors.
Key achievements in clinical trials include the completion of the Phase I Clinical Trial Data Review for RECCE® 327 (R327), which met all primary study endpoints and international regulatory standards.
The data demonstrated that RECCE® 327 is safe and well-tolerated.
Progress continued in the Phase I/II urinary tract infection (UTI) clinical trial, where multiple cohorts of male and female subjects were dosed with RECCE® 327, which was found to be safe and well-tolerated at faster infusion rates.
Additionally, Recce commenced dosing patients in a diabetic foot infection clinical trial at the South West Sydney Limb Preservation and Wound Research Unit.
The Phase I/II Burn Wound Infection Trial also reached a significant milestone with Stage 1 completion, where bacterial infections were successfully treated with RECCE® 327 in patients treated to date.
Multiple patients for this trial were dosed with RECCE® 327 Gel (R327G) under the Therapeutic Goods Administration's (TGA) Special Access Scheme – Category A.
The company's IP portfolio was strengthened with the grant of a new Family 4 Patent for RECCE® Anti-Infectives by the Australian Patent Office. Additionally, the RECCE® Trademark was registered in Vietnam, under Trademark Registration No. 1289603.
Recce's research and development efforts were showcased through an abstract and poster presentation at the 2023 Military Health System Research Symposium (MHSRS) and the delivery of the opening R&D address at the World Anti-Microbial Resistance Congress.
Financially, Recce received further support through an additional A$801,604 R&D Advance and a bonus Canadian R&D Rebate. The company also secured Austrade sponsorship to attend BIO Japan as part of Team Australia.
Immuron
Immuron Ltd (NASDAQ:IMRN, ASX:IMC) achieved record sales of Travelan, with sales of the over-the-counter gastrointestinal supplement reaching a high of A$1.55 million in the first quarter of this financial year.
It’s a substantial increase in sales of about A$1.5 million, representing a 130% boost to the pre-pandemic period of the first quarter of 2020.
Winding the clock back a little further, the company was also busy earlier this year.
In April, Immuron tripled sales of its Travelan® and Protectyn® products in Australia, with global year-to-date sales soaring 233% to A$1.779 million in the last financial year, generally attributed to a massive upswing in global travel.
In May, IMC initiated clinical trials for a new oral therapeutic targeting Campylobacter and ETEC, following FDA removal of the clinical hold. The trials, conducted in collaboration with the US Naval Medical Research Centre, focus on a hyperimmune product to protect against ETEC infections and campylobacteriosis.
In June, Immuron‘s board elected to proceed with IMM-529 cGMP manufacturing for treating gastrointestinal diseases and an FDA pre-IND submission.
IMM-529, targeting C. difficile, has shown potential with an estimated annual revenue base case of US$92 million in the USA.
In July, Immuron's strategic investee Ateria Health launched the gut health supplement Juvia in Australia, and Immuron enrolled the first cohort of participants in the Travelan® clinical trial. The primary focus was on the prevention and reduction of moderate to severe diarrhea.
In August, IMC presented at the US Military Health System Research Symposium, focusing on Travelan® as a preventive treatment for traveller’s diarrhea among military personnel.
Back to the September quarter, US sales of Travelan® reached A$211,080 in Q1 FY24, compared to A$16,614 in the same quarter of the previous year.
The company anticipates an increase in sales given the recent launch of Travelan® on the Amazon (NASDAQ:AMZN) store and the upcoming US spring-summer peak travel season.