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Faron Pharmaceuticals Ltd: THE INVESTMENT CASE

Faron Pharma: Share price tracks progress of flagship drug

The share price, 280p a year ago, has tracked the progress the firm has made in the clinic with its lead product Traumakine
man on a ventilator
The drug is being developed to treat acute respiratory distress syndrome, which develops as a complication of an existing serious illness such as flu, or pneumonia

Faron Pharmaceuticals Oy Ltd (LON:FARN) certainly appears to have delivered in the past year – particularly for investors.

Had you bought £1,000-worth of shares 12 months ago, you would now be sitting on a nest-egg worth more than £3,000.

Not a bad return, and certainly better than you would have received ploughing your savings into the sector’s bigger and more illustrious players.

The share price, 280p a year ago, has tracked the progress the firm has made in the clinic with its lead product Traumakine, which is being developed to treat acute respiratory distress syndrome (ARDS).

READ: Faron making headway in the US

ARDS is a little-known condition that can affect people of any age and usually develops as a complication of an existing serious illness such as flu, pneumonia, sepsis or even severe trauma.

It is so serious that the mortality rate is between 30-45% and there is no recognised pharmaceutical treatment.

Faron has repurposed beta interferon (a drug normally used to slow the progression of multiple sclerosis) to tackle the life-threatening illness with remarkable results.

Recently the company completed the recruitment process for phase III clinical assessment of Traumakine with the data from the INTEREST study expected sometime in the first half.

It was prompted to press on with development after some hugely impressive data gleaned from an earlier trial that received significant coverage in the prestigious Lancet medical journal revealed.

In the control group (i.e. those people who didn’t receive Traumakine) 32% died from ARDS.

That compares with an 8% mortality rate in the tranche of patients that received the new treatment.

As the trial comes to an end what next?

In theory the company should have the results within four weeks of the phase III trial’s end; however, researchers are going to spend around six months assessing the quality of life of the survivors, which may help burnish the credentials of Traumakine further.

Running in tandem is a phase II/III trial of the Faron drug for a second indication to treat post-operative sufferers of ruptured abdominal aorta aneurysms.

It is fair to say, however, the market’s focus is on ARDs and with good reason.

While it is rare, the market opportunity is a decent one, particularly given there is currently no drug treatment for the condition.

Europe-wide there are 170,000 cases. In the US ARDS affects around 200,000 people annually.

Valuable product 

The maths is simple. Analysts say if a six-day course of Tramaukine is priced at, say, €4,500, which is around €1,000 more than it costs for a one-day stay in an intensive care unit, then the market in Europe alone is worth €765mln annually.

Add in the US – with potential sales of around €900mln euros a year – and suddenly you have a drug with blockbuster potential.

It is hoped that Traumakine can provide a major saving to hard-pressed hospitals by cutting the number of days an ARDS patient spends in the intensive care unit in half to just 14.

Remember each day in one of these high dependency units costs around €3,500 per day.

If Traumakine comes anywhere close to repeating the results published in the Lancet in phase III, Faron will have a truly extraordinary drug on its hands.

Looking once again at the share price chart, it would appear the market is taking seriously the drug’s potential; Faron is currently valued at €287mln.

With plenty of potentially positive news flow to come you suspect the current holders of the shares, who have done very well to date, will be hanging on in there with Faron.

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