Over the past few years – during which a once-in-a-century pandemic made a clutch of megacap biotech companies a lot of money – the health care industry has experienced a surge in interest from investors seeking potentially high returns and opportunities to support more groundbreaking medical advancements.
Companies in the sector are at the forefront of scientific innovation, aiming to tackle some of the most challenging health issues of our time, such as mosquito-borne viruses, fibrosis, antimicrobial resistance, genetic predisposition to illness, and heart disease, to name a few.
But change doesn’t always happen as rapidly in the sector as it had to during the pandemic years.
Biotech investors play the long game in what is often perceived as a high-risk, high-reward pursuit.
The industry faces specific headwinds such as high research and development costs, lengthy clinical trial timelines, and uncertain regulatory outcomes. A single negative trial result or regulatory setback can significantly impact stock prices, leading to volatile swings.
And when times are hard – see war, supply chain difficulties and an on-again-off-again recession – these long-cycle investments can lose even more momentum.
With all that said, the thirst for human innovation and the imperative to find novel therapeutic solutions to disease is not going anywhere.
The cost of disease to economies at all stages of advancement is considerable – governments know this and will always invest in good research to mitigate this cost.
Investors, too, play the long game and are on the lookout for companies that are focused on good clinical data, patents to protect their IP and maintaining a solid war chest to see them through.
Trends over time
Several trends are influencing the performance and shaping the landscape of these industries:
Advancements in gene editing and precision medicine: The emergence of gene editing technologies has opened new frontiers in precision medicine, offering the potential to treat genetic diseases at their root cause.
Pandemic-driven innovation: As mentioned, the COVID-19 pandemic highlighted the crucial role of the healthcare industry, driving increased investment in pandemic preparedness, telemedicine, and vaccine development.
Artificial Intelligence and Big Data: The integration of artificial intelligence and big data analytics in healthcare has led to improved diagnostics, drug discovery, and personalized treatment options.
Mergers and acquisitions: Established pharmaceutical companies seeking to expand their portfolios and access innovative technologies have often acquired smaller biotech firms, leading to significant value creation for shareholders.
Looking ahead, the future of health care stocks appears promising yet challenging, with continued medical breakthroughs, and an increased focus on sustainability and ESG factors coming to the fore.
Investors will be watching the regulatory landscape for novel interventions including those involving cannabis and psychedelics. Ease of approval is always a factor as companies navigate the regulatory landscape, as is the ability to demonstrate the value, safety, efficacy and accessibility of their products in an often-crowded market.
Small cap biotech companies make gains in June
Several small cap Australian biotechs stand out from the crowd when it comes to innovation, approvals and resilience to market forces.
Immuron
In the three months just gone, news broke that Immuron Ltd (NASDAQ:IMRN, ASX:IMC)’s Travelan product had launched on Amazon US. Travelan is known to protect against the onset of travellers’ diarrhea (TD), the most common illness reported by travellers.
Launching directly onto Amazon US gave consumers across the US the convenience to purchase Travelan with the ease of a click.
On the clinical front, the company enrolled its first cohort of 30 participants into the Travelan® clinical trial to evaluate its efficacy to prevent infectious diarrhea caused by enterotoxigenic Escherichia coli (ETEC).
Also during the quarter, Immuron partnered with Ateria Health, a UK-based gut health biotech and investee, to launch the gut health supplement Juvia in Australia.
Juvia was launched in the UK last year targeting people who suffer from irritable bowel syndrome (IBS), containing Ateria’s breakthrough patent-pending natural ingredient ERME.
Recce
During the June quarter, Recce Pharmaceuticals Ltd (ASX:RCE, OTC:RECEF) secured Human Research Ethics Committee approvals for Phase 1/2 clinical trials of its lead pipeline compound RECCE® 327.
The trials will evaluate the compound's effectiveness and safety in treating bacterial infections, urinary tract infections and diabetic foot infections. Trial sites were expanded to include the FDA audited Scientia Clinical Research facility, which will allow for a broader patient population.
On the patent front, the company's RECCE® anti-infectives were granted a new Family 4 Patent for "Process for Preparation of Biologically Active Copolymer" by the Australian Patent Office, extending the protection of its intellectual property. The RECCE® trademark was also registered in Israel.
Back at headquarters, CEO James Graham voted with his feet by increasing his shareholding through on-market purchases.
The company also received a further R&D rebate advance of A$973,144 from Radium Capital, providing non-dilutive funds for ongoing research and development, and benefited from sponsorship from the West Australian Government to attend key biotech conference BIO Korea 2023.
Orthocell
Orthocell Ltd (ASX:OCC, OTC:ORHHF) had a bumper quarter in the back office, reporting increasing quarterly cash inflows totalling $3,984,000, including receipts from customers, interest and an R&D Tax Incentive rebate.
The total cash inflows for the 2023 financial year amounted to $5.62 million, showing a significant growth of 52.8% compared to the previous year.
The average cash inflow per quarter in FY23 also notably increased, to the tune of 60.2%.
The company sold 10,936 units of Striate+™ to its global distribution partner BioHorizons, almost three times the sales forecast. Additionally, 682 units of Remplir™ were sold to Australian and New Zealand exclusive distributor Device Technologies, exceeding the sales forecast by more than 50%.
Additionally, the company's nerve repair study for US regulatory approval is on track for completion in the first quarter of CY24, supporting product marketing and international regulatory approval strategies.Top of Form
Orthocell ended the quarter with a robust cash balance of $24.8 million, positioning the company well for continued commercial traction and regulatory approval efforts for its medical devices.
John Van Der Wielen joined the team as an independent non-executive chairman, bringing more than 35 years of experience in wealth management, private banking, investments, and health insurance – a good fit for the company’s medical device and cellular therapy commercialisation plans.
Last but not least Orthocell organised a successful Orthocell Nerve Transfer and Reconstruction Symposium, gathering key orthopaedic and plastic surgeons.
Island Pharmaceuticals
Island Pharmaceuticals Ltd (ASX:ILA) garnered Investigational New Drug (IND) clearance from the US Food and Drug Administration (FDA) for its ISLA-101 clinical program – this came after the FDA lifted the clinical hold placed on the trial, allowing the company to proceed with the Single Ascending Dose study.
The study will assess the safety and effectiveness of ISLA-101 against the dengue virus.
The company also obtained grant research support from The Research Foundation for the State University of New York (SUNY) and the Congressionally Directed Medical Research Programs (CDMRP).
The US$1.3 million grant will support laboratory testing and data analysis during the planned PEACH study in dengue fever, significantly expanding the data generated during the trial.
The company appointed Senior Regulatory Consultant Bobbi Drais to support regulatory strategy. Island's Board approved a plan to explore the acquisition or in-licensing of new drug candidates, focusing on small molecules with antiviral properties eligible for a Priority Review Voucher and possible non-dilutive funding.
CEO Dr. David Foster participated in industry conferences such as Pharma Meeting Brazil and the BIO International Convention, exploring partnering opportunities and potential clinical trial sites.
At the end of the quarter, Island Pharmaceuticals had a cash position of A$1.998 million. The company focused on capital efficiencies during the quarter, resulting in reduced cash operating outflows compared to the previous quarter.
Genetic Technologies
Genetic Technologies Ltd reported A$2.1 million in receipts for the June quarter. Receipts from customers for the 12 months ending on June 30, 2023, increased by 29% compared to the prior corresponding period.
The company’s GeneType Multi-risk test gained significant traction, with a 250% growth in commercial samples received compared to the previous quarter. The company received repeated referrals from 20 medical practices in the US and Australia, adding new practices incrementally every week. A National Television campaign in the US further drove consumer engagement.
Genetic Technologies published peer-reviewed studies validating the use of the GeneType platform for identifying elevated risk of developing melanoma, pancreatic, and prostate cancer. The studies demonstrated improved risk assessment and earlier diagnosis of these serious diseases, emphasising the clinical foundation of GeneType.
At the end of June 2023, the company had A$7.9 million in cash and cash equivalents. Cash receipts from customers for the financial year were A$8.8 million, and the company received A$6.3 million from the issue of equity earlier in the year.
Global Health
“We are very proud of our achievements over the June 2023 quarter – both from a financial and operational perspective,” Global Health Ltd (ASX:GLH) managing director Mathew Cherian said of the health technology company's past three months.
“Group EBITDA, pre-R&D expenses, more than doubled in the quarter, while the group’s Australian operations were cash flow positive both in the latest quarter and the June 2023 half year. Global Health’s focus on delivering sustainable revenues is also bearing fruit, with a good double-digit uplift in annual recurring revenues in the current financial year over the previous year.
“Operationally, we successfully completed or progressed several important system implementations in the June 2023 quarter, while a key new contract was executed. At the same time, we have also laid the groundwork for future growth, with our re-platformed Allied Health and Medical Specialists software as a service (SaaS) products set to be released by December 2023 and all other client/server applications re-platformed by December 2024.
“We now look forward to providing further updates on our growth strategy at the time of our FY23 results announcement in August.”
Operational highlights for the June 2023 quarter showed a positive turn for Australian operations, with a reduction in the overseas cashflow deficit by 64%. The quarter saw significant improvements in various financial aspects compared to the previous year ending June 2022.
Customer revenue increased by 20% to $7.8 million, while professional services surged over 100% to $1.4 million. Annual Recurring Revenue grew by 12% to $5.7 million, and the Gross Margin showed a remarkable increase of 48% to over $4 million. Overheads remained flat at $4 million, and the operating profit before R&D expenses rose by an impressive 106%.
AdAlta
During the June 2023 quarter, AdAlta Ltd (ASX:1AD) achieved some milestones and made strong progress in its operations.
The company successfully de-risked the lead asset AD-214 Phase 2 dosing regimens by linking Phase 1 results with efficacy for the first time. This breakthrough allowed for increased confidence in the viability of intravenous dosing at two-week intervals, reducing the risk of Phase 2 clinical studies.
Additionally, the company received Human Research Ethics Committee approval for a Phase 1 extension study of AD-214, generating valuable data to inform Phase 2 design and attract potential partnerships.
AdAlta's proactive efforts in advancing partnering programs were evident at the BIO 2023 partnering conference, where the company engaged with multiple potential partners for AD-214 and other programs.
In capital terms, AdAlta raised $1.28 million through a rights offer and secured an oversubscribed shortfall facility commitment of $1.87 million, providing the necessary capital to return AD-214 to clinical trials and progress other transactions.
With a strong cash position of $4.79 million as of June 2023, AdAlta is well-positioned to continue its development and growth in the biotech industry.
Anteris
Anteris Technologies Ltd (ASX:AVR, OTC:AMEUF) had a busy quarter in the clinic, continuing its first-in-human study of the DurAVRTM Transcatheter Heart Valve (THV) and successfully implanting the THV in seven additional patients, bringing the total treated patients to 21.
The thirty-day follow-up results for the third cohort of patients showed “outstanding” clinical outcomes with no device-related complications, confirming the safety and efficacy of the DurAVR™ THV.
Anteris released one-year follow-up results for cohorts one and two, demonstrating preserved valve performance and excellent safety maintained over the course of a year.
The strong safety profile was showcased with no mortality, disabling stroke, life-threatening bleeding, or myocardial infarction reported.
The data also indicated significant improvements in Effective Orifice Area and Mean Pressure Gradient, promising increased long-term survival and exercise capacity.
The company fortified its position in the transcatheter heart valve replacement (TAVR) field by securing utility patents for the DurAVRTM THV based on its innovative single-piece tissue design and biomimetic leaflets.
These patents provide enhanced intellectual property protection, strengthening Anteris' competitive advantage.
Financially, Anteris progressed towards commercialisation with continued investment in R&D. During the quarter, the company had net cash outflows of $11.5 million, which included R&D, staff costs, administration and corporate costs and customer receipts. Despite these expenditures, Anteris maintained a healthy cash balance of $20.3 million as of June 2023, showcasing its capacity to pursue growth initiatives.