The narrative around Faron Pharma Ltd. (LON:FARN) has been a gloomy one – recorded in high definition by the company’s share price graph.
A Phase III clinical trial of its lead drug Traumakine, which had performed well in an earlier study, produced inconsistent results in patients suffering acute respiratory distress syndrome (ARDS).
The response to the top-line data published in May was binary and characteristic of the junior market here in the UK.
It’s worth pointing out the preliminary results were just that – a summary of the clinical trial. We’ll get a full understanding of what occurred on October 22 when Faron provides a full update to the European Society for Intensive Care Medicine.
READ: Faron makes key regulatory submission
This should fill in many of the blanks from the interim analysis; hopefully answering why the impressive Phase I/II data wasn’t replicated in Phase III.
We’ll find out too whether there may still be hope for the drug.
It is worth remembering Traumakine is still being trialled in patients with multi-organ failure and ruptured abdominal aorta aneurysm. So, it isn’t a complete bust.
In the wake of the clinical trial announcement, Faron has been keen to re-focus attention on Clevegen, an immuno-oncology drug bound for the clinic in the final quarter.
Living up to its name, the antibody does something quite clever. Tumour cells are adept at creating a shield around themselves to evade detection by the immune system, therefore staving off detection and destruction.
Clevegen by name, clever by nature
Clevegen has been designed to recognise cancer and break the cell’s protective shell. Ultimately, if it is successful, this new-breed of treatment will be used in combination with PD-1 inhibitors to tackle the killer disease.
There is a lot of industry interest around precision immunotherapies such as Clevegen.
Big pharma hasn’t exactly been at the forefront of innovations. But with deep pockets, these industry Goliaths have been splashing the cash buying assets and sewing up licensing deals.
This is good news for Faron, which is currently fielding interest from would-be partners. Normally these deals would only be done when a small drugs company had Phase II data in hand.
However, around a third of the transactions in the sector is being done at the pre-clinical phase such is the demand for new and innovative immunotherapies.
So, Faron is in an industry sweet spot and is apparently fielding a lot of interest.
Turning to the share price, it was up around 890p before the Traumakine top-line data release. Today, the stock is worth just over 100p.
That means the business’ enterprise value (market cap minus around £10mln of cash) is around £21mln.
Oversold?
This ascribes very little real worth to Clevegen, and zero prospect of eking a return from Traumakine.
Just as the stock was probably over-bought when it shot to 890p, there is a good argument to made that it is now oversold.
There are two potential catalysts worth looking out for. The first is the October 22 presentation to the European Society for Intensive Care Medicine.
It will be interesting to see how the market reacts if any positives can be unearthed now Faron is in possession of the full data set.
And of course, the successful conclusion of a Clevegen out-licensing deal would be deemed as a big positive – and one not currently fully factored into the share price.