I am quite surprised Quindell’s shares aren’t higher this week after their detailed response to the accusations of Gotham. They seemed to put to bed Gotham’s issues. We have now seen nine of the directors buying shares in the market, M&G have said they will continue to support them and Cenkos reiterated the stance on them.
As well as all that the company announced a two-year contract extension with one of the UK’s leading insurance brokers. In this announcement they also intimated that they will still be looking at a full listing as well as possibly listing in the states.
QPP still remains volatile and whether there is even the smallest truth in the allegations, only time will tell, but we feel the short/medium term potential is clear.
Desk discussions at Shard this week were about the medical devices and healthcare sector, due to a draft guidance published by the US Food & Drug Administration under the title: “Expedited Access for Premarket Approval Medical Devices intended for Unmet Medical Need for Life Threatening or Irreversibly Debilitating Diseases or Conditions”.
Once we had deciphered it the title and the contents it looked like great potential news for the sector.
The FDA intend to put in place a programme that will help accelerate the development of medical devices, which is a positive step for patients, physicians and the entire sector.
Some of the major negatives of the sector are the time it takes to get devices and treatments to market, the cost incurred (which time is a key factor) and bureaucratic/statutory challenges that agencies like the FDA have in place.
Therefore, if the draft guidance is duly accepted as legislation, development lead times, development cost and regulatory processes will be far more favourable for healthcare and medical device companies.
Companies that are set to benefit from this legislation are those that combine both medical devices and drugs as part of their development strategy. We are now looking out for companies that fit this bill. One of the companies we have supported is Proteome Life Sciences (LON:PRM).
Proteome Life Sciences
It is a global leader in protein biomarker solutions for pharmaceutical and diagnostic applications. Proteomics is the next step on from genomics. Genomics uses DNA as a fingerprint in understanding disease. Proteomics is the study of proteins surrounding the DNA. When things go wrong it is not the DNA but the proteins that go wrong - of which there are billions. Whilst DNA does not change, proteins do hour by hour.
Proteome’s SysQuant technology provides ‘real time disease management’. It provides a ‘helicopter view’ over cell signalling pathways. Knowing how different cell proteins react is the key to personalised medicine, thus improving the efficacy of treatment without increasing the total cost of care.
Importantly they are a diagnostic company NOT a drug discovery company. It gets revenue every time a test is performed using its technology. It has a broad pipeline of contracts from a rapidly expanding customer base moving from pilot to large scale studies.
Of course the company is facing competition in the sector, has to maintain relationships with its drug partners, keep increasing revenues and gaining market. We feel the skilled management team and favourable industry backdrop could see Proteome succeed as a business.
The shared, long-term trends of an ageing population and an increase in people inflicted with chronic diseases are expected to drive demand for health care services in both developed and emerging economies in 2014 and beyond.
We are seeing merger and acquisition talks lighting up the sector with the potential Pfizer/AstrazZneca deal and the Eli Lilly/Novartis deal gaining investor focus. We also have better than expected US corporate results (in the most part) and certain signs of recovery in developed economies.
Corporate balance sheets are in the best shape for a number of years and we expect the sector to continue to perform well for the remainder of 2014 and beyond.
*The views expressed are the views of Shard Capital and should not be construed as investment advice, as we have not assessed your individual suitability for personal investment advice.