Motif Bio plc (LON:MTFB) – BUY*: FDA grants iclaprim Fast Track designation
Market Cap: £66m; Current Price: 61p; Target Price: 114p
Fast Track designation will expedite iclaprim’s market approval
- Motif announced that the U.S. Food and Drug Administration (FDA) has granted it Fast Track designation for its flagship late clinical-stage antibiotic, iclaprim intravenous (IV), to treat Acute Bacterial Skin and Skin Structure Infections (ABSSSI) and Hospital Acquired Bacterial Pneumonia (HABP).
- The FDA's Fast Track programme is designed to aid the development and accelerate the review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs.
- Drugs with Fast Track designation typically qualify for priority review, which expedites the FDA review process and market approval.
- Companies that receive Fast Track designation for a drug benefit from more frequent interactions with the FDA during clinical development and can submit completed sections of their New Drug Application (NDA) on a rolling basis.
NORTHLAND CAPITAL PARTNERS VIEW: Motif continues to progress its flagship late clinical-stage antibiotic, iclaprim, towards market approval. The FDA recently designated iclaprim for the treatment of ABSSSI and HABP as a Qualified Infectious Disease Product (QIDP) - making iclaprim eligible to benefit from incentives as provided under the Generating Antibiotic Incentives Now (GAIN) Act in the US. These incentives include: priority review, eligibility for fast-track status and up to 10 years of market exclusivity from the time of the drugs approval. Today’s announcement confirms iclaprim’s Fast Track designation which will expedite the FDA review process and iclaprim’s potential market approval. We reiterate our 114p Target Price. BUY.
Botswana Diamonds (LON:BOD) – SPECULATIVE BUY*: Exploration update
Market Cap: £1.9m; Current Price: 0.8p
Drilling to commence at PL210 in late September
- A team of seven geologists and mineralogists from Russia are expected to join the local Botswana Diamonds’ personnel in early September to complete a drilling and an intensive soil sampling programme on PL206, PL210 and PL085, located in the Orapa Region of Botswana.
- Work during H115 identified a specific target located in PL210 and a three hole drill programme is expected to commence in the final week of September testing this target.
- Further soil sampling will also be completed on PL206 and PL085 to refine target definition.
- Verification sampling is planned on the three small licences located in the Gope Region of Botswana.
NORTHLAND CAPITAL PARTNERS VIEW: After what seems like a long wait we look forward to Botswana Diamonds’ and major joint venture partner Alrosa’s second drill programme in the Orapa Region of Botswana. The joint venture partners undertook an extensive exploration programme that included; soil heavy concentrate sampling, hard rock sampling, in-field mineralogical analysis, electromagnetic and ground magnetic surveying, during the first half of the year and is now commencing follow up drilling this month, in line with our expectations. The target being drill tested at PL210 is a coincident geochemical and geophysical anomaly that the joint ventures partners believe could represent a kimberlite body. The discovery of a diamond bearing kimberlite pipe would be a transformational event for Botswana Diamonds but we highlight that diamond exploration remains high risk and high reward.
Northland Capital Partners Monthly Summary: September 2015
A squally outlook
Markets were beset by squalls at the end of August with most indices suffering substantial corrections on Monday 24th before seeing some sort of recovery during the final week. China was seen as the obvious culprit with the unexpected devaluation suggesting that the economy is in worse shape than feared and that Chinese central policymakers have limited control over the situation. The Shanghai Composite fell 12.5% in August (including the largest two-day sell off in more than two decades), in spite of a 10% rally at the end of the final week. This follows a 14.3% decline in July. The currency devaluation has ramifications for emerging market currencies and a slowing Chinese economy also impacts commodity-rich emerging economies. But the spread of the selling to European markets and ultimately the US suggested that western markets were looking for a catalyst to correct. The S&P 500’s trailing EPS has flattened and net revenue per share has started to decline – unsupportive of high valuation cyclically adjusted multiples. Share repurchases have driven much of this strength but with some signs of wage inflation and the prospect of higher interest rates, buybacks may slow. The start of September also looks tricky with disappointing Chinese PMI data and much focus on the forthcoming FOMC meeting. The implications for UK small caps are nuanced – M&A activity remains buoyant as overseas companies look for growth and the UK economy continues its recovery but falls in the major indices impact general sentiment to equities.
- Mining: The summer blood bath for London listed mining and exploration companies has continued from June and July where 75% and 85% of miners experienced negative or neutral share price movements, respectively, with 71% of miners experiencing negative or neutral share price movements in August. This month we initiated coverage on Thor Mining (LON:THR) with a SPECULATIVE BUY* rating. We also upgraded our forecasts and maintained are price target for Stratex International (LON:STI) following the publication of its interim results.
- Healthcare: We highlight our top Healthcare pick, Motif Bio plc (LON:MTFBwhich we believe to be grossly undervalued (current price: 56p; PT: 114p). In the wake of a major global public health crisis driven by rampant antibiotic resistance, Motif’s late clinical-stage antibiotic, iclaprim, is set to fill a major market void. Having already been tested on over a thousand patients, iclaprim’s safety and efficacy is well supported. If approved, the drug could achieve over $1bn/year in sales
- Consumer/Leisure: Consolidation continues to be the key theme in the gambling subsector as higher taxes in both online and land based gambling impacts operators’ margins. Ladbrokes (LON:LAD) and Gala Coral are set to merge which will create the largest LBO business in the UK, and with Jim Mullen at the helm of the new entity, emphasis will be placed on expanding the online operation in particular. Playtech (LON:PTEC) remains a good way to gain exposure without being subject to gaming taxes, in our view. Meanwhile, the battle for Bwin.Party Digital (LON:BPTY) remains competitive with GVC Holdings (LON:GVC) tabling a revised offer of 125.5p. This has spurred 888 Holdings (LON:888) into action where we believe a revised offer is imminent. Finally, the merger between Betfair Group (LON:BET) and Paddy Power plc (LON:PAP) makes strategic sense, one business being primarily an exchange model and the other a supplier of fixed odds prices on events, so we expect to see strong cross-sell between the two platforms, whilst significant cost savings should also be achievable. The market likes the deal as both share prices rallied strongly on the back of the news.
- Support Services: Latham (James)* (LON:LTHM) reported a good start to FY16 at its AGM with revenue up 7% in the first four months and an improvement in margins, reflecting a richer product mix. Overall trading is in line with our expectations.
- TMT: Amino Technologies (LON:AMO) completed the significant acquisition of its competitor Entone Inc that substantially increased Amino’s scale, particularly in North America. Meanwhile Keysight Technologies completed the acquisition of Anite plc at 126p/share. The Innovation Group (LON:TIG) received a 40p/share cash offer from Carlyle Group. Starcom* (LON:STAR) reported flat H1 revenue but a substantially reduced operating loss and has been building the sales pipeline for its newer products.