The small to mid market cap biotech/healthcare section of the market has had a banner year in 2019 with numerous stocks enjoying the benefit of success in the clinic (Paradigm Biopharmaceuticals) as well as regulatory and commercialisation success (Avita Medical). Among the medical device stocks and those with an exposure to healthcare IT, Nanosonics, Promedicus and Volpara Health Technology have each enjoyed significant gains in market share and revenue growth.
Turning to the outlook for 2020 and a predominantly new group of stocks are included in our key picks including Oncosil Medical and Botanix Pharmaceuticals. Both are undervalued in our view with significant news flow likely in 2020.
Longer term we believe stocks developing gene therapies will be at the cutting edge of new drug development over the next decade. These drugs have the potential to cure previously untreatable disease including many debilitating inherited genetic conditions of which there are thousands. In our stock coverage the company with the nearest term drug candidates (albeit still pre-clinical) is Avita Medical (AVH).
ONCOSIL MEDICAL (OSL) (Speculative)
Following a long period of sustained effort, Oncosil Medical is finally on the verge of obtaining a CE Mark in Europe. This should lead to first commercial revenues in 2020. Oncosil has a brachytherapy device for the treatment of inoperable pancreatic cancer as well as for use in down staging of borderline cases such that patients become eligible for surgical cure.
Data from the 42 patient trial conducted in Europe and Australia demonstrated an impressive survival benefit compared to patients treated with the standard of care. The overall survival benefit is at least 3 months with 50% of patients still alive and in long term follow up.
We expect the company will receive a humanitarian device exemption in the United States in 2020 and this is likely to be followed by a larger clinical program at some point.
BOTANIX PHARMACEUTICALS (BOT) (Speculative)
Botanix Pharmaceuticals is an Australian biotech company engaged in the development of novel compounds for the treatment of a range of dermatological conditions. All products utilise synthetic cannabidiol (CBD) in conjunction with Permetrex skin delivery technology. The company has exclusive rights to this technology for all drugs that treat dermatology conditions. The first two indications are for chronic acne and atopic dermatitis (AD). Botanix recently reported results from a phase II trial in the treatment of moderate to severe acne. The trial did not meet the primary clinical endpoints, nevertheless we believe extenuating circumstances contributed materially to this outcome, namely the US DEA restrictions regarding the transport and storage of drugs involved in the trial. These restrictions have now been relaxed and will allow for a much tighter level of control in subsequent clinical programs. The results from the Australian sites were in line with earlier testing and are supportive of further analysis.The company’s approach to testing and registration of this controversial new class of drug is no different to any new chemical entity. Feedback from clinicians and patients involved in the clinical program has been highly encouraging with the safety aspect of the drug representing a significant advantage over competitors.