Australia | Jun 26 2006
By Chris Shaw
Money to fund the development work required to bring a new compound or treatment to market is essential for smaller biotech companies and is one reason ABN Amro Morgans is positive on ChemGenex Pharmaceuticals (CXS), rating the stock as Buy.
The broker notes the company recently completed a $15m capital raising, which should provide sufficient funds to bring its anti-Chronic Myeloid Leukaemia compound Ceflatonin to market by the end of next year.
A further positive development in the broker’s view is the new alliance with Molecular MD, a company that provides diagnostic services. It suggests the alliance will help in two ways, one though the speeding up of the recruitment of participants for the ongoing clinical trials of Ceflatonin, for which positive clinical data has already been achieved. Secondly, Molecular MD has identified a particular mutation in Chronic Myeloid Leukaemia patients known as T315i, so the combined knowledge of the two companies should see a stronger compound developed.
The market is beginning to take notice of the stock, as respected biotech industry newsletter Bioshares recently ran a feature on the company, pointing out the impressive potential of Ceflatonin.
The company is no one-trick pony though, its product development pipeline including treatments aimed at depression, cancer and anti-anxiety markets, meaning there should be a steady flow of news on the stock. The broker is also trying to generate some interest, organising a roadshow to help focus market attention on the stock.
As with most biotechs the stock is not widely covered, as no broker in the FN Arena database has a recommendation on the shares.
ABN Amro Morgans has a DCF valuation on the stock of $1.40 and a share price target of $0.91, both of which compare very favourably to the current share price of about $0.38. This is at the bottom of the stock’s range over the past 12 months of $0.37-$0.80, the current price capitalising the company at around $50m.