Australia | Nov 15 2006
By Chris Shaw
For companies developing treatments for diseases a key is success in clinical trials, so when a company receives fast-track status from the US Food & Drug Administration (FDA) it is a positive as it shows the FDA thinks highly of the product it is developing.
ABN Amro Morgans notes ChemGenex (CXS) has just been granted such fast-track status for its Ceflatonin compound, which is being developed to treat Chronic Myeloid Leukaemia.
The broker notes one reason for the fast-tracking, which is done for compounds meeting previously unmet market needs, is because Ceflatonin is considered a possible alternative for patients whose illness is showing resistance to current treatment methods.
The fast-tracking means the company will enjoy a closer relationship with the FDA, so speeding up the whole process of hopefully brining the compound to market. Under fast-track status the FDA will review data from the company’s trials on a rolling basis, rather than waiting for the completion of the trial to assess the results.
The broker expects Ceflatonin to be registered next year before reaching the market sometime in 2008. It is the company’s lead product, but the broker points out the pipeline appears quite solid as there is also work being done on compounds for treating cancer, anxiety and depression among others.
With enough cash to see it through to the end of next year the broker sees definite upside potential in the stock, rating it as a Speculative Buy with a price target of $0.91. This is below its valuation, which on a DCF basis stands at $1.40.
It suggests further share price upside is possible in coming months as news flow should remain positive, the broker estimating data from preliminary trials should be available in the current quarter and complete enrolment for registration directed trials should be achieved by the second half of next year.
ChemGenex shares are currently stronger, the stock up 3.5% in morning trading to $0.59, which compares to a range over the past 12 months of $0.35-$0.68. At current levels the company has a market capitalisation of around $90m, so it is not widely covered in the Australian market.