Australia | Jan 08 2007
By Rudi Filapek-Vandyck
ABN Amro Morgans analysts Scott Power and Tanya Salomon suspect there may be a trading opportunity in biotech Avexa (AVX). The analysts have updated their thoughts and assumptions on the company for the new calendar year and believe there are a few compelling reasons why investors should consider buying Avexa shares now.
The most compelling argument put forward in the research report which was released to clients and contacts this morning is that both expect the share price to rally closer to their share price target for the stock of $0.62. This compares with a closing share price of $0.32 on Friday.
Avexa’s potential HIV drug called apricitabine (ATC) is in Phase 2b clinical trials and the results should be released in March. A positive result from the trial would indicate ATC can be used to treat drug-resistant patients.
Equally important, and positive, is that initial feedback from the regulators signals the company might be able to file for approval after 24 weeks dosing in the Phase III trial rather than the usual 48 week dosing period. Both analysts believe if this approval is obtained the cost of the Phase III trial could be reduced by 20% to 30%.
In addition, the analysts highlight their current price target is still at a 15% discount to their $0.73 valuation for the stock. If March delivers a positive outcome, this will increase the probability of ultimately developing a successful product and thus the broker’s valuation for the stock.
The analysts point out that every HIV drug that starts Phase 3 –which in essence means it works at least as well as products from competitors in larger population size- has made it to the market. Currently there are about 31 HIV drugs on the market.
Avexa shares have already risen more than 14% this morning and are currently trading 4.5 cents higher at $0.365.