Australia | Jan 09 2007
By Chris Shaw
A good track record is an important ingredient for success in the biotechnology sector as the uncertainties associated with developing new compounds or treatments means investors look for companies with a history of positive results when determining where to allocate funds.
One such stock according to Intersuisse is Peptech (PTD), which has demonstrated an ability in the past to acquire early stage therapeutic antibodies before developing them further. The broker suggests the recent sale of its Domantis asset could be the spur for another round of acquisitions, as it has provided the company with cash of $172.5m and a further payment in a year’s time of $17.8m. Combined with the $20-$25m in annual royalties from its patented Tumour Necrosis Factor (TNF) antibody the company appears well placed.
The broker expects management will look to acquire further antibodies already in clinical trials or high quality early stage technologies and antibody platforms, which it would then look to develop in a similar way to Domantis. This is a necessary step, as the company’s TNF antibody comes off patent in 2010 and these revenues would likely then stop.
In terms of operating developments the broker notes the company is to enter Phase I clinical trials for its anti-TNF antibody PN0621 in the second quarter of this year, so there should be no shortage of news to maintain investor interest in coming months.
Supporting its Speculative Buy rating, the broker points out the company has around $40m in cash separate to the Domantis proceeds and the market goodwill on its technology is currently valued at around $60m, though the broker expects this will increase if and when the company makes any new antibody acquisitions.
Given the stock is a biotech it receives only limited coverage in the market, with the FNArena database showing only Aspect Huntley among the leading brokers and equity researchers follows the stock, rating it as an Accumulate.
Peptech shares have risen 1c today to trade last at $1.61, which compares to a year’s range of $1.21-$1.85.