Australia | Feb 14 2007
By Chris Shaw
While the share prices of a number of companies either surge or are punished depending on whether or not they meet earnings expectations, a different set of criteria apply to stocks in the biotech sector, where earnings are not as important as developments in a company’s product pipeline.
This is the case with Peplin (PEP), ABN Amro Morgans continuing to rate the stock as Buy despite the company posting a loss of $10.4m for the half year on the way to what it expects will be a full year loss of around $23.3m.
In the broker’s view far more significant are upcoming milestones in the company’s development of its PEP compound, which has the potential to become a treatment for sunspots. THe broker points to a number of clinical trials either under way or upcoming as being likely to drive the share price, including results from current trials in the US and Australia and New Zealand of its PEP005-006 compound for which recruitment is progressing well, and a recently initiated Phase II trial of its BCC PEP005-009 compound, where results are expected later this year.
There is also the upcoming start of Phase III trials for its actinic keratosis compound, where again results are expected later in the year. The broker expects this activity will keep the stock in the news in coming months, with good results likely to drive the share price towards its target of $1.13, a solid premium to the current share price of $0.84, which is up 4c in today’s trading.
With a market capitalisation of around $155m the stock receives little coverage in the broader market, but attracts enough investor attention to have a trading range for the year of 62.5c to $1.02.