Small Caps | Aug 05 2011
– Bionomics enjoying good early trial results for BNC210
– The BNC210 compound is an anti-anxiety treatment without side effects
– Market is large, Bionomics also developing an anti-cancer compound
– Bell Potter rates Bionomics a Speculative Buy
By Chris Shaw
Australian biotech junior Bionomics ((BNO)) has, according to Bell Potter, received outstanding Phase Ib/IIa clinical data on the performance of BNC210, which is an an anti-anxiety drug the company has been developing.
Bell Potter suggests the qualities of BNC210 make it an ideal candidate for an early licensing deal, as the drug has been shown to relieve anxiety quickly without causing sedation or being addictive. These are two common side effects of existing anti-anxiety medications.
The anti-anxiety market is large, Bell Potter noting around 18% of the US adult population will suffer an anxiety disorder this year, with 4% to experience a severe form. The economic costs of anxiety in the US market alone have been estimated to be as high as US$120-$130 billion annually, while the global market for anti-anxiety drugs is estimated at US$5-12 billion annually.
Bell Potter suggests the anxiety disorder patient population is probably growing around the world, as for example in Australia in 2007 14.4% of the adult population had an anxiety disorder, up from a comparable figure of 9.7% in 1997.
At the same time existing anxiety drugs are inadequate, as Bell Potter notes while benzodiazepines can be effective in treating anxiety they bring various side effects such as sedation, addiction and memory loss.
While BuSpar is a non-benzodiazepine alternative it needs be taken daily for 2-3 weeks before its anti-anxiety effect kicks in, while antidepressants also take some time to act and in some cases can cause liver toxicity.
This makes the trial results achieved by Bionomics appealing, Bell Potter suggesting there should be interest from both investors and pharmaceutical companies. This is especially the case as there is evidence BNC210 works in treating depression as well as anxiety.
While the trial results are early stage, Bell Potter notes Bionomics is looking at two further Phase II trials, one on Generalised Anxiety Disorder and one in Major Depressive Disorder, with required Phase III trials to follow.
It is the stockbroker's view the quality of the data received to date is likely to be enough for Bionomics to find a partner for the BNC210 compound, which would help facilitate the necessary trials.
But the Bionomics story doesn't end with BNC210, as Bell Potter notes the company is also developing BNC105, a Vascular Disrupting Agent that is designed to kill cancers by cutting off the blood supply to the tumour. This kills the tumour but leaves healthy blood vessels untouched.
At present BNC105 is being trialled for the treatment of renal cell carcinoma and ovarian cancer, but Bell Potter suggests there is applicability across all solid tumours. This makes BNC105 potentially more valuable than BNC210 longer-term given the size of the market for new cancer drugs.
In the stockbroker's view, Bionomics can develop into a strong platform technology company through its Multicore, ionX and Angene platforms. These have already yielded pipeline opportunities through the Kv1.3 program in Multiple Sclerosis and programs in Alzheimer's, cancer and epilepsy. This adds to the potential for Bionomics to be attractive to an acquirer among big pharma companies.
On a probability weighted discounted cash flow basis Bell Potter values Bionomics at $1.40 using base case assumptions, rising to $2.50 under more optimistic assumptions. To be conservative the price target of $1.50 has been set at the lower end of this range. The stockbroker rates Bionomics as a Speculative Buy.
Bionomics has a market capitalisation of a little more than $200 million at current levels, so the stock attracts little attention from other brokers, as the FNArena database shows no coverage of the company.
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