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Paradigm Biopharmaceuticals Ltd: THE INVESTMENT CASE

Paradigm Biopharmaceuticals banking on near-term revenues from repurposing FDA approved drugs

Paradigm’s share price has increased more than 60% in the last month and it was up more than 12% on Friday.
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The company was granted a European patent for the treatment of bone marrow edema lesions with PPS

Paradigm Biopharmaceuticals Ltd (ASX:PAR) is a biotechnology company focused on repurposing Pentosan Polysulfate Sodium (PPS), an FDA-approved drug with a long track record of safely treating inflammation.

However, Paradigm is repurposing it for a number of applications with a focus on the treatment of orthopaedic and viral arthritic indications.

While the company’s market capitalisation of about $60 million could suggest it is a small player in a big pond, it has a blue-chip management team at the helm.

Heading the team is non-executive chairman Graham Kaufman, whose CV includes chief financial officer at CSL Limited (ASX:CSL) and executive vice-president of the $700 million Mesoblast Limited (ASX:MSB).

Strategy beginning to resonate with investors

The company’s strategy appears to be gaining traction with investors.

Of course, one of the advantages of drug repurposing is that it lowers costs and minimises risks, resulting in accelerated development times.

Paradigm’s share price has increased more than 60% in the last month and was up more than 12% on Friday when it hit a high of 52 cents, a level it hasn’t traded at since June 2017.

Establishment of commercial partnerships

Paradigm’s upfront costs aren’t as substantial as those encountered by companies developing and launching new drugs.

Such companies need to finance research and development, as well as conducting studies and trials, in most cases necessitating financing or royalty arrangements with larger players.

While Paradigm’s needs are different, it would be beneficial to establish commercial partnerships with pharmaceutical companies.

Success in achieving this goal may be a share price catalyst.

Multiple applications translate into large end market

PPS is a multi-acting treatment for osteoarthritis, viral arthritis, heart failure and respiratory conditions.

From an osteoarthritis perspective, it is useful in treating bone lesions and bruising.

Consequently, the treatment has broad applications across the ageing demographic, an increasingly emerging challenge for most first world countries.

As medical progress continues to enhance longevity, demand for treatments such as PPS should increase.

Paradigm’s management recently indicated that the combined addressable market was more than US$37 billion.

Vast difference in time to market

The following standard clinical development pipeline, as outlined by industry bodies, demonstrates significant difference between drug development and drug repurposing.

Research by Khanaoure A, Chuki P & De Sousa A in 2014 also demonstrated that the drug repurposing route had a 25% chance of successful commercialisation compared with 10% in ‘de-novo’ (starting from the beginning) drugs.

On the score of speed to market, Paradigm has demonstrated its efficiencies in this area, a factor that has no doubt resonated with investors.

In relation to its phase IIb osteoarthritis/bone marrow lesions development progress, the trial remains ahead of schedule with important results expected in the fourth quarter of 2018.

Management recently referred to this as one of the ‘value inflection points’ for the company, and it would appear logical that this will be reflected in its share price performance.

Success in Europe

Paradigm is also having success outside Australia.

In January, the company was granted a European patent for the treatment of bone marrow edema lesions with PPS.

Paradigm has initiated the process of validating the patent in most European countries, as well as the UK.

The company anticipates that the patent will be validated in these individual countries over the coming six months, providing an effective patent life of 20 years.

Management said that the patent would expire on February 2, 2032.

The European registration enhances Paradigm’s strong patent position, adding to previously granted registrations in the US, Japan, China, Canada, Taiwan, Singapore and Australia.

Additional layer of exclusivity

Paradigm has an additional level of market exclusivity via its supply agreement with bene pharmaChem GmbH.

Bene pharmaChem is the original manufacturer of PPS and its manufacturing process is protected via trade secrets.

The supply agreement with the group provides Paradigm with exclusive rights to the injectable PPS for use in humans for all its orthopaedic indications for a term of 20 years.

Paradigm also has the right to extend the term if it so chooses.

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