It was a good day for backers of junior biotech shares, who watched two stalwarts of AIM make strong moves higher.
Plethora Solutions’ (LON:PLE) shares raced up as it reported positive progress in the USA for its lead product, PSD 502, for premature ejaculation.
The firm's recent meeting with the United States Food and Drug Administration (FDA) has now “unambiguously defined the path” to a successful submission for making a drug application for 502.
The company, which now forecasts more than US$1 billion a year in peak prescription sales, saw its shares finish up 24% at 11.1p.
The stock has proved a lucrative turnaround play for the brave. The shares have put on 550% since trading at just 2p a year ago amid funding issues.
Daniel Stewart lifted its target price on the stock from 18.9p to 25.6p, reducing its discount rate from 19% to 15% in its DCF (discounted cash flow) model now that the treatment is closer to being awarded US approval.
“We continue to see significant scope for reducing our conservative discount rate, and hence increasing our target price, as PSD502 further progresses through to US approval and commercial launch,” analyst Vadim Alexandre said.
Deltex Medical (LON:DEMG) also racked up a 10% gain following its final results.
Growing sales of its surgical blood monitoring probes boosted the underlying performance over the past twelve months.
Deltex made £0.3mln in the six months to December before one-offs and the cost of setting up an operation in the US.
Over the whole of 2013, revenues from surgical probes rose 24% to £5.5mln, with the UK 26% higher, the US up by 13% and French sales ahead by 37%. Deltex said it had now trebled its probe sales since 2008.
The loss before non-cash and US market development costs in 2013 fell to £286,000 from £1.06mln in 2012 driven by the increased revenues from probes.
Broker Zeus Capital says 2013 was the year Deltex “set the foundations” for future growth.
“The US market opportunity for ODM is substantial and warrants the efforts the company is making to increase the number of dedicated trainers in key locations,” says analyst Dr Gary Waanders.
“The clear benefits of ODM, both for healthcare systems (cost reductions and more efficient use of resources) and patient outcomes (reduced length of stay in hospital, better clinical performance), will ensure that the technology establishes a strong, international user base with sustainable and growing revenues.”
Chris Thomas at Arden Partners points out that the strong operational performance last year stands in “sharp contrast” to the share price performance.
“This disconnect provides a highly attractive opportunity for investors,” says Thomas, who has a ‘buy’ recommendation.
It was also a good day to be a ReNeuron (LON:RENE) investor. The stem cell specialist rose 10% to 3.6p after receiving more backing for its retinal treatment ReN003 from the US-based Foundation Fighting Blindness.
The Foundation is the world's leading private source for inherited retinal disease research funding and has already supported ReN003 through earlier pre-clinical work conducted by the Schepens Eye Research Institute, ReNeuron's principal US collaborator on the treatment for retinitis pigmentosa.
ReNeuron said the Foundation intends to provide additional resources to both itself and its collaborators ahead of initial clinical trials, including access to its network of expert pre-clinical and clinical advisers.
Those eyeing up other opportunities in the sector might want to check out Summit Corporation (LON:SUMM), which according to N+1 Singer, is at an interesting stage with phase II patient clinical trials on the horizon.
Its recent £22mln fundraising provides the necessary funds to progress its two development programmes - for Duchenne Muscular Dystrophy (DMD) and C.difficile.
The firm's lead candidate is SMT C1100 for the treatment of DMD, and is the most advanced utrophin modulator in Summit’s modulator portfolio, the broker notes.
It is currently in Phase Ib with top line results expected in the second quarter of 2014, said analyst Sheena Berry.