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Investing in a biotech company? Here’s what you need to know

Biotechnology companies by and large look to develop and bring to market drugs or treatments for a cavalcade of conditions, and there’s plenty to be found on the ASX.

Paradigm Biopharmaceuticals Ltd - Investing in a biotech company? Here’s what you need to know

Nestled in the healthcare sector, biotech companies present an attractive investment to would-be shareholders.

There is the obvious upside of potential financial returns, particularly if a small company can bring a safe and effective drug to market - some of Australia’s largest listed companies are in the biotech and medical technology space (CSL Ltd, Cochlear Ltd and Resmed Inc, to name a few).

But there is also the knowledge that one’s investment dollars could help fund a life-saving drug.

So how do biotech companies get to commercialisation, a rising, sustainable share price and investor returns?

In it for the long haul

The first thing to know is that investing in a biotech company is a long-term and expensive play. According to Pharmaceutical Research and Manufacturers of America (PhRMA), the average length of time it takes for a drug to complete the journey from discovery to market is at least 10 years, with an average cost of $2.6 billion.

Drug development also goes through a range of phases, to ensure the drug is both safe and effective in what it is trying to treat.

  1. Discovery/invention: An initial discovery is often made by researchers, academics, or scientists, who then seek out business partners who have the means to support the lengthy process of development and commercialisation.
  2. Pre-clinical: Once out of the research lab, drugs head into pre-clinical trials, in which the drug is trialed in animals, most often rodents. Pre-clinical trials occur regularly, at lower cost, and sometimes result in blockbuster outcomes, leading to the sensational headlines we often hear about.

However, in an article for Australian scientific magazine Cosmos, journalist Anthony King spoke with world-leading researchers who described pre-clinical trials as a “failed strategy”, as what happens in mice often fails to be replicated in humans.

“Single-gene mouse models are different from the illness that we experience in humans,” University of Edinburgh neuroscientist Malcolm MacLeod told Cosmos.

Stanford Genome Technology Centre director Ronald Davis pointed out the physiological and biological differences between mice and men.

“Mice eat garbage,” he said. “Their habitat is extremely exposed to microorganisms that they eat.

“Mouse studies are valuable, but we always need to move to humans. We can cure cancer pretty effectively in mice, but the agents don’t work in humans in most cases.

“These are complicated diseases and we live far longer than mice and evolutionarily we are far apart.”

Three phases of human trials and approval process

Phase I: When pre-clinical trials have been successfully passed, Phase I trials in humans see the drug being tested in healthy subjects, to evaluate the safety and tolerance of the drug in humans.

Phase II: If it proves to be safe and tolerable, the drug will progress to crucial Phase II trials, which tests the drug for efficacy in patients with the condition the drug is trying to target.

Phase III: If Phase II trials are successfully completed, Phase III trials test the efficacy of the drug in much larger numbers and compare the results against existing approved treatments.

These trials are very expensive and take a long time - many biotech companies that reach Phase III will seek a much larger commercial partner to help foot the bill and take on some of the risk involved.

Regulatory approval: Once Phase III trials are successfully passed, the drug in question can then be taken to regulatory bodies for approval, another long process - and in four of 10 cases, the regulatory bodies ask the biotech to undertake further studies to prove the drug’s worth.

To market: If the regulatory bodies, such as the US Food and Drug Administration (FDA), Australia’s Therapeutic Goods Administration (TGA) and European Medicines Agency (EMA), sign off on it, then the drug can be taken to market.

(You may be asking, at this point, if it usually takes so long to bring drugs to market, then how did we develop COVID-19 vaccines so quickly? The answer to that is simple - resources around the globe were intensely focused on vaccine development. Biotech companies, even the largest ones, don’t have the wherewithal to develop drugs so quickly on their own.)

Australian players

So, who are some of the most promising Australian-based small and mid-cap biotech players hoping their treatment will be the next wonder drug? There is no shortage!

Paradigm Biopharmaceuticals Ltd (ASX:PAR) is gearing up for a huge 2022 financial year, with a pivotal Phase III study to take place.

The company is advancing its osteoarthritis clinical program and other pipeline indications in a bid to bring historic drug pentosan polysulphate sodium (PPS) to the market and help improve pain and mobility in millions of people who suffer from joint stiffness.

Little Green Pharma Ltd (ASX:LGP), which has extensive expertise in the medicinal cannabis space, was just granted a Schedule 9 licence from the Western Australia Department of Health for the supply of psilocybin that is used in treating addiction, depression, anxiety and post-traumatic stress disorder (PTSD).

Fellow medicinal cannabis business MGC Pharma Ltd spoke with Proactive recently on approval by the Indian authorities to import its phytomedicine CimetrA into that country as a final step towards obtaining emergency-use authorisation for the treatment of patients with coronavirus (COVID-19).

Emyria Ltd (ASX:EMD) released promising results from a previously published study assessing the effects of MDMA (ecstasy) and a unique MDMA-analogue (UWA-101) in a Parkinson’s disease (PD) model.

The results indicate that both MDMA and UWA-101 extend the duration of action of L-DOPA, a common treatment for PD, and reduce the proportion of time associated with L-DOPA induced dyskinesia (LID).

Zelira Therapeutics Ltd (ASX:ZLD, OTCQB:ZLDAF), another medicinal cannabis biotech, is currently focused on the expansion of commercialisation activities and revenue generation from its new clinically tested products, with the strategy expected to lead to the launch of a suite of new cannabinoid-based products over FY22.

It has a range of products currently earning money for the company, treating conditions such as insomnia, autism and opioid addiciton.

Orthocell Ltd (ASX:OCC), a regenerative medicine company, was recently granted new patents in Canada and Hong Kong for its novel CelGro® collagen medical device platform for soft tissue regeneration applications.

The patents cover the method of using CelGro® to repair a defect in soft tissue, such as tendons, ligaments and nerves, avoiding the use of damaging sutures.

Anteris Technologies Ltd (ASX:AVR, OTC:AMEUF, FRA:DDF) is also looking to create in-body structures that can improve human function - its DurAVR™ aortic replacement valve addresses the acute need in terms of superior hemodynamic profile as well as chronic needs in its ability to sustain that profile longer over the lifetime of the patient.

SUDA Pharmaceuticals Ltd (ASX:SUD) is developing low-risk oral sprays using its OroMist® technology to reformulate existing pharmaceuticals.

SUDA is also working towards developing oral sprays for the treatment of migraine headache, motion sickness, drug-resistant epilepsy and certain cancers.

In the cancer space, Kazia Therapeutics Ltd (ASX:KZA, NASDAQ:KZIA) is tackling treatment-resistant brain cancer, Imugene Ltd is developing a range of novel immunotherapies that seek to activate the immune system of cancer patients to treat and eradicate tumours and Chimeric Therapeutics Ltd (ASX:CHM) is focused on research related to the usage of cell therapy for the treatment of cancer.

- Daniel Paproth

Quick facts: Paradigm Biopharmaceuticals Ltd


Price: 1.82 AUD

Market Cap: $417.88 m

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