Good morning Armchair Army,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
The result that the industry desperately needed.
Avecho (ASX: AVE) just successfully passed the interim results for its Phase 3 clinical trial for insomnia:
(Source, Avecho)
My “Bull Case” scenario was hit, and I expect there to be strong support for the company today and over the next few weeks:
(Source: The Armchair Analyst)
Avecho holds a special place in my heart.
I remember 15 years ago in high school when my dad (who was a stockbroker at the time) would talk about this company with a special TPM technology.
A better way to deliver drugs.
It was his highest conviction stock.
He had all his clients in, all his money in it… and if you trace through the history of the company, you’ll wonder why he stayed so long.
Dad actually moved onto the company’s board for a brief period to help them navigate some challenges and remained a shareholder throughout.
The 15-year-long game…
The company went through MANY ups and downs.
I’m just so thrilled for him and all the Avecho shareholders that it looks like they are on a winner.
The path to success is paved with challenges.
… long-term Avecho shareholders know that more than most.
But this is one of THE most resilient companies on the ASX, and it gives hope to the other battlers trying to make things work.
The infamous “I didn’t hear no bell ring” line from Rocky V comes to mind…
(Maybe with some Eye of the Tiger playing in the background, too)
Well done to Paul Gavin and the entire team at Avecho.
A good omen for the biotech industry.
What happens next?
FIRST, Complete the clinical trial.
Avecho will now ramp up recruitment to complete the second half of its clinical trial.
More sites will mean recruitment goes faster than last time (and publicity from this result should also help with recruitment).
According to the latest company presentation, recruitment for the final patients should take around 12 months.
NEXT, Topline Results
This will be the largest catalyst for the company; topline results for Phase 3 registrational trials are extremely rare on the ASX.
A good result is also just the beginning.
From memory, the last ASX-listed biotech company to have positive topline results for a Phase 3 clinical trial was Neruen (ASX: NEU), and if you take a look at the chart, the results were the beginning of the journey:
THEN, Sales and the Company Building
Avecho has already signed a deal with Sandoz for Australia.
Sandoz's best-selling product is Melatonin (another treatment for sleep):
This could also be the first ever over-the-counter cannabis product since the Australian government changed the rules back in February, 2021.
(No cannabis product has been approved for sale over the counter… although a few have tried)
Avecho will earn royalties from the sales of this product.
What could sales revenue look like?
I won’t make any assessments just yet, but over the next 12 months, the analysts will start to sharpen their model and predict just how much this product is worth in Australia.
ALL WHILE, Expanding into New Jurisdictions
With the successful interim Phase 3 trial results, Avecho will look to start expanding its product into other jurisdictions.
The US Government recently downscheduled Cannabis at a federal level to recognise it as a medicine:
Big pharma needed permission to enter the space; now it has it.
Avecho is as good a place for them to start as any…
… given it is just 12-18 months away from a large clinical trial readout.
Avecho will also look to license it off to a number of other jurisdictions as well (with Sandoz having first right of refusal):
Deals will drive the catalysts over the next 12 months.
(A similar thing happened to Dimerix after it was successful in its Phase 3 interim readout. The interim results were the data point that partners needed to see.)
How will they fund/finance it?
There are a few options for Avecho.
The company has $6.25 million in the bank and will probably need to find another $10 million based on the cost of the trials so far.
They could raise on the the market, but more likely, I see that they either:
Secure a deal with Sandoz (who will need to pay US$16 million on the trial success - perhaps they look to bring some of that forward)
Leverage an upfront payment from an outlicensing through another jurisdiction.
Lots of non-dilutive options for the company.
What does this mean for the industry?
This is big.
Wins like this create winners, which creates capital that can be fed back into the ecosystem.
These results start to fill up the top of the waterfall, which then trickles down to earlier and earlier investments.
A few more big “wins” like this, and the sector should be roaring back:
Again, well done to the Avecho team.
(And nice work, Dad, for holding on all these years)
Let’s dive in…
The Pulse Check
Emyria (ASX: EMD) announces positive early results from its psychedelic treatment program for treatment-resistant depression. (EMD)
🪑 Again, some great results that show Emyria’s treatment is working.
This data should support future applications to insurance companies for treatment coverage, as well as data packages that it can resell to US companies looking to bolster their own insurance submissions.
This data follows Definium Therapeutics, which published positive top-line results for its Phase 3 LSD (psychedelics) trial for Major Depressive Disorder.
More data = more support for the industry.
Avecho Biotechnology (ASX: AVE) received positive interim analysis from its Phase III trial for a CBD insomnia treatment. (AVE)
🪑 🎉
LTR Pharma (ASX: LTP) receives HREC ethics approval for a clinical study of OROFLOW®, an intranasal treatment for Oesophageal Motility Disorders. (LTP)
🪑 Non-core asset, but still could become interesting based on the study results.
Report: Wall Street Is Chasing a Peptide Market Finally Ready to Go Legal (Average Joe)
🪑 Nice article on how the US markets are chasing promising peptide investments…
See you all tomorrow,
The Armchair Analyst
