Good morning, Armchair Army,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
A reality check.
Interest rates are high.
Multiple high-profile drug failures in the last 12 months.
… it’s tough out there for a late-stage ASX-listed biotech company looking for capital.
Which raises the question…
Where does the money come from?
Dave Williams gave a great interview this week in which he says…
“There is money EVERYWHERE”.
“Don’t think about needing to go to the US…
if you aren’t getting the money in Australia… it’s your fault. You’ve got the story wrong. The money is here… you just have to convince them.”
And honestly… I agree with him.
There is money out there.
(We just have to look)
But I’m not just going to sit behind my keyboard and tell the sector to “figure it out”.
I have an idea.
To bring capital BACK into ASX biotechs.
A big one.
With three letters.
C-S-L.
Unlocking the CSL Cash Box
Last week CSL announced a deal with Swiss-based Alentis for a couple of kidney and liver assets.
CSL will pay:
US$355M upfront.
Up to US$1.2 billion in commercial milestones.
AND fund the remainder of a Phase 2 trial, a planned Phase 3 trial, TWO other Phase 2 trials, and supporting development work.
In return, CSL gets:
55% of the global profits in the commercialised product, with Alentis keeping 45%.
In my opinion… this deal was crap.
My full take here:
I started thinking…
That US$355 million that CSL just spent?
That would go a longggg way on the ASX.
Not to fully fund development…
But to provide validation that gives investors confidence.
There is precedent.
Last year, the $25 billion-capped Pro Medicus (ASX: PME) invested A$10 in a little company at the time, 4D Medical (ASX: 4DX)...
From that point, 4DX went on to 10-bag.
Now it is worth A$2.3 billion.
LOTS of wealth created.
(It 10-bagged Pro Medicus’ investment as well… )
They then did it AGAIN.
This time with EchoIQ (ASX: EIQ).
Pro Medicus invested $10 million… EIQ goes on to raise $110 million.
… days later.
Pro Medicus was the “King Maker” for AI-based diagnostics software companies on the ASX.
Why can’t CSL do the same… but with late-stage biotech companies on the ASX?
Surelyyyy over the years people in the industry have thought of this.
CSL already supports early-stage Australian science with its JulBioincubator.
So… why now?
Since I published that article on the CSL-Alentis deal, several ex-CSL employees have reached out to me.
It’s clear there has been some internal restructuring, specifically around “business development”.
Internal BD teams out… external BD teams in.
More aggressive investment from the CSL.
(at least that’s the word on the street)
What has always been an uphill battle, getting CSL to invest in its pipeline assets, now appears to be a focus for the company.
The question is…
Will CSL look in its OWN BACKYARD for some undervalued biotech assets?
(where it has an edge)
OR…
Will it look abroad and compete on the global stage?
(where there have been 220 deals this year and CSL is late to the part)
My suggestion is that CSL support ASX-listed companies at a later stage of development.
Fill up the top of the capital waterfall… and let the capital flow back in the sector.
TWO stocks that CSL could immediately invest in
Two companies spring to mind when I think about this idea.
Dimerix (ASX: DXB): The Phase 3 Kidney Asset
The obvious strategic fit.
CSL has already built out a kidney franchise, and holds the European licence to Sparsentan for IgA nephropathy.
CSL’s most recent deal with Alentis was in the kidney space.
… and it is clearly a focus for the company.
The trouble for DXB is that it has licensed out much of its late-stage FSGS asset.
…still, an equity investment from CSL would cast a big spotlight on the company.
Noting that CSL paid nearly 4x DXB's entire market cap in upfront fees in that Alentis deal.
Noxopharm (ASX: NOX) - Vaccine Franchise
CSL already partners with NOX for its vaccine program.
CSL is using NOX’s anti-inflammatory products with its self-amplifying flu vaccines.
The idea is to reduce side effects (fever, aches, a day on the couch).
CSL presented the results at the Options for the Control of Influenza conference, where the oligos "show clear promise."
Existing partner with a co-development program?
Seems like a good fit.
… but there are many, many more.
What about Syntara (ASX: SNT)?
They are looking for a partner to support their Phase 2b trial for Mylofibrosis.
What about Alterity (ASX: ATH)?
Everything is set up to run the Phase 3 clinical trial… they just need some funding.
What about Acrux, Nurizon, Amplia…
Companies that need funding for more trials, and are WAY undervalued when compared to their US counterparts.
It’s NOT about financing the entire thing.
It’s NOT even about a licencing deal.
But it's about providing cornerstone equity in late-stage ASX-listed healthcare companies and empowering investors to close the rest.
… and who knows.
Maybe they’ll 10-bag a few of those investments.
Just like Pro-Medicus did with 4DX.
Let’s dive in…
The Pulse Check
Identifai Genetics (ASX: ID1) had a strong couple of first days as an ASX-listed company. The stock traded as high as 55 cents yesterday (IPO at 20 cents).
🪑 IPO market back?
Mayne Pharma (ASX: MYX) wins in the NSW Supreme Court as Cosette's appeal case is dismissed, and the court awards Mayne Pharma its appeal costs. (MYX)
🪑 💪
BLS Pharmaceuticals (ASX: BLS) reports record Q1 FY27 revenue of $26.7M, (up 123% on pcp) with positive operating cash flow and reaffirmed FY27 revenue guidance of A$105-$115M. (BLS)
🪑 What a chart this is…
Epiminder (ASX: EPI) enrols the 100th patient ahead of schedule in the US DETECT study. (EPI)
🪑 I had a good conversation with the EPI management last week. I didn’t realise their tech was sub-scalp EEG (and it operates in that “brain computer interface” sector).
The pace of recruitment for this trial directly indicates the sales potential.
So very good to see.
One to watch, trading near cash backing.
Medical Developments International (ASX: MVP) reports $10.2 million of group revenue for the quarter (down $0.7 million from the previous quarter), with both Penthrox and Respiratory sectors down. (MVP)
🪑 Not the best quarter for MVP.
Still, operating cash flow is at break-even with $20 million in the bank.
Plenty of runway to turn things around.
Medical Developments International (ASX: MVP) announces CEO Brent MacGregor's resignation, with CFO Anita James stepping in as interim CEO. (MVP)
🪑 Growth just hasn’t quite been there the last few years.
Talius Group (ASX: TAL) reports a 47% revenue increase to $1.9M (on pcp) and secures $2.5M in additional contracts. ARR is rising to $3.5M. (TAL)
🪑 Good result.
See you all tomorrow,
The Armchair Analyst
