##{"id":58395,"date":"2011-07-04T11:20:33","date_gmt":"2011-07-04T01:20:33","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/07\/04\/first-royalties-drawing-nearer-for-starpharma\/"},"modified":"2011-07-04T11:20:33","modified_gmt":"2011-07-04T01:20:33","slug":"first-royalties-drawing-nearer-for-starpharma","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/07\/04\/first-royalties-drawing-nearer-for-starpharma\/","title":{"rendered":"First Royalties Drawing Nearer For Starpharma"},"content":{"rendered":"

\n\t– Starpharma still on track for VivaGel revenues this year
\n\t– Positive results from refomulation of cancer drug another opportunity
\n\t– Bell Potter "reiterates" Buy rating<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tIn May, Southern Cross Equities suggested Australian biotech Starpharma ((SPL)) was a Speculative Buy because of its world-leading position in the dendrimer market and the potential on offer from the group's VivaGel anti-microbial product (see Starpharma, Rising Star, FNArena, 25\/5\/11).<\/p>\n

\n\tHaving now been integrated under the Bell Potter banner, the stockbroker remains positive, reiterating Starpharma as a Speculative Buy. One reason is expected revenues in the short-term, Bell Potter expecting Starpharma could enjoy VivaGel related condom royalties from Reckitt Benckiser of as much as $30 million annually once the product launches later this year.<\/p>\n

\n\tThere is scope for revenues to eventually become larger, Bell Potter noting there is potentially a billion dollar Western World market for VivaGel as a topical microbicide. This reflects the prevalence of genital herpes infections in women in particular. <\/p>\n

\n\tAs Bell Potter notes, around 16% of the US population has had genital herpes. Given this, women increasingly want to be able to protect themselves via the use of microbicides, so offering an opportunity for Starpharma.<\/p>\n

\n\tThis opportunity may receive funding from the US government, as in 2009 the government made around US$236 million available for microbicide research and development. Such funding would likely be needed as a trial for HIV efficacy would likely cost as much as US$60 million. <\/p>\n

\n\tDown the track, Bell Potter also sees potential for Starpharma to develop a microbicide for HIV as well, so opening another market opportunity.<\/p>\n

\n\tBell Potter has also suggested Starpharma has the potential to develop other applications for its dendrimer technology. Examples of opportunities include the drug delivery, animal health and agro-chemicals markets.<\/p>\n

\n\tLast week, Starpharma announced a reformulation of the cancer drug doxetaxel through the use of a number of dendrimers. The result is the drug's water solubility has improved by 2,000-8,000 times. Further work has been planned, with management declaring its version of the docetaxel drug is now the lead candidate in the drug delivery program.<\/p>\n

\n\tTo Bell Potter this is an example of Stapharma's ability to leverage its dendrimer technology, as the market for docetaxel, the old Taxotere drug of Sanofi-Aventis, generated US$3 billion sales in 2009. This suggests an attractive opportunity for a company able to develop a better formulation of the drug.<\/p>\n

\n\tGiven the potential upside for dendrimers as a platform technology, along with the expected revenues from the VivaGel related royalties, Bell Potter values Starpharma at $1.87 under base case assumptions and $3.68 under more optimistic numbers.<\/p>\n

\n\tPrice target has been set near the base case valuation at $1.90. There is no basis for any valuation comparison as no brokers in the FNArena database cover Starpharma.<\/p>\n

\n\tShares in Starpharma today are higher, the stock trading up 3c at $1.50 as at 11.00am. Over the past year Starpharma has traded in a range of $0.48 to $1.665.
\n\t <\/p>\n

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