\n\tBy Greg Peel<\/p>\n
\n\tWhat?<\/strong><\/u><\/p>\n \n\tQRxPharma<\/span> ((QRX<\/span>)) is rated by three brokers in the FNArena<\/span> database as a Buy, with an average target price 74% above the current trading price. RBS<\/span> expects a solid re-rating of the stock in the lead-up and achievement of a partnering deal.<\/p>\n \n\tWhy?<\/strong><\/u><\/p>\n \n\tWith US FDA approval of QRX's<\/span> low side effect pain relief drug MoxDuo<\/span> expected next year, the biotech has been looking for a joint venture partner under a licencing<\/span> arrangement to help with the funds required to get MoxDuo<\/span> over the line. RBS<\/span> Australia learned from QRX<\/span> representatives on Friday that there is no change to the company's timelines or progress, meaning a partnering deal will be in place by Christmas.<\/p>\n \n\tBackground<\/strong><\/u><\/p>\n \n\tIt's been a disappointing run for QRX<\/span> shareholders in 2011 given the stock fell from $2.40 in May to under $1.00 in September. Aside from the general market sell-off over the period, QRX<\/span> was forced to raise $30m<\/span> in additional capital in July to provide the funding a yet unsigned partner was supposed to assist with. While the benefit to shareholders is that dilution is offset by earnings that will not be lost to paying a partner its dues, the risk is that an ongoing lack of a partnership would mean more dilutive raisings<\/span> would have to follow.<\/p>\n \n\tQRX<\/span> has remained resolute nevertheless, and as noted RBS<\/span> reports the company is expecting a deal to be signed before the year is out.<\/p>\n \n\tIs the biotech market hotting<\/span> up?<\/p>\n \n\tPharmaxis<\/span> ((PXS<\/span>)) shares put in a double-digit rally on Monday ahead of the impending decision by the EU drug authority on October 21. BA-Merrill Lynch published a report on Friday noting the substantial upside a positive result would achieve while acknowledging a negative result would also suggest significant downside.<\/p>\n \n\tAt risk is whether or not the EU will approve PXS's<\/span> Bronchitol<\/span> drug (a) for use by anyone old or young, (b) for use by adults only, or ( c) provide conditional approval only for patients for whom the drug shows a positive effect, or (d) provide no approval at all. Having crunched the numbers, Merrills<\/span> estimates on the stock valuations for each outcome are (a) $3.55, (b) $1.63, ( c) $1.63 or more and (d) 15c<\/span>.<\/p>\n \n\tSo far Merrrills<\/span> has based its target price on outcome (b) which implies, with appropriate risk discounting, $1.08. PXS<\/span> shares closed at 86c<\/span> on Friday but ran over $1.00 in intraday trade on Monday.<\/p>\n