##{"id":61055,"date":"2012-12-12T11:11:56","date_gmt":"2012-12-12T00:11:56","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/12\/12\/starpharma-sparkles-with-dendrimer-promise\/"},"modified":"2012-12-12T11:11:56","modified_gmt":"2012-12-12T00:11:56","slug":"starpharma-sparkles-with-dendrimer-promise","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/12\/12\/starpharma-sparkles-with-dendrimer-promise\/","title":{"rendered":"Starpharma Sparkles With Dendrimer Promise"},"content":{"rendered":"

\n\t-SPL<\/span> Buy opportunity after FDA setback
\n\t-Dendrimers<\/span> offer many streams<\/strong>
\n\t-VivaGel<\/span> will provide revenue
\n\t-Agrochemical application potential<\/strong><\/p>\n

\n\t
\n\tBy Eva Brocklehurst<\/span><\/p>\n

\n\tStarpharma<\/span> ((SPL<\/span>)), the developer of dendrimer<\/span> drug delivery technology, has a fan in Bell Potter. CIMB<\/span> has also initiated coverage with an enthusiastic Buy rating and $1.79 target. Why? The company had a recent setback because one of its VivaGel<\/span> product trials, in the treatment of Bacterial Vaginosis<\/span> (BV), failed to meet end points specified by the US Food and Drug Administration. Over $150m<\/span> was wiped off its market capitalisation<\/span> because a potential partnership and near-term US filing was put in doubt. However, this is a buying opportunity, these brokers maintain, because there is so much more on offer.<\/p>\n

\tCIMB<\/span> notes the setback will have little impact on an ongoing Phase 2 trial targeting the much larger market for prevention of BV recurrence. No impact is seen on other VivaGel<\/span> programs either, such as coated-condom and in the prevention of sexually transmitted infections. Starpharma<\/span> is Melbourne-based and its leading product is VivaGel<\/span>, an anti-microbial dendrimer<\/span> with demonstrated ability against viruses such as HIV, HSV2<\/span> and HPV<\/span> as well as the bacteria that causes BV. VivaGel<\/span> is currently being prepared for use as a coating for Ansell<\/span> ((ANN)) and Okamoto<\/span> condoms, as well as topical microbiocide<\/span> to help women protect themselves against sexually transmitted infections. Bell Potter expects a re-rating of Starpharma<\/span> with commercial launch of VivaGel<\/span> in the condom market in 2013. CIMB<\/span> views VivaGel-coated<\/span> condoms as the first product to generate revenues, targeting $2.2m in FY14<\/span> to $25m<\/span> by FY20<\/span>.<\/p>\n

\tAmerica’s National Institutes of Health (NIH<\/span>) has provided ample non-dilutive funding to Starpharma<\/span> to develop VivaGel<\/span>, and Bell Potter notes the potential for further NIH<\/span> funding where there are clear public health benefits from products utilising<\/span> dendrimer<\/span> technology. Improved drug delivery is beginning to look interesting, according to Bell Potter. Starpharma<\/span> has demonstrated that dendrimers<\/span> have considerable utility, having been used for such functions as improving solubility of paclitaxel<\/span> and reducing toxicity of doxorubicin<\/span>.<\/p>\n

\tThere are several other catalysts besides the large upside in VivaGel<\/span>. CIMB<\/span> finds the prospect of dendrimer<\/span> reformulation for agrochemicals<\/span> a compelling value proposition. Starpharma<\/span> is looking to improve the properties of a number of agrochemicals<\/span><\/span> (pesticides, synthetic fertilisers<\/span>, chemical growth agents) by reformulating these using dendrimers<\/span>. Promising results have been shown with glyphosate<\/span> (the active ingredient in Roundup) which has shown improved characteristics compared to glyphosate<\/span> alone. Bell Potter concurs. It is confident dendrimers<\/span> will find wide applicability in crop protection and sees strong upside from multiple licensing deals in this segment. The broker expects Starpharma<\/span> will be able to license three crop protection products by June 2014, including its glyphosate<\/span> program.<\/p>\n

\tBell Potter also notes that the market likes reformulated cancer drugs. Herein lies big potential for Starpharma<\/span>. Bell Potter quotes Celgene16<\/span>, which bought Abraxis<\/span> in 2010 for US$2.9bn primarily to get hold of the cancer drug Abraxane<\/span> – paclitaxel<\/span> rendered more effective by the use of albumin17<\/span>. That product enjoyed US$424m<\/span> in sales in the year to September 2012. A similar situation could play out for Starpharma<\/span>, which now wants to develop the docetaxel<\/span> (Taxotere<\/span>) formulation for its own account, with the potential to license this product after pre-clinical and toxicology work and perhaps an early clinical study. Given the large market for Taxotere<\/span>, a cancer drug, until patent expiry and the clear safety advantages of Starpharma’s<\/span> formulation, Bell Potter thinks that the resulting package has potential to attract a strong licensing deal featuring large up front payments and a double-digit royalty.<\/p>\n

\tExisting commercial partnerships indicate the quality of the technology, according to Bell Potter. As well as the condom collaborations with Ansell<\/span> and Okamoto<\/span>, Starpharma<\/span> is working with Eli Lilly, GSK<\/span> and AstraZeneca<\/span> on drug delivery and with Nufarm<\/span> ((NUF<\/span>)) on dendrimers<\/span> for agrochemical use. The broker think these associations indicate the potential for market leadership across a broad range of potential applications.<\/p>\n

\tBell Potter values Starpharma<\/span> at $1.19 per share base case and $1.90 per share optimistic case, using a probability-weighted discounted cash flow approach. The target price of $1.55 per share sits at the mid point of its valuation range. Of course, as with all biotechs<\/span>, there remains the main risk that trials fail to live up to expectations. Another key risk is the cash burn rate of biotechs<\/span>. As at September 2012 Starpharma<\/span> had $37.6m cash but had burned around $1m<\/span> per month over the previous twelve months. Bell Potter notes Starpharma<\/span> may have to raise further capital to fund its burn rate, should licensing not yield strong revenues in the near term.<\/p>\n

\tCIMB<\/span> flags the benefits from royalties and licensing revenue in existing agreements across four products. While sales are modest (FY08-12<\/span> averaged $1.4m), the broker says it does help to augment cash burn. First there's Starburst<\/span> – dendrimers<\/span> sold by Aldrich<\/span> for use by researchers — then Superfect<\/span>, a gene transfection<\/span> agent licensed to Qiagen<\/span>. Stratus CS is licensed to Siemen<\/span> for a cardiac marker diagnostic and then there's Priofect<\/span> , a transfection<\/span> agent for siRNA<\/span> and DNA work licensed to Merck. Dendrimers<\/span> represent a platform technology. Since potential applications of dendrimers<\/span> are manifold, Bell Potter regards Starpharma's<\/span> intellectual property base as a genuine platform technology from which multiple value streams can emerge.
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