Pharma stocks have strengthened in 2020
We are living in strange times, times where what was previously obscure has become mainstream. This is certainly the case as far as the pharmaceutical / biotech space, where in the UK especially investors were happy to stay on the sidelines. Of course, since Covid-19 in early 2020 there have been massive gains for drug companies of all shapes and sizes, largely, but not exclusively off the back of their exposure to potential treatments for the pandemic.
But the best aspect is the heightened awareness investors have for the science behind drug development companies, and hence appreciate them much more. This means that what may have passed over the heads of those in the market previously, has been added both to Watchlists and Portfolios.
Tiziana Life Sciences
A case in point so far this year is Tiziana Life Sciences (TILS), a clinical stage biotechnology development company. It has been firing on multiple cylinders in the battle against cancer and inflammatory disease, and latterly Covid-19. The shares have more than tripled over the past quarter off the back of the rising tide in the sector, but particularly its leading StemPrintER genomics based personalized medicine business to be used in the fight against breast cancer. StemPrintER is set to be spun off into a separate listed company imminently, extracting massive value for existing Tiziana shareholders.
The Next Big Thing
But the stock market being what it is, investors are always looking for the next big thing, and it may be that in Okyo Pharmaceuticals, a company backed by the same team as Tiziana they have a worthy choice. This is said on the basis of Okyo’s two drugs. As in the case of Tiziana, the model is to look at existing market leading treatments, and beat them on efficacy and safety. The first drug to look at is a unique treatment for Dry Eye Disease. In Chemerin – its flagship offering, Okyo has its answer to the existing billion dollar treatment, Restasis. Chemerin is a GPCR receptor drug which dramatically improves known inflammation problems.
Also key as far as the company is concerned, may be Bamm-8. This is a standout given that it is a non-opioid anti pain treatment, something which is all too timely given the well documented Opioid crisis in the US, and beyond. Indeed, Purdue Pharma was tainted by the high rate of addiction its OxyContin drug. As Okyo’s treatment is not opioid based, it is therefore not addictive.
What can be said as far as the approach of both Tiziana, and the still modestly rated Okyo at an £80m market cap is that their raison d’etre is to replace existing billion dollar blockbusters, with better alternatives. Given their edge, it can be deduced that the valuation of these new products will be as high or higher than those currently on the market.
Shareholder Value And 35p Share Price Target
Therefore, one can conclude that what we have seen with Tiziana / StemPrintER could easily be repeated in terms of unlocking shareholder value, with Okyo / Chemerin / Bamm-8. Part of this process is already in motion with Okyo’s share price, which has risen from under 3p in April to 11p now. In fact, most shareholders in Okyo are nursing a very high cost base as they were close to being wiped out as the previous company, West African Minerals fell from entry prices between 50p and 100p. So it can be concluded that no significant selling pressure on the stock would emerge until this trading band was recovered.
Also talking of current shareholders, speculation in the market regarding StemPrintER being folded into Okyo is incorrect, something which may have been a distraction for observers of both entities.
However, if things play out in the way that they have with Tiziana, we should see decent upside. For Okyo, it can be said that the technical share price target is the top of the rising one year trend channel at 35p on a three months timeframe. Given the fundamentals, this seems a modest target.
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