Company Overview: Botanix Pharmaceuticals Limited, formerly Bone Medical Limited, is a pharmaceutical company. The Company focuses on developing medical dermatology products for dermatologists and their patients. Its segments include Research & Development and Corporate. The Company's products and pipeline products are all based on drug delivery technology known as Permetrex, which helps solve the challenge of delivering active pharmaceutical ingredients across the skin. The Company's products, which are under development, are focused on modulating the body's endocannabinoid system of receptors which regulates skin function, growth and renewal. Its product pipeline includes BTX1503, BTX1308 and BTX1204. Its BTX1503 is a transdermal gel formulation used for the treatment of serious acne in adults and teenagers. Its BTX1308 is a transdermal gel formulation used for the treatment of plaque psoriasis. Its BTX1204 is a transdermal gel formation used for the treatment of atopic dermititis.
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BOT Details
Developments and Initiatives Witnessed in HY Ended December 2018: Botanix Pharmaceuticals Limited (ASX: BOT) happens to be a clinical stage medical dermatology company which is having the market capitalization of $84.16 million. BOT’s focus revolves around the development of safe and effective topical treatments for the acne, psoriasis, atopic dermatitis as well as other skin conditions. The company recently published results for half-year ended December 2018 in which BOT stated that, in October 2018, it presented new data demonstrating Permetrex™ enabled superior delivery of cannabidiol into target layers of skin, against the competing cannabidiol formulations at increased doses. The company has been working with several partners with respect to additional early stage formulation work. The company’s revenues from ordinary activities amounted to $4,743,690 in the half-year ended December 2018 which implies a substantial rise of 163% on the YoY basis. This rise was witnessed mainly because of higher interest revenue and research and development incentive scheme. The company’s net loss post income tax for six months ended December 2018 amounted to $4,181,110 while, in the same period of the previous year, the loss was $2,392,381. The net loss was because of expenditure with respect to research and development activities and general administration costs related to ASX listed company. In January 2019, the company made an announcement about the findings of through market review of a range of potential skin infections which could be targeted by BTX 1801. The findings concluded that there happen to be many potential indications which could be addressed by BTX 1801 and the 2 attractive indications to address initially are bacterial folliculitis and impetigo. From the liquidity standpoint, the company seems to be in a decent position as its current ratio stood at 8.44x at the end of December 2018 as compared to the industry median of 2.55x which indicates that it can meet its short-term obligations in a better way.
There are expectations for significant clinical and operational milestones across multiple programs over the next twelve months. The company’s primary differentiating factors are expected to act as tailwind moving forward. Moreover, the global dermatology market has significant market potential and we expect that BOT is in a strong position to capture the market opportunities.
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1HFY19 Income Statement (Source: Company Reports)
A Look at BOT’s BTX 1503: After the enrolment of the first patient in BTX 1503 Phase 2 clinical study in the month of July 2018, the company conducted investigator’s meeting in July 2018 so that the details, as well as protocol of the study, can be discussed. The meeting got positive feedback with respect to data from Phase 1b study, the planned patient recruitment rates as well as physician’s assessment of novel BTX 1503 formulation. BOT stated that all the US and Australian clinical sites are activated and, as a result, there has been an acceleration of recruitment. Botanix is on track to wrap up recruitment for the study by the mid-CY2019 with the data available in Q3 CY2019.
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Phase 2 Patient Study Advancing on Schedule (Source: Company Reports)
Understanding BOT’s BTX 1204: In the month of August 2018, the company wrapped up Pre-Investigational New Drug (or pre-IND) meeting with FDA confirming its proposed development plan and data package supported Phase 2 clinical development in the United States. In the month of December 2018, BOT got the ethics approval for BTX 1204 Phase 2 atopic dermatitis clinical study which allowed the recruitment of first patients.
Completion of Primary Pre?Clinical Formulation and Testing Work on BTX 1308: In the report for half-year ended December 2018, Botanix stated that, in the month of July 2018, it wrapped up primary pre-clinical formulation and testing work on BTX 1308 with respect to treatment of psoriasis. The results have allowed BOT to progress the product into Phase 1b patient study and it treated the first patient in the month of November 2018. The study is testing a new formulation of synthetic cannabidiol along with BOT’s novel PermetrexTM skin delivery technology.
Understanding BOT’s Latest Pipeline Product: BTX 1801 is the company’s latest pipeline product which happens to be a novel antimicrobial that has a potential to address the unmet needs in serious skin infections and which is having numerous market opportunities. In the month of July 2018, the company had made an announcement about the wrapping up of pre-clinical testing which reflected that BTX 1801 was very effective in killing methicillinresistant staphylococcus aureus (MRSA) strains of bacteria as compared to Permetrex™ or cannabidiol alone.
A Look at Results from Independent Analysis: Recently, Botanix had released the presentation which had data from the independent analysis which got completed by Tioga Research in which BTX 1503 was compared with other commercially available cannabidiol (CBD) creams or gels. The comparative analysis reflected that, relative to closest comparator CBD topical product, BTX 1503 delivered >5 times as much CBD to the epidermis, and >3 times as much CBD to the dermis and substantially more than other CBD topical creams and gels.
Also, further analysis was wrapped up by Tioga Research so that the amount of CBD in other comparator products can be determined. The results demonstrated that BTX 1503 delivered more CBD in each dose utilized by the patients in clinical studies than an entire package of each of comparator products.
Presentation of BOT’s data at AAD: Botanix had recently made an announcement that its cannabidiol clinical data and product programs were presented independently by dermatology key opinion leaders at annual American Academy of Dermatology (or AAD). The management of the company stated that during the times when patients and physicians are very much interested in the discovery of new therapies in cannabinoids, its clinical pipeline happens to attract attention from the industry and potential partners.
In presentations, BOT’s rising profile with regards to the dermatology community got highlighted by the leading key opinion leaders, featuring data and development updates from Botanix’s clinical programs. Botanix also met the number of industry partners in order to present an update on the progress of its late-stage clinical programs, BTX 1503 and BTX 1204, as well the ongoing patient study for BTX 1308.
What Might Drive Growth for BOT Moving Forward: Botanix Pharmaceuticals had stated that 2019 is expected to be a transformative year with the planned completion of two Phase 2 studies, a Phase 1b patient study coupled with the milestones for broader pipeline and the Permetrex™ technology platform. Moving forward, the company is expected to be aided by its focus towards high-value pharmaceuticals with the de-risked late-stage studies underway. The company is having several key differentiating factors some of which are that it is targeting the markets where there are no new alternatives in 15-20 years, it has already generated positive clinical data, it has advanced and broadest clinical program globally and unrivaled track record. As per the company’s presentation, there are anticipations that the global dermatology market would grow to US$33.7 billion by 2022 and there is a very thin pipeline of new products across the industry.
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Global Dermatology Market (Source: Company Reports)
Stock Recommendation: On the daily chart of Botanix Pharmaceuticals Limited, Exponential Moving Average or EMA has been used and default values were considered for the purposes. After careful observation, it was noted that the company’s stock price has crossed the EMA and moved upwards after the crossover which reflects bullishness. Therefore, there are expectations that the company’s stock might witness a rise moving forward.
Besides this, the company might be helped by unmet patient needs, billion-dollar market size as well as a novel mechanism of action for skin disease. Also, the company might be supported by its decent liquidity levels as its current ratio is higher than the industry median which implies that the company is in a better position to meet its short-term obligations. However, the company’s stock is quite volatile as, in the past 1 year, it posted the return of -8.33% while, in the span of previous three months, it delivered 57.14% return. Although, we are positive on the stock at the back of (1) improving cash conversion cycle; (2) decent liquidity position; (3) transformative year ahead with planned completion of two Phase 2 Studies, a Phase 1B study, along with milestones for the broader pipeline and the PermetrexTM Technology platform; (4) improving RoE as compared to historical trends, etc. Hence considering aforesaid facts and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.110 per share.
BOT Daily Chart (Source: Thomson Reuters)
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