Paradigm Biopharmaceuticals Limited

PAR Details

 Key Business Updates: Paradigm Biopharmaceuticals Limited (ASX: PAR) is an Australian-based biopharmaceutical company. PAR is engaged in repurposing the drug pentosan polysulfate sodium (PPS) to treat arthralgia.

• First Patient Dosed in Phase 2 of Clinical Trials in Brazil: As announced on 30 September 2021, the first MPS-VI participant was dosed at Hospital de Clinicas de Porto Alegre in Brazil. The primary objective is to evaluate the tolerability and safety of PPS in patients (subjects). Furthermore, PAR’s MPS program was awarded Orphan Drug Designation status in the EU and the USA for MPS-VI and MPS-I.
• PAR Receives Feedback on IND Submission: As announced on 27 September 2021, PAR received a written response from the US FDA regarding Investigation New Drug (IND) submission for PPS to treat pain in subjects with knee Osteoarthritis.
• Australian Ethics Approval Received: As announced on 24 September 2021, PAR received ethics approval for its pivotal Phase 3 clinical trial, focused on evaluating the treatment effects of PPS against placebo.

FY21 Financial Performance; Analysis by Kalkine Group

Key Risks and Challenges: The company’s mounting losses on a YoY basis, may throw significant cash flow challenges. In addition, adverse movements in forex may impact financial performance. Failure of clinical trials may uncover high sunk costs and under commercialisation of products. PAR operates in a highly regularised landscape.

Outlook: The company holds a decent liquidity position to sustain growth momentum and smoothed research and development processes. The commencement of Phase 2 Clinical Trials puts PAR one step further to product commercialisation. Approval for Phase 3 Clinical Trials marks a significant milestone for the company.

Stock Recommendation: The stock of PAR gave a negative return of ~35.911% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $1.760 - $3.190. On a TTM basis, the stock of PAR is trading at a Price to Book Value multiple of 5.4x, lower than the industry (Biotechnology & Medical Research) average of 11.6x, thus seems undervalued. Considering the current trading levels, valuation on a TTM basis, high commercialisation potential, technical levels as mentioned below, approval for clinical trials, and the key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the market price of $1.855, as of 11 October 2021, 02:02 PM (GMT+10), Sydney, Eastern Australia.

Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks in stringent regulator landscape, failure of clinical trials, and foreign currency risks.

Technical Commentary:

PAR's prices are trading around the major support level $1.70, indicating the possibility of an upside movement hereon. The recent fall in the stock was not backed by higher volumes, further suggesting the weakening of a downtrend. However, the momentum indicator RSI (14-period) is trading in negative territory at ~41.47 levels. Now the crucial support levels for the stock are $1.70 and $1.55 while the resistance levels are $2.17 and $2.30.

PAR Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart depicts RSI (14-period).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined: - 

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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