SBP solbec pharmaceuticals limited

SBP & VRI Sunday Times article

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    Healthy choice

    BIOMEDICAL shares are a high-risk investment but the rewards can be worth it.

    WA's VRI BioMedical Ltd and Solbec Pharmaceuticals Ltd (SBP) are two of a few exceptions in the volatile sector that have performed above the index, on the back of solid and exciting developments, while many others have foundered or flopped.
    Osborne Park-based drug company Solbec has developed a drug it says has slowed or put into remission cancer in more than 60 per cent of the patients on whom it has been tested – with no side-effects other than nausea and headaches.

    The company is going ahead with plans to register the drug, called BEC, and hopes to have it on the market in 18 months or so.

    Managing director Stephen Carter said progressing to human trials was an exciting time for the company.

    "The outlook for us is very positive but it is not a get-rich-quick scheme," he said.

    "The biomedical sector takes time but the upside is significant. For example, positive results from the human clinical trials can triple a share price overnight."

    In an announcement to the ASX this week, Perth-based VRI BioMedical stated its intention to accelerate its research and discovery program, targeting the $93 billion cardiovascular drug market.

    It plans to begin human trials of Atheromastat, its probiotic treatment for coronary heart disease, within the next few months.

    The company has also developed a non-invasive blood test called Secril Alert, which aids in the prediction of cardiovascular disease by detecting inflammation and infection.

    VRI chief executive Leon Ivory said this week: "The outlook is very positive for us.

    "We have a long solid future, particularly because we have strong interest from some very major companies."

    He said VRI had a further 23 projects – all patented and protected – in the pipeline covering diagnostics, therapies and vaccines.

    All of them drew on immunology and microbiology to combat cardiovascular disease – the most common cause of death in the Western world.

    Many of the projects were close to market stage and longer term proposals were being developed to bring sustainability to the company.

    DJ Carmichael senior analyst Peter Strachan said that while some stock – such as SBP and VRI – could offer excellent returns for investors, it was necessary to exercise caution when investing in biomedicals.

    Mr Strachan said the surge in interest in the sector 18 months ago – the result of new companies listing, including many mining companies reinventing themselves as biomedical companies – had waned because of massive drops by some stock.

    "ResMed was selling at $11.50 in December but is now at $5.15," he said. "And Biota, which was trading at $8 in 1999, fell dramatically at the end of the tech wreck and after September 11. It was 90c in December and is now 45c.

    "It would be fair to say some companies operating in the medical area have disappointed."

    Mr Strachan said the lengthy time it took to deliver a new discovery to the market also put off many investors.

    But he added there was a huge market for some of the new treatments and therapies being developed, and that meant the wait could sometimes be well worthwhile.

    He favoured VRI as a particularly strong performer, after it jumped from 30c in October to 90c in January, and SBP which was 10c in September and rose to a 23c high in February. VRI is now trading at 79c and SBP at 16c.

    Mr Strachan said it was important to look at the track record of management and ensure the company was well funded.

    His advice to investors is to back only those companies that are well funded and can attract a pharmaceutical company to pay for expensive, human phase two and phase three trials.

    He said other companies looking at animal treatments and therapies could provide quicker returns to the investor because the regulatory process was faster for animals than it was when dealing with humans.

    Paterson Ord Minnett industrial analyst Kim Christie said the sector was highly speculative and announcement-driven.

    It also had a particularly long lead time.

    She said that while WA biomedical companies such as Chemeq (CMQ) – which has developed an antibiotic compound for pigs and chickens and is now looking for finance to manufacture the product – had performed very well, other companies in the sector had slumped.

    "The biomedical sector is very stock dependent," Ms Christie said.

    "There are some good stories but there are many stories of projects that progress well only to fall over when the effectiveness of the drug is being tested.

    "There are no guarantees a drug will make it to market; often they don't."

    Katie Hudson, industrial/health care analyst for JB Were in Melbourne, said the sector had performed poorly of late.

    "Some have performed not so bad but I wouldn't say any have performed very well," Ms Hudson said.

    She noted that the market struggled with the long timeframe required to gain legitimate benefits.

    "True value creation only occurs over time and that is an investor specific market," she said.

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