[Ed. Note: Here is our second installment from Dr. KSS, formerly known as “karmaswimswami” in Gumshoe discussion threads. Dr. KSS has agreed to our trading and disclosure restrictions, and he’s not offering you personal investment or medical advice. As with all of our columnists, we don’t assign topics or opinions and do just a bit of light editing as needed — the doctor’s words and opinions are his alone.]
This column grew out of a discussion thread that began on biotechnology companies on Stock Gumshoe during January 2014. In that thread, I introduced the unknown Australian biotech company Benitec (BLT on the ASX, BNIKF in the US), which has an extraordinary patent estate in DNA-directed silencing/inhibiting RNA and has, just in recent weeks, become a clinical-stage company. Like many readers of that thread became, I am long BNIKF. Benitec is the best example of a rather clever set of “young Turk” Australian biotech companies almost unknown outside the Pacific. In 2011 and 2012, I traveled extensively in Australia and immersed myself in its biotech landscape. Recently, another Australian biotech declared itself to investors, and is worth discussing as a case study in deciding whether a biotech issue is worth having money in. How one analyzes it is a lesson in how to analyze any biotech company.
6 March 2014, morning in Australia. A biotechnology company that no one has heard of squawks out a press release. The company, Biotron, in New South Wales, reports that patients coinfected with hepatitis C (HCV) and HIV have cleared HCV with the help of a new drug it has developed called BIT225. The news sends share prices soaring from A$0.084 briefly as high as A$0.315, to close at A$0.17, up 124 per cent. This may seem exciting. Or it may seem unexciting: a penny stock in a tiny company (Biotron’s market cap is only about US$37 million). Biotron’s capital structure, however, is not uncommon among Australian companies, which often have extraordinary numbers of outstanding shares at seemingly nugatory prices. Biotron shares trade on the US grey market as BITRF.
Biotron warrants exploring as an object lesson on how to sift through data from biotechnology companies. Investing in this company is highly speculative (I have no stake in it), and as is often the case, a decision as to whether the company’s science and pipeline have ...