When it comes to medical procedures, we all want to hear “now this won’t hurt a bit.” The pain relief market in the U.S. alone was worth $22 billion in 2010, and that number is expected to keep rising. The neuropathic (nerve) pain relief market alone is forecast to reach $3.6 billion by 2020 from $2.4 billion in 2010. Australia-based drug discovery and development firm Bionomics Ltd. (BNO.AX) may be pricking this market as it recently reached a partnership agreement with Merck & Co. Inc. (MRK.N) for the development and marketing of new chronic pain relief products.
Bionomics has operations in Australia, Europe and the U.S. During Alpha Deal Group’s initial due diligence call, CEO Dr. Deborah Rathjen said that it relies on strategic partnerships with large pharmaceutical manufacturers for the late stages of drug development and testing, and fast commercialization. This allows Bionomics to focus on the discovery of new drugs and the development of therapies for the treatment of cancer and conditions of the central nervous system, including anxiety, multiple sclerosis and epilepsy.
Agreement with Merck
The partnership with Merck concerns the discovery and development of novel small-molecule candidates for the treatment of chronic pain, including neuropathic pain.
Under the accord, Merck will have the option to license exclusively a compound from Bionomics for late development and commercialization. Bionomics may receive up to $172 million in option exercise fees, development and regulatory milestone payments and undisclosed royalties on the net sales of any products resulting from the partnership.
The deal is significant both on its own and when considering the forecast expansion of the pain relief market. What’s more, for Bionomics the deal will provide a steady cash flow that will help reduce group funding risks, due to the partnership model which also provides for future success-based revenues. The scale of the agreement is a validation of the company’s drug discovery platforms, which may be good for the share price.
Chart 1: Bionomics Stock Price
Source: Thomson Reuters Eikon/StarMine
Product pipeline
Bionomics has a considerable product pipeline generated by its technology platforms: Multicore®, Angene®, ionX® and CSC Rx Discovery™ with an extensive portfolio of clinical and preclinical drug candidates. Among them are BNC105, a solid tumor targeting agent in a Phase II trial for renal and ovarian cancer, BNC210 (IW-2143) targeting anxiety and depression and developed in partnership with Ironwood Pharmaceuticals, and BNC101, a cancer stem cell targeting antibody.
Financial position
Bionomics closed its 2013 financial year with revenue of $3.72 million and an operating loss after tax of $10 million. Cash as at June 30, 2013 was $22.45 million with a net cash inflow for the 12-month period of $4.99 million. Cash at end-December 2013 stood at $20.4 million
At the moment, the company has 12 months of funding in the bank with an average burn rate of $1.5 million a month. Current debt to equity ratio stands at 0.95, compared to 6.44 for the sector.
Table 1: Bionomics Financial Strength
Source: Thomson Reuters Eikon/StarMine
Return on assets
The current TTM return on assets is -28.03% compared to an overall 4.01% for the sector, while TTM return on equity is -39.14%, compared to 19.55% for the sector.
Table 2: Bionomics’ Management Effectiveness
Source: Thomson Reuters Eikon/StarMine
Upcoming milestones
In the short term, Bionomics plans to focus on adding to its pipeline of drug candidates for development and partnering, said Rathjen and CFO Melanie Young, with ongoing negotiations for two of its candidates: BNC375 which is aimed at treating cognitive impairment related to Alzheimer’s disease and Parkinson’s disease, as well as schizophrenia, and BNC164 which focuses on psoriasis, multiple sclerosis and rheumatoid arthritis.
The three drug candidates highlighted earlier are all approaching critical milestones. BNC105, the tumor targeting agent, has displayed encouraging signals of clinical benefits from its Phase I trial and is now going into a Phase II trial. The success of this drug could have positive implications for the company’s performance on the renal cancer market due to the pending patent expiration of a number of current targeted therapies in 2019. BNC210, aimed at treating anxiety and depression, is also going into a Phase II trial. Finally, BNC101, the cancer stem sell targeting antibody, has been submitted for approval to the FDA, and is now getting closer to the start of its first human clinical trial.
Investors following Bionomics’ fortunes may be feeling no pain.
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