Why all the excitement in 2019?
Paradigm Biopharmaceuticals captivated investors with an impressive 300% rise over 2019. Paradigm aims to alleviate the suffering and cartilage degradation of Osteoarthritis through their repurposed drug Zilosul. PAR’s rapid stock rise was due to the company’s outstanding collection of clinical data on Zilosul.
For any Biotech to achieve success, the company must commercialise a drug that is effective, safe, and simple to use. Commercialisation is a steep road to travel down. This is because Biotechs need an arsenal of clinical data to illustrate the drug’s effectiveness, patients who are willing to trial the drug, and a significant amount of cash to fund the development.
Key 2019 achievements
- 28th May 2019 – PAR reported that Zilosul successfully reduced 50% pain in 205 knee OA patients, under the Therapeutic Goods Administration Scheme.
- 29th August 2019 – The breakthrough that Zilosul reduces cartilage degradation – Results from Phase 2b Clinical Trial = Zilosul reduces pain + protects cartilage from the progressive degradation
- 10th September 2019 – Paradigm received FDA approval on Its Investigational New Drug Application (IND). The IND contained an application for 10 patients suffering from knee OA to receive Zilosul
- 30th September 2019 – Paradigm reports the ground-breaking discovery that Zilosul prevents Nerve Growth Factor in a patient’s bone cells and thus reduces pain. Paradigms discovery was peer-reviewed and published in the international scientific journal PLoS One.
- 25th October – Paradigm announced the commencement of treating Zilosul in 10 ex-NFL players. The first patient is scheduled for December 2019. With all ten patients being treated by the end of Q1 2020.
Financials of Paradigm
Firstly, Paradigm’s revenue grew 11% over the past year (June 2018-2019). Despite the small increase, revenue growth indicates a step towards profitability.
Moreover, Paradigm’s cash balance has skyrocketed by 740% (September 2018-2019) to 75.39 million. In turn Paradigm can comfortability fund the commercialization of Ziolsul, if it gets to that stage.
Furthermore, over the last 12 months, Christopher Fullerton and Paul Rennie have purchased 580,392 shares valued at $429,826. The insider trades indicate a bullish trend. Also, the recent purchase of 100,000 shares at $3.01 indicates that investors see growth in the share price.
Despite the extensive list of clinical data and healthy financials, we must examine the negatives (risks). Primarily, because YIG believes investors must have a balanced perspective to prevent speculative stocks alluring investors without the full picture.
Firstly, Paradigm is still unprofitable. Instantly sending alarms bells inside the smart investor. Unprofitability is forecasted due to the costly commercialisation of Zilosul. Unprofitability results in PAR having a negative Return on Equity and price to Earnings ratio. Also, Paradigms revenue is at 3 million, which is not meaningful. These fundamental negatives could explain the recent correction (9% decrease) over the past week.
Is Paradigm a buy going into 2020?
With Paradigms 300%+ escalation, investors are pondering the question of whether Paradigm’s success will continue in 2020? It all gets down to the commercialisation of Zilosul. Because investors are only willing to put with up unprofitability, minimal revenue, and no credible regulatory approvals only if Zilosul goes through. PAR does have enough cash for 2020.
However, if Zilosul cannot be commercialised then the excitement around Paradigm would instantly fade. YIG recommends that if investors are attracted to PAR then watch out for the following 2020 bullish events:
- Submission of pre-IND dossier to FDA = Q4 2019
- Joint submission t0 US FDA and European EMA on mucopolysaccharidosis = Q1 2020
- Feedback from TGA on Provisional Approval
- Results from Zilosul treatment on NFL players = Q1 2020
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Associate of YIG, Patrick McLoughlin.