Small biotech companies tend to be almost entirely focused on their core technology. This means shareholders often have to be very patient while being called on to fund lengthy R&D projects and that everything can depend on the success of a single product.
Midatech (AIM: MTPH) has tried to differentiate itself by acquiring existing pharma products to provide a revenue base while it develops its innovative drug delivery products.
Following those acquisitions it has a team of 40 in the US and six products in the market, which the company believes have the scope to reach $50 million of peak sales. Group revenues will be £9 million this year and are expected to almost double over the next two years. This will still leave the company in loss, but it does provide a sales and marketing infrastructure as well as the potential to create some value.
R&D is focused on two techniques for the innovative delivery of existing drugs. Gold nanoparticles are being used deliver drugs to targeted cells in chemotherapy. Being incredibly tiny they can pass through membranes and cells in order to reach the disease. Midatech’s other platform is a sustained release technology called Q-Sphera.
Because Midatech is working with already approved drugs means the authorisation process is much shorter and less expensive than the trials that have to be undertaken to get a brand new medicine approved. Even so, Midatech has had an early product failure. This was MidaForm, a strip designed to release insulin orally which disappointed in phase II trials and was pulled.
The remaining pipeline products are in oncology and immunotherapy with MTD201 the top priority. The best case here is for an FDA application at the end of next year with commercialisation in 2018. MTX110 for childhood brain cancer is in phase I trials and MTR104 for liver cancer should enter the clinic by the end of 2017.
Following a recent £16.9 million fundraising at 110p, CEO Jim Phillips says he has enough cash for the next two years. If the established pharma products perform well, the company could be profitable by 2019. Though it’s important to remember that cash might be needed for further product acquisitions as well as expanding the clinical trials programme. Broker Panmure has an aggressive looking target price of 297p, though we should get newsflow throughout the coming year.