At the start of April, the Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price reached $2.02. Much of Paradigm’s share price increase was in anticipation of secondary end point results for its phase 2b osteoarthritis trials.
The recent trial report showed extremely positive results.
Most importantly, it was found that Paradigm’s repurposed drug showed a stark difference between itself and the placebo. The results were verified using an MRI scan which measured the lesion caused by bone marrow edema.
At day 53 of treatment, Paradigm’s repurposed drug showed a reduced bone marrow lesion volume of 34% vs the placebos 3.6%. Furthermore, the bone marrow lesion area increased in the placebo group by 11.9% compared to a 25.3% decrease in the treatment group.
The objective results obtained were also statistically significant with a p-value of 0.03, meaning that it’s highly likely that Paradigm’s repurposed drug is causing the improvement of bone marrow lesions.
Why did the Paradigm share price not respond accordingly?
Despite fantastic secondary endpoint results from Paradigm, the share price did not react positively.
The cause can be attributed to Paradigm’s capital raise at a significant discount which was announced alongside the secondary endpoint results.
Although Paradigm’s share price could have responded better, Paradigm received strong attention for its $77.9 million capital raise which should be filled promptly.
Paradigm expects a cash level of $82 million post raise which will allow it to take its repurposed drug through phase 3 trials.
Additionally, a strong cash position by Paradigm will ensure a better offer from potential future negotiators.
At this stage, Paradigm is aware that it has a potential blockbuster drug on its hands and therefore wouldn’t give it up without a significant premium.
Where does Paradigm go from here?
Paradigm has multiple share price catalysts coming up. These include the phase 2/3 clinical trials for MPS and the approval for selling its repurposed drug in Australia.
With the results obtained from its phase 2b trials, Paradigm has significantly de-risked its repurposed drug for phase 3.
Paradigm Biopharmaceuticals is currently well positioned to take its repurposed drug into phase 3 clinical trials. If Paradigm succeeds throughout phase 3, the share price could take off for many years to come.
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Motley Fool contributor Elton Wang owns shares of PARADIGM BIO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.