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Is Paradigm the real deal blockbuster biotech?

The Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price has gone gangbusters in 2019 as wild investor excitement mounts over its Zilosul drug’s commercial potential. The biotech now has a market value around $516 million despite posting an operating cash loss of $6.4 million on zero sales for the six months ending June 30 2019.

In some consolation for enthusiasts it did have $73.2 million cash on hand as at June 30. 

What’s all the excitement about?

Paradigm’s Zilosul drug is claimed as a treatment for osteoarthritis and other common general joint inflammations.

The biotech is conducting or plans to conduct several major clinical trials to get the clinical evidence required to make bulletproof a case for Zilosul’s commercial approval. 

It currently has applications of varying levels in with the the US healthcare regulator the FDA and local regulator the Australian Therapeutic Goods Administration (TGA).

Today it reported that if it obtains “provisional approval” from the TGA for Zilosul it could generate revenue as early as Q3 in calendar year 2020. 

It also expects to meet the US FDA over its “investigational new drug” (IND) application before the end of 2019. It expects to have treated 10 US patients (all ex NFL players) for joint pain by the end of Q1 in calendar year 2020. 

Should you buy?

Paradigm has a strong balance sheet and there’s a lot of bullish talk in the market about its drug’s potential and historical track record.

However, given it has no sales revenues and no credible regulatory approvals it remains highly speculative.

It’s also worth noting with shares at $2.67 it already has a market value more than $500 million.

In other words some success is already priced in while the downside remains huge in case of any number of clinical trial failures.

Of course if it does deliver on its potential it could prove a multi-bagger for anyone brave enough to speculate on it. 

As such if you wanted to buy it I’d suggest doing a lot independent fundamental research and only investing what you can easily afford to lose.

I would not suggest buying shares myself as I believe you can make strong returns in the share market without speculating. 

Other speculative biotechs exciting some investors include Mesoblast Limited (ASX: MSB), Next Science Ltd (ASX: NXS) and Opthea Ltd (ASX: OPT)

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Motley Fool contributor Tom Richardson owns shares in Dicker Data.

You can find Tom on Twitter @tommyr345

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.

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