Why the Paradigm share price is up 250% in 2019

About Latest Posts Tom RichardsonTom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) …

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Paradigm Biopharmaceuticals Ltd (ASX: PAR) shares are up from 99 cents on New Year's day 2019 to $3.49 today and even hit as high as $4.12 last November.

What does Paradigm do?

With its shares up 250% in less than a year you'd think Paradigm is sporting big profit and sales growth. But it's actually on the contrary in that it has zero sales or approved commercial products, let alone profits. 

Despite the lack of dollars coming though the door, Paradigm is getting bid higher on investor excitement over the potential of its patented Zilosul drug as a treatment for osteoarthritis and other common joint inflammations in patients. 

The biotech currently has various applications in with the the US healthcare regulator the FDA and local regulator the Australian Therapeutic Goods Administration (TGA) to have the drug assessed and approved for commercial use. 

More specifically the FDA has granted Zilosul an 'expanded access program status' and the drug's first U.S. patients are being treated on a trial basis in December 2019. 

Are the shares worth a punt?

Paradigm already has a massive $666 million valuation based largely on hype, FOMO, and shareholders' views that Zilosul has a good chance of commercial approval.

Anecdotally, much of the bullishness is based on the view that past trials and usages of the drug have been effective according to some clinicians and former patients. 

The company boasts that the revenue potential for Zilosul in Australia on a 20 per cent market share basis is $1.5 billion.

Needless to say it would be many multiples of that in a market like the U.S.

However, as a word of warning if Paradigm's drugs fail to meet expectations it would join a long list of biotechs promising the world but delivering almost nothing.

It's also fair to say that its current valuation it's already priced for success, which means plenty of downside if it disappoints. 

It also has the opportunity to partner with big pharma to meet some of the significant trial and marketing expenses it will incur on the way to getting any treatments commercialised. If it does this the investment profile will de-risk nicely, although the upside will not be quite so great. 

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

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. 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.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »