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.
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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.