These are the 22 small cap biotechs closest to bringing a drug to market

There are no shortage of small cap health and biotech companies listed on the ASX — around 140 or so — but less than 25 are anywhere close to their ultimate dream of bringing a drug successfully to market, a Stockhead analysis has found.

Taking a drug or treatment from an idea to the lab, through animals, into patients and then onto the market is a notoriously difficult exercise.
The average length of time it takes for a drug to complete the journey from discovery to market is at least 10 years, with the average cost of that process $2.6 billion.
Once out of the lab, drugs head into what are know as pre-clinical trials, in which the drug is tested in animals, usually rodents. The problem with that is experiments in mice nearly always fail to be replicated in humans.
If pre-clinical trials are successfully passed, drugs then undergo in-human testing, firstly in healthy patients to determine its safety (phase I), then in ill patients for efficacy (phase II) and finally in larger populations to compare the results with currently available treatments (phase III).
Between 2005 and 2016, only 9.6 per cent of drugs made it from phase 1 to market, according to Biotechnology Innovation Organisation data, and only 30.7 per cent of drugs make it out of phase II.
And in worse news, even if phase III trials are successful, the drug has to be taken to regulatory bodies for approval, another long process that in more than 40 per cent of cases requires the company to undertake further studies to prove the drug’s worth.
Phase III trials are also very expensive and take a long time, and so it is at this stage that many biotech companies will look to find a partner company, usually a bigger pharmaceutical company, to take on the expense and risk.
All this explains why there are so few ASX-listed biotech companies that are close to realising their shareholders’ dreams of becoming the next CSL (ASX:CSL) by raking in billions from drug sales.
The two closest to bringing a drug to market
There are two small caps currently engaged in phase III trials: Neuren Pharmaceuticals (ASX:NEU) and Telix Pharmaceuticals (ASX:TLX).
Neuren announced just last week that its North American licensee ACADIA Pharmaceuticals had kicked off a phase III trial of its drug trofinetide in patients with Rett syndrome in the United States.
Rett syndrome is a rare genetic brain disorder that affects brain development in females.
It currently has no cure and is treated mainly focusing on improving function and addressing symptoms, which can include problems with language, coordination, and repetitive movements, slower growth, smaller head size, seizures, scoliosis and sleeping problems.
In phase II trials, trofinetide was shown to achieve statistically significant improvement compared with placebo on three of five syndrome-specific efficacy measures, in 82 girls with Rett aged between five and 15.
The phase III trial and its associated costs are fully funded by ACADIA and Neuren will commercialise trofinetide outside North America if successful.
Meanwhile, Telix in August reported that it had dosed the first patient in the phase III trial of its drug TLX250-CDx, designed to help detect renal cancer.
The share-moving phase II results
Several small cap biotechs have read out results from phase II trials, which has unsurprisingly resulted in their shares flying — as they all now look to either find a partner to fund third-phase trials or figure out how to afford it themselves.
About a year ago Biotron (ASX:BIT) claimed it had made a “major step” towards curing HIV, with news its drug BIT225 was “having a unique effect in patients, over and above viral suppression seen with current antiretroviral drugs” in phase II trials.
Its shares however have languished since that news, with not so much as a peep since. The company is focused on “commercialisation activities and setting up technology for phase III and beyond”, it recently told shareholders.
Orthocell (ASX:OCC) shares flew 377 per cent in a single day back in May, when the company announced its CelGro technology was helping patients with damaged nerves regain sensation and muscle function in affected limbs, reporting an 83 per cent improvement in muscle power.
Paul Anderson, Orthocell’s managing director, told Stockhead recently the technology may have even helped Superman (the actor most well known for playing him at least, Christopher Reeve).
Focusing on osteoarthritic knee pain, Paradigm (ASX:PAR) hit record highs this year when it released the latest round of positive data from its phase IIb trial, which followed a 2018 112-patient study that showed its drug iPPS had a “clinically meaningful and statistically significant effect” on patients’ reported pain.
Paradigm boss Paul Rennie told Stockhead his company had no plans to partner, having raised $78m in capital to fund phase III trials on its own.
Finally, Botanix (ASX:BOT) is on the verge of phase III trials, having reported phase II results of its acne treatment in late October.
The trial failed to meet its primary endpoint, but showed enough promise to allow the company to progress to phase III anyway.
Other companies to have reported phase II results include Actinogen (ASX:ACW), Antisense Therapeutics (ASX:ANP), Benitec Biopharma (ASX:BLT), Bionomics (ASX:BNO), Kazia Therapeutics (ASX:KZA), Living Cell Technologies (ASX:LCT) and Opthea (ASX:OPT).
…and the rest
The following small caps, in addition to several of the above, are currently conducting phase II trials: Cynata (ASX:CYP), Dimerix (ASX:DXB), Impression Healthcare (ASX:IHL), Immuron (ASX:IMC), Immutep (ASX:IMM), Imugene (ASX:IMU), Medlab (ASX:MDC), MGC Pharma (ASX:MXC) and Regeneus (ASX:RGS).
Pharmaxis (ASX:PXS), which already has a number of drugs on the market, is also currently conducting phase II trials alongside its German partner.

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