City-Analysts upbeat after Biocompatibles’ strong interims

Biocompatibles (LON:BII) represents a very attractive investment in the medical technology sector,  according to Nomura Code’s  Michael King.

Describing yesterday’s interims and clinical trial results as ‘very encouraging’, the analyst reiterated his buy and 310p per share price target.

“With marketed products justifying the current valuation and the potential from the company’s longer term R&D projects ... Biocompatibles represents a very attractive investment in the sector with a well balanced risk profile,” King said in a note to clients.
The potential news flow over the next 12-18 months gives the Nomura drugs guru cause for optimism.

Of most interest is possible roll-out of Biocompatibles’ drug-eluting beads in China next year, and also  any progress across its clinical trials, King said.

Sam Fazeli, at City-broker Piper Jaffray, was also upbeat in his post results coverage of Biocompatibles.

He highlighted the fact that the first half performance was ahead of forecasts, and he expects the company to complete a profitable 2010.

“Biocompatibles offers a good-value lower-risk investment opportunity. Currently, around a third of its market value is accounted for by cash,” Fazeli wrote.

Based on the company’s growth potential, and peer analysis, Piper Jaffray estimated Biocompatibles enterprise value at £134.6m, which it says equates to a market cap of £160.5m, or 410p a share.

Currently Biocompatibles is trading at 260p – unchanged on the day.

“Given the estimated growth potential of Biocompatibles is higher than the 10% median [for its peers] ... we believe the stock should trade on at least a 30% premium to the peer group,” Fazeli said.

Yesterday’s impressive results, revealed a 22% jump in total revenue jump, or 24% at constant currency to £17 million as Bead products revenues increased 38% to £9.3 million. Most importantly, the company made a profit of £1.2 million after posting a £0.7 million loss in H1 2009.

Overall, the company was pleased with the results, particularly the strong revenue growth, and expected to continue trading profitably.

Biocompatibles also gave investors a boost with positive news from its DEBIRI (Drug-Eluting Beads loaded with irinotecan) clinical trial.

The company announced the presentation of Phase I/II data in a clinical trial evaluating DEBIRI (Drug-Eluting Beads loaded with irinotecan) in liver metastases from colo-rectal cancer and FDA approval for continuing the clinical trial into a randomised Phase IIb.

The data was presented at the World Congress for Gastro-Intestinal Cancer in Barcelona in July for ten patients
with unresectable liver metastases who had received no prior treatment and who had been treated with the combination of the FOLFOX chemotherapy regimen and DEBIRI.

Five of the ten patients were down-staged to a potentially curative surgical treatment.

Associate Professor of Surgery in the Division of Surgical Oncology at the University of Louisville Robert martin, who was presenting the data, described the treatment regime as “safe and effective with superior surgical downstaging”.

With the FDA approval secured, 60 patients will now be randomised for treatment with the FOLFOX or FOLFOX and DEBIRI.

Biocompatibles noted that while FOLFOX was a standard of care that has been shown to extend survival, the liver metastases still progressed with systemic chemotherapy unless surgically removed.

The primary end-point is tumour response with secondary end-points including safety, progression free survival and overall survival. Results are expected in 2012.

“And while FOLFOX is a systemic treatment, DEBIRI is a catheter-targeted local treatment - so there is a good rationale to explain the increase in the number of patients in this trial who were down-staged to resection and a potential cure. These are very promising results. And following the NICE rejection of Avastin this week, patients do now have another option to discuss with their doctor,” said Simon.

DEBIRI with DC Bead has been approved for use in the UK and 30 other countries