Dimerix (ASX:DXB): Good news on Phase 3 trials can catapult this stock

Behzad Golmohammadi Behzad Golmohammadi, April 6, 2022

 
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Dimerix has lots of irons in the fire

Dimerix Limited (ASX: DXB) is a clinical stage biopharmaceutical company, developing DMX-200, which is in Phase 3 clinical trials for COVID respiratory complications and focal segmental glomerulosclerosis (FSGS) disease, a rare kidney disorder without an approved pharmacologic treatment. FSGS often leads to end-stage kidney failure. Lastly, DMX-700 is in pre-clinical development for chronic obstructive pulmonary disease.

 

A lot has been going on with Dimerix in the last 18 months

Let’s take a look at the DXB chart and see what has moved the share price. We’ll pay special attention to the company’s progress with its COVID-related studies.

 

Dimerix

Dimerix Limited, Daily Chart in Semi-log Scale (Source: Metastock)

 

❶ DMX-200 selected for inclusion in the REMAP-CAP global study protocol for Acute Respiratory Distress Syndrome (ARDS) caused by COVID-19.

❷ Positive results from Phase 2a ACTION study of DMX-200 for the treatment of Focal Segmental Glomerulosclerosis (FSGS).

❸ Poor Phase 2 study results of DMX-200 in diabetic kidney disease.

❹ DXM-200 is selected for inclusion into a new phase 3 study, CLARITY 2.0, for the evaluation of DMX-200 a potential treatment for respiratory complications associated with COVID-19.

❺ DXB announces a successful A$20m placement to fund DXB’s Phase 3 trials. The Australian Financial Review (AFR) publishes an article on DXB’s placement highlighting investment by Merchant Biotech Fund in Dimerix, boosting the bullish sentiment on the stock.

❻ DMX-200 CLARITY COVID-19 study approval in India.

❼ Clarity 2.0 receives ethics approval in Australia for a Phase 3 COVID-19 study. Expected to commence patient recruitment in Australia in January 2022.

❽ Patients dosed in DMX-200 COVID-19 Phase 3 study in India.

Shares of DXB have been trading at prices above their pre-pandemic levels in the last one and a half year. This shows the higher valuation market is assigning to DXB for their position in having the potential to benefit from the newly created market by the COVID-19 pandemic.

 

We expect more exciting news to come out in the near-term

According to DXB’s latest announcement, published on 11 January 2022, the first patients were dosed in a Phase 3 study of COVID-19 patients with respiratory complications in India. The primary endpoint is an 8-point clinical health score change, measured on treatment day 14. In addition, interim data safety analysis on the first 80 patients in India is expected in the first quarter of 2022. Additionally, DXB’s second Phase 3 study in Europe also continues to recruit. All that means that we can expect ongoing news flow regarding the company’s progress with DXM-200 effectiveness on treatment of respiratory complications in COVID-19 patients in the near term.

 

Finding treatments for COVID-19 symptoms is now more important than ever

With Omicron moving freely around the globe and governments no longer opting for lockdowns as their first response to the spread of COVID, prevention and treatment of the disease becomes more and more important. This increases the significance of the work done by companies such as Dimerix in their attempt to find treatments for COVID-19 patients. DXB claims that “If effective in the treatment of COVID-19, DMX-200 may be equally effective across all strains and other infection-related pneumonias.”

 

Dimerix looks cheap at the current market capitalisation

DXB has a market cap of only $86 million. In its latest capital raise, which closed on 28 September 2021, the company raised $24m, which puts it in “an excellent position to fund its multiple Phase three trials”, according to the company. In our view, this should decrease the risk of further dilution until at least a positive result from one of the company’s ongoing trials.

 

Our expectations for the share price

Based on technical analysis, 20 cents should be the bottom for the share price until the next important announcement is made by the company.

The latest cap raise was at 20 cents (point 5 on the chart). What was unusual was that the share price spiked to almost 50 cents after the announcement of the share placement. Usually when a cap raise is announced, the share price drops to around the capital raise price due to new shares being sold down to that raising price by investors who got an allocation in the raise.

In this case, DXB’s share purchase plan closed oversubscribed, meaning that there were still plenty of investors wishing to buy into the stock.

 

Next target is 80 cents with a Stop-Loss at 20 cents

The short-term downtrend has already been broken to the upside on the back of announcements regarding DXB’s advances in the execution of its COVID-related trials. This shows the stock is getting the market’s attention.

In case of successful results announcements on the ongoing trials, the minimum target for the share price is the all-time-high level at 80 cents.

However, if the stock were to break the 20 cents support level, that would signal a significant shift in market sentiment on the stock. So, this level can be used as a stoploss level. Entries near this level will offer a great risk-reward opportunity.

 

 

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