Here are 6 important milestones of ASX biotech companies other than clinical trial results and regulatory approval

The list of major milestones of ASX biotech companies is headed with clinical trial results, regulatory approval and commercialisation. However, clinical trials can take a long time, and there are no guarantees of success. And, as goes without saying, there won’t be regulatory approval or commercialisation without results.

As important as they are, there are other milestones along the journey to these points that need to happen. And here are 6 of the most important.

6 important milestones of ASX biotech companies that investors need to watch for

Ethics/safety approval for clinical trials

Before a biotech company can undertake clinical studies, it needs Human Research Ethics Committee (HREC) approval. There are 200 such HRECs in Australia alone, all of which ensure any human research meets the National Statement on Ethical Conduct in Human Research.

R&D funding

In most of the world’s major jurisdictions for healthcare companies, there are various programs enabling tax incentives for companies undertaking R&D activities in the healthcare space.

In Australia, companies with an aggregated turnover of less than $20m can receive a tax offset that is 18.5 percentage points above the company’s rate. If the tax offset exceeds the entity’s tax liability, the balance is paid to the company in cash. This is sometimes called the ‘43.5%’ Research & Development Tax Incentive – calculated from the 18.5% percentage point figure above, as well as the 25% corporate tax rate for small companies. In essence, 43.5% of a company’s R&D activities are captured, and it does not matter where in the world such activities are undertaken.

WHO lists

This is a milestone not many biotech companies achieve, and is not strictly necessary for commercialisation. However, this can be an important milestone, and Recce Pharmaceuticals is one of the few biotechs that has. The World Health Organisation last month added its RECCE 327 (R327) drug to its list of Antibacterial Agents in Clinical Development and Preclinical Development. R327, is being developed by the company to fight super bacteria. It is uniquely classified as an adenosine triphosphate (ATP) production disruptor, the only compound under this category. This showcases the drug’s potential as it continues to edge through the clinic.

Patents

Patents are vital for biotech companies because they protect their assets while developing them, ensuring they do not need to worry about competition. For investors who do not know, a patent is a legal right granted by a government to an inventor or assignee, giving them exclusive rights to make, use, sell, and distribute a particular invention for a specified period. This invention can be the drug itself, but also a company’s methods of manufacturing and administration of the drug. Companies may have multiple patents across multiple jurisdictions.

Manufacturing milestones

As companies undertake clinical trials, they will generally need to manufacture their own doses. This is easily done when a biotech company is at early-stage trials, particularly when the company has only one drug and is targeting one indication. For biotech companies such as Recce, targeting multiple indications and conducting multiple clinical trials, they will need to prove that they can manufacture sufficient doses for the trial. Some companies will even patent their manufacturing method, and reaching milestones will be even more important for them. Recce recently proved that it can produce 5,000 doses for R327 per week.

Licensing deals

Many ASX biotech companies seek licensing deals to commercialise their technology. This will involve selling their rights to commercialise their drug to other companies, in return for royalties on sales, along with upfront and milestone payments (subject, of course, to the company reaching milestones such as commercialisation and passing later-stage clinical trials).

Dimerix (ASX:DXB), a biotech developing its DMX-200 drug to market for Focal Segmental Glomerulosclerosis (FSGS) secured 2 licensing deals in the last 12 months, even prior to the conclusion of a pivotal Phase 3 trial. First was a deal with Advanz Pharma to commercialise DMX-200 in the European Economic Area, the UK, Switzerland, Canada, Australia and New Zealand as well as a right of first offer to commercialise DMZ-200 for other indications in any of these territories. Second was a deal with Taiba 7 Middle Eastern markets: The United Arab Emirates (UAE), Saudi Arabia, Oman, Kuwait, Qatar, Bahrain and Iraq. These two deals are worth over $300m all up including upfront and milestone payments in addition to tiered royalties, starting at 30% on net sales.

Dimerix and Recce Pharmaceuticals are Pitt Street Research or Stocks Down Under clients, but they did not sponsor this article.

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