Today’s announcement of a “significant” deal with AstraZeneca will be welcome news for Starpharma (ASX : SPL) shareholders and will no doubt move the needle on the perception of progress by the company. I am sure that there will be a lot of high-fives on HotCopper today.
While I think it is great news to see continued evidence of the international biopharmaceutical community engaging with Australian biotech, and we should acknowledge that all deals take real time and effort to close, this particular deal doesn’t particularly move the needle for me in my enthusiasm for Starpharma. In my opinion, it’s a pretty light deal – reflective of a typical early stage commercial relationship despite all the “biodollars” tagged in the announcement. I don’t think it fundamentally changes the valuation of the company – indeed, any analyst coverage I have ever seen of SPL essentially has this kind of partnership deal essentially baked into the valuation. If we are all honest with each other, this information isn’t really anything new. Frankly, I was also a bit irritated by the $2m “signing fee” part of the announcement. That’s just a way to tart up an “up-front” payment into something that sounds better than it really is. It’s still only $2m up front and there isn’t enough detail around short-term clinical milestones to get all that excited.
Still, it’s good to see Jackie Fairley doing her job – especially as she is still one of the most over-compensated CEOs in the biosciences industry. Frankly, in reading the last couple of shareholder reports, one couldn’t help but notice the inverse relationship between her executive compensation and the valuation of the company.
Shareholders still need to exercise caution amidst the jubilance. The DEP-docetaxel program took a very long time to get to the clinic (animal studies reported early 2012), presumably because the company was having difficulty controlling stability/solubility – not unusual for this type of product. Starpharma’s programs with AZ may be very promising but significant milestone payments may be quite far off into the future, for exactly the same reason. As I also previously commented, I am extremely lukewarm about the company’s recurrent bacterial vaginosis (R-BV) Phase III study because I don’t believe there is sufficient clinical evidence to support the investment. In my opinion, this Phase III study is a complete and utter waste of shareholder capital and is mostly reflective of a blind commitment to proceeding down an “articulated” pathway, than a robust management decision based on solid clinical science and product economics. Good news flow like today’s announcement should not excessively obfuscate the fact that this company has some serious challenges.
I would get somewhat more excited about Starpharma if they made the decision to abandon the R-BV study and use that capital to drive the dendrimer program in cancer, building on the experience with DEP-docetaxel. This would more productively align resources with external relationships like AstraZeneca and might, with intelligent pipeline decisions, create the foundation of an exit opportunity for the company.
Of course that scenario is highly unlikely, but one can always live in hope…