I've been actively investing in stocks for a decade now and I've come across stocks that have been inexplicably undervalued by the market through a cycle. Examples I can think of that I invested in at the time, where the stock was extremely undervalued through stock price, especially post GFC are iinet, tpg (tpn), CSL, Thorn Group, AX1 (when it was previously under another code), and more recently BSL, anyway...
KZA is different in that it is a speculative biotech. But, it is seriously kicking goals with GDC-0084 and, after divesting of a lot of other candidate drugs, it is still progressing Cantrixil, albeit on a slower lane, but with phase 1 results to date demonstrating potential.
The recent step up in share price is due to early data on phase II trials of GDC-0084 in treating primary glioblastoma. There are several other trials being undertaken of GDC-0084 by leading international clinics around brain cancer. The recent news released by the company has included the suggestion that the next clinical trial is likely to be a "pivotal" trial designed to achieve registration of the drug for commercial use.
Yesterday, Kazia announced that
further clinical trial of GDC-0084 will be conducted through the GBM Agile research program. This is huge. This is going to provide a potential path to commercialization (if the drug can be proven to be worth registration) at considerable less cost and time to a conventional phase III definitive study.
Why is this shortcut available and why have the doors been flung open to Kazia for GDC-0084? Because there has been no drug that has been able to progress glioblastoma treatment for over twenty years and because the current treatment provides such poor marginal outcome (and in fact no benefit for 75% of glioblastoma patients).
GDC-0084 is one of several of the recent generation of PI3k inhibitor. Some of these are demonstrating potential effect against cancers, especially breast cancer. A problem with cancers such as breast cancer, melanoma, etc, is that they often metastasize into brain cancer. GCD-0084 is the only PI3K inhibitor known to cross the blood-brain barrier. This is why several other research institutes are researching GDC-0084 in their own clinical trials. The potential scope for GDC-0084 as a "wider" acting PI3K inhibitor for therapeutic is interesting.
How Kazia (formerly Novegen) got to be the custodian of GDC-0084 as a potential brain cancer drug is a long story. The short story is that what was then called Novogen had several drugs ready to go into human trial but no financially viable means of getting there. A few years ago the Novogen board took a decisive course of action that saw the then CEO depart (he went off to establish Noxopharm) and the appointment of James Garner as CEO.
Garner did two things. He narrowed down the suite of potential Novogen drugs to take forward into human clinical trials to just Cantrixil for ovarian cancer which is currently under phase I trial. Secondly, through serendipity, he acquired the license allowing Novogen (now Kazia) to take GDC-0084 to phase II trial. I've said enough here for now. Anyone interested should go and do some background research on how this came about.
The post-worthy point to this post is, in addition to the announcement that GDC-0084 will now be proceeding under the GMB Agile program, is the shift in assumption over the business model around Kazia taking GDC-0084 commercial. The business case has always been that Kazia licensed development of GDC-0084 from Genentech (part of Roche) as an intermediary along the road to commercialisation with the intention to enter some sort of deal to pass the drug along to big pharma (perhaps back to Genetech) after having economically (on the smell of an oily rag) facilitated the drug through the trials needed to demonstrate commercial viability justifying further big phara investment.
The GBM Agile collaboration now sees Kazia better able to propel GDC-0084 further toward registration as a drug without the need for substantial funding from big-pharma. This is huge because the assumption has always been that, along with the commitments from the licensing deal with Genetech (which we don't know the specifics of) Kazia would need to significantly dilute its interest in the commercial potential of GDC-0084 in raising significant further capital to advance clinical trials and/or diluting its interest in the drug through big phara collaboration.
If you listen to
this interview with CEO Garner at a bit after the 8 min mark he states that the GBM Agile pathway means it should not be assumed that a partnership with big pharma is necessary to register the drug. For me as a long term shareholder this is huge. I don't care what the share price is today or tomorrow or next year quite frankly. I am interested in what value this drug may have as a registered administered drug and excited by the scope of the potential clinical application.
After having said all of the above, it is my opinion that anyone who invests in speculative stocks such as KZA should do so after evaluating their personal circumstances, including their risk tolerance and should size their investment appropriately.