Small Caps | Jan 24 2017
This story features ANATARA LIFESCIENCES LIMITED. For more info SHARE ANALYSIS: ANR
Anatara Lifesciences will soon offer a treatment for meat animals such as cattle and pigs, designed to reduce gastrointestinal disorders and increase meat yield.
-potential solution to significant problem of antibiotic resistance
-global demand for meat expected to grow significantly
-potential human applications in IBD and IBS
By Eva Brocklehurst
Anatara Lifesciences ((ANR)) will soon be offering its first product to the market — Detach — a treatment for production animals such as cattle and pigs, designed to reduce gastrointestinal disorders and increase meat yield. The company filed for Australian approval of the product in October and expects to be selling it commercially to pig farmers in 2017.
NDF Research envisages significant upside for the company with an option granted last year to the animal health company Zoetis over a worldwide licence for Detach. The product's mechanism does not involve killing the pathogens directly, which makes it a potential solution to the significant emerging problem of antibiotic resistance.
The company is looking at human applications for Detach, including inflammatory bowel disease (IBD) and irritable bowel syndrome (IBS), that are in need of new anti-inflammatory approaches. NDF Research values Anatara at $2.22 as its base case and $5.94 as an optimistic case, using a discounted cash flow approach. The price target of $4.00 is around the midpoint of the valuation range.
How does the drug work? It uses a natural product called bromelain by harnessing the notable anti-infective properties of the substance. This is a protein digesting enzyme which is obtained from the fruit or stem of pineapples. Researchers over the years have identified numerous potential therapeutic applications in conditions as diverse as osteoarthritis, angina and even cancer.
One of the product specific, anti-infective properties arises from its ability to prevent the attachment of pathogenic gut bacteria to various receptors located on the intestinal mucosa. When unable to attach to these receptors such bacteria are rendered harmless and, as bromelain does not kill the offending bacteria, there is no opportunity for drug resistant strains to emerge.
Detach is a patented formulation of bromelain protease and, while NDF Research acknowledges this is far from novel, since the early 1990s no other company has advanced the use of bromelain in animal health in a serious way, so Anatara is considered a leader in the field.
Why this product interests cattle and pig producers is that it cuts the level of mortality and antibiotic use, which has demonstrable economic benefits. A field trial has signalled this product could lower the incidence of scour in post-weaning pigs by 40% as well as increase weight gain, while reducing antibiotic use.
Given global demand for meat is expected to grow significantly the over the next two decades, producers of cattle and pigs are expected to seek new tools to lower the rate of infectious diseases which do not involve antibiotics. Detach represents one such tool, NDF Research believes.
Anatara also envisages potential for partnering discussions around various human indications in 2017. The prevalence of IBD and IBS suggest a significant pay-off for the company should Detach be found to have utility in such a setting. NDF Research notes big pharmaceutical companies are seriously interested in treatments for IBD, a serious chronic inflammation of all or part of the digestive tract which is characterised by severe diarrhoea, pain, fatigue and weight loss.
The company is fully funded through to its first revenues, having raised $9m in a placement at $0.78 per share in July 2015. NDF Research believes the stock is undervalued on its numbers and expects Anatara to be re-rated by the market as further data emerges on the utility of Detach in pig farming and the deadlines for first regulatory approvals approach.
The researcher also notes that when Anatara Lifesciences listed on the ASX in October 2014, it was the third public company to have been involved in the development of bromelain as an anti-infective in animal health. NDF Research believes perseverance and investment in the project through all three companies by the developer, Tracey Mynott, should bode well for an eventual commercial pay-off for shareholders.
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