BioTech’s Magic Bullet: Molecular Delivery Platform Sector Overview and Plays

Now more than ever before, once remote terms and concepts from the field of biotechnology and pharmaceuticals have become household words. This shift was induced, of course, as a consequence of the COVID pandemic and the subsequent vaccine rollout that, in one way or another, affected almost everyone in some manner around the globe. Growing public awareness of definitions like mRNA vaccines and antigen vs PCR testing coincides with another exciting trend in the world of biotechnology: a strong push for innovation in the subfield of molecule delivery platforms for a range of pharmaceutical and therapeutic products. Today I wanted to discuss the general contours of this field, where its going, and some potential investment plays therein.

In 1907 German Nobel laureate Paul Ehrlich coined the term “magic bullet” to describe a then-hypothetical technology that could target specific microbes (such as bacteria), which cause diseases in the body, without harming the body itself. Medicine has advanced by leaps and bounds since Ehrlich’s time, and this novel concept is now a reality. According to a recent scientific article published on the topic: “the targeted delivery of bioactive molecules to the appropriate site of action, one of the critical focuses of pharmaceutical research, improves therapeutic outcomes and increases safety at the same time..[in recent years] a considerable amount of research effort combined with enormous investment has carried selective drug targeting into clinical practice.”

This academic overview is substantiated by market research and analysis. According to Markets and Markets Research, the global pharmaceutical drug delivery market is projected to reach $2.2T by 2026, at a CAGR of 5.9% through 2026. While pharmaceutical drug delivery is an umbrella term, molecular delivery tech is alternately classified as a subcategory of nanotechnology or specific drug markets (oncology, diabetes, etc), meaning that the value of this market is likely higher than forecasted above.

The first company up for discussion today is a Canadian-listed smallcap that I discussed in a similar capacity in one of my previous posts, Innocan Pharma (CSE: INNO)(OCTQB: INNPF). Innocan is a pharmaceutical innovator developing delivery systems for the targeted and extended-release of CBD (yes, cannabidiols) into the body. The company is pursuing a double-pronged R&D strategy that involves two different delivery molecules, namely liposomes and exosomes. Its liposome-platform technology (LPT) is being developed in collaboration with Hebrew University, and its CBD-Loaded Exosome (CLX) platform in collaboration with Tel Aviv University. Significantly, the company recently had a case report published in the prestigious Frontiers in Veterinary Science journal that outlines the successful use of its LPT to treat canine osteoarthritis and other inflammatory parameters. The company sees the field of veterinary medicine as a stepping-stone to clinical trials involving human participants.

Since listing in Q3 2019 Innocan on the Canadian Security Exchange, Innocan has entered a hyper-growth trajectory that has resulted in share price gains of nearly 100%. After major price action volatility in Q3–4 2022, INNO price action has consolidated in the $0.55–0.60 range, and looks to be in consolidation mode pending a major catalyst. Sectorally, Innocan has a foot in the worlds of both pharma and CBD/cannabis, the latter of which is expecting a fundamental catalyst sooner rather than later in terms of US legalization. I’m a LT holder of INNO, and am intrigued to see where they take their current focus on liposome and exosome-based delivery platforms.

The next company up for discussion is Ayala Pharmaceuticals (NASDAQ: AYLA). Ayala is a bit further down the corporate evolutionary ladder than Innocan in that its a clinical-stage oncology company that focuses on developing and commercializing small molecule therapeutics for patients suffering from rare and aggressive cancers. The company’s lead product candidate is AL101, a potent, selective, and injectable small molecule gamma secretase inhibitor (GSI) that is in Phase II clinical trial for the treatment of recurrent/metastatic adenoid cystic carcinoma for patients bearing Notch-activating mutations. In terms of collabs/JVs, Ayala Pharmaceuticals, Inc. has a collaboration agreement with Novarti–a global pharma giant–to develop AL102 for the treatment of multiple myeloma.

According to April analyst ratings, AYLA remains a BUY/STRONG BUY despite its short-term bullish chart pattern that can be attributed to skewing variables like high volatility on NASDAQ and sector-wide declines. Though they missed their Q4 ’21 earnings goal, target price for the company remains bullish at ~$15, i.e. potential upside of >600%. I’m not a current holder of AYLA, but the price looks to be bottoming out and I have LT hopes for this one. Will be watching closely to see how their Q1 ’22 financials look, but this may be prime time to establish an entry position in this one for biotech investors unafraid of assuming some extra risk in this speculative play.

The final company I cover today that is working to disrupt the molecular delivery system market is Nurexone Biologic. Nurexone is an Israeli start up pharmaceutical company developing treatment for spinal cord injury (SCI) based on exosome delivery technology. Nurexone has signed an exclusive worldwide license agreement with the Technion, Israel Institute of Technology, Haifa, to take responsibility for the development and management of clinical studies and commercialization of its proprietary technology. Though currently private, Nurexone will be listing on the TSXV in Q2/3 ’22 through a reverse takeover of EnerSpar (TSXV: ENER). The most recent news on the deal is that the agreement is moving along as planned, and EnerSpar just announced its closing of a private placement, which should be a positive sign for potential investors. Keep an eye out for Nurexone’s listing and the completion of the proposed transaction; if all goes according to plan, then this is another strong candidate to add to the molecular delivery platform portfolio.

Judging by the dramatic course assumed by the biotechnology and pharmaceutical sectors since March 2020, we can expect some volatility to endure, particularly given the state of markets today. Even so, the subsector of molecular delivery solutions within the broader pharma/biotech space is girding for hypergrowth over the course of the decade, and there is massive upside for early-entrants. As is the case with pharma and drug development, early entrants hold an advantage over their peers that can be as much as years. This translates into immense profits for early investors. A qualifier is that with most emerging technologies, the space can be speculative and is not for risk-averse investors. In any event, this is not financial or investment advice but rather a reflection of my personal views.