e-Therapeutics (ETX), like many other small biotech stocks, is hard to value. When we floated a speculative buy call in May 2014, things were looking promising for the group. But progress has not been as dynamic as investors (including the famed Neil Woodford), may have hoped, and it's hard to really spot any imminent share price catalysts in the recent end of year statement.
The group's first drug ETS6103 - for the treatment of clinical depression - remains in the early stages of the clinical trials process, and while results have been encouraging, e-Therapeutics is not willing to move on to costly Phase 3 clinical trials without a licensing partner. The second, much more lucrative oncology drug ETS2101, has had a pretty disappointing year as current clinical trials have been abandoned due to dosage problems.
Furthermore, the group spent just shy of £10m on research and development in 2015 and, although £25m remains in the bank, if cash burn continues at its current rate there will only be a year and a half of juice left. As it's looking increasingly unlikely that the group will be making any money by that point, e-Therapeutics will have to raise more cash to keep going.
However, it's not all bad news. For a start, Mr Woodford remains keen, and as he has a better knack than most in picking out successful biotech stocks, this is a good sign. Secondly, the group's drug discovery platform continues to churn out exciting new drug candidates much quicker than traditional methods will allow. As rapid discovery of drugs is increasingly important for big pharmaceutical companies as patents dwindle, there could be the potential for acquisition of e-Therapeutics based on the speed of the platform. Additionally, if the group can make some progress with ETS2101, larger industry companies could also come calling.
