The Uncapped 100 is strongly outpacing the wider market today and the outperformance can be credited in part to biotech stocks.
Bionomics (BNO) is one of the shooting stars with a close to 10% surge to a more than one-year high of 50 cents on news that it had signed a deal with pharmaceutical giant Merck that could earn the small biotech $US172 million plus royalties.
That is a sizable deal given that it's worth more than the $203 million market cap of Bionomics, although any potential drug that could come out of the collaboration is still years away.
Merck will have the option to exclusively license a compound using Bionomics’ small molecule technology to treat chronic pain, including neuropathic pain (pain that is caused by normally non-painful stimuli).
The deal is exciting for two reasons. Firstly, Merck was the one who came knocking and when the giant approached Bionomics 18 months ago about a possible deal, the small cap was not actively pursuing opportunities in the chronic pain space as it was focused on using its technology to treat cancer and Alzheimer’s.
The second reason is that Merck’s approach goes a long way to validate Bionomics’ technology platform, on which a wide range of drugs can be developed.
Bionomics would not release any further details on the financial arrangement with Merck, but it is likely to have received a small upfront payment and should get a low single digit royalty if Merck can successfully bring a new drug to market.
Nanosonics (NAN) is another that has run ahead with a 3.5% jump to 74.5 cents – its highest level in two-years.
The $195 million market cap company, which developed a machine to more effectively disinfect ultrasound probes used in hospitals and medical facilities, reported a 50% increase in sales to $6.3 million for the June quarter compared with the same time last year.
While Nanosonics is yet to become a cash flow positive business, consensus estimates are forecasting the company to become profitable in 2014-15.
All brokers polled on Bloomberg have a “buy” recommendation on the stock with a price target of 84 cents a share.
The Uncapped 100 is up 1.5% on Wednesday compared with a 0.1% gain on the S&P/ASX 200 Index.
Universal Biosensors (UBI), another Uncapped 100 biotech, is releasing its full-year results tomorrow.