Bucking the Big Pharma trend

Lead asset XF-73 has potential to be first to a $1.2bn core market. We think that its low propensity to trigger Antimicrobial Resistance (AMR) seen in testing to-date means the strong commercial rationale for XF-73 bucks the trend which has caused a steady retraction in Big Pharma antimicrobials pipelines.

 

In FY18 DEST made progress on achieving its strategic aims including delivering two successful Phase I skin irritation studies for lead program XF-73 a topical gel for intranasal delivery targeted at a new FDA-backed indication for prevention of post-surgical S aureus infection. These studies demonstrate XF-73 has a benign safety profile, fulfilling the requirements needed to initiate the placebo-controlled randomised Phase IIb study in post-surgical S aureus infection which is to commence imminently. 

 

XF-73 has low propensity to trigger Antimicrobial Resistance (AMR) meaning that the drug can be used for high risk surgery to replace mupirocin which is routinely employed off-label in US in pre-surgical prep for S aureus carriers, but which has led to rates of resistance up to 95% in some cases. 

 

The Company ended FY18 with a strong cash position of £12.1m having managed expenses tightly including £3.5m of R&D expenditure, providing a cash reach into 2020 on our forecasts and covering the cost of the Phase IIb trial. Further non-dilutive funding includes the award of up to £1.6m under the UK-China AMR programme for drug discovery with an ocular and dermal focus and is further validation of the XF platform.

 

DEST shares have underperformed since IPO, falling around 60%. By contrast, the imminent launch of the Phase IIb study is likely to be a key catalyst for revaluation and so we reiterate that at current share price offers a compelling entry point into a novel and commercially attractive antimicrobials pipeline.