Emerging or early-stage companies offer new investment opportunities to investors, and higher returns are expected from start-ups due to their potential for growth. Investing in early-stage companies is risky; however, it offers the potential for astronomical growth and outsized returns as compared to big and well-established market players.
The two major approaches for investing in early-stage companies are:
- Investing in a priced equity round- The investors purchase shares in a start-up at a fixed price;
- Investing in convertible securities- The investment amount eventually converts into equity
Below discussed are five tips that can help investors in making informed decisions while investing in early-stage companies.
Understanding the business model- Before investing in any early-stage and emerging company, a thorough check of the business model is a must. Investors should look how the company is organising itself and progressing with business operations including investments and partnerships.
Management: Management is the key strength of a company. A sound management team can help the company continue operations well into the future. Check whether the company has a great management team in place, with the right set of skills to help grow the business.
Verifying the current market scenario- The investors should gain knowledge about the market in which the company is dealing to know whether the market opportunity is enough. They should check the current market scenario in prospect of the products developed by the company. Checking the requirement of the company’s products in the market could be helpful in deciding whether to invest in the stock or not.
Clinical development and future plans- For investing in early stage health care companies, another way to check whether the stock could provide good returns or not, is to go through the clinical developments of the company. If the company has a positive outlook from its clinical development then it is a sign that it is performing well, and in upcoming years one could get decent returns.
Products in the market - Health care sector companies are focused towards the product development and launching the product in the market for the well-being of patients and addressing the diseases and illnesses. Before investing in early stage and emerging health care stocks, investors should look at the marketed products of the company if any or else they can check the developmental stage of the company.
Over the past couple of years, Australia's cannabis industry has gained momentum, and in this article, we are discussing some of the emerging companies in the Australian cannabis space.
MGC Pharmaceuticals Ltd (ASX: MXC)
EU-based and ASX listed biopharma company, MGC Pharmaceuticals Ltd (ASX: MXC) is into supplying medicines derived from phytocannabinoids, and caters to the markets of Australasia, Europe and North America. MXC has a strong product offering, which targets widespread medical conditions including epilepsy, dementia and irritable bowel syndrome (IBS), with further products in the development pipeline.
MGC Pharmaceuticals Receives Approval to Sell CannEpil® in Ireland
Recently on 3 December 2019, MGC Pharma updated the market regarding formal approval for the distribution of its investigational medicinal product for the treatment of drug-resistant epilepsy in Ireland. The go ahead for the CannEpil® sale was received after the recommendation by Irish regulatory agency HPRA (Health Products Regulatory Authority). CannEpil® is manufactured at the company’s facility in Slovenia. The company expects that it would be easy to get approval in other European member states after this approval.
Prescribed Standardised, Affordable Cannabinoid Medicines Cross 1,400 Mark
On 26 November 2019, the company announced that the prescriptions of its phytocannabinoid derived medicines increased 40% from 1,000 to more than 1,400 as at 25 November 2019 and the unique patient numbers went up by 28% since 31 October 2019.
The MXC stock closed the day’s trading at $0.033 on 10 December 2019, up 6.452% from its last close. With a market cap of $42.37 million, the stock has 52 weeks high and 52 weeks low price at $0.067 and $0.031, respectively. The company has outstanding shares of approximately 1.37 billion in the market.
Althea Group Holdings Limited (ASX: AGH)
ASX listed company, Althea Group Holdings Limited (ASX: AGH) is a licensed producer, exporter and supplier of medicinal cannabis (pharmaceutical grade), currently operating in medicinal cannabis markets including the United Kingdom and Australia. The company has plans to expand its business into the Asian and European emerging medicinal cannabis markets.
3k Patient Milestone
On 15 November 2019, Althea announced that the company achieved a milestone of approximately 3,000 patients in November. In Australia, till date, a total of 3,031 patients have been prescribed with the company’s medicinal cannabis products. The company anticipates reaching nearly 4,000 patients by the end of December 2019.
Licence from Care Quality Commission (CQC)
MyAccess Clinics is Althea’s chain of private medical clinics in the United Kingdom, which was launched in mid-2019 and is the second medical cannabis clinic in the UK to have received licence from the Care Quality Commission in the UK. Following this registration, MyAccess Clinics prescribers can now provide domiciliary care.
The AGH stock settled at $0.340 on 10 December 2019 (at AEST 01:52 PM). With a market capitalisation of $81.66 million, the stock has 52 weeks high and 52 weeks low price at $1.445 and $0.175, respectively. The stock has outstanding shares of approximately 233.31 million in the market and has delivered a positive return of 32.08% on a year to date basis.
Botanix Pharmaceuticals Limited (ASX: BOT)
Clinical-stage cannabinoid company, Botanix Pharmaceuticals Limited (ASX: BOT) announced positive data from the mechanism of action (MOA) study for synthetic cannabidiol in skin disease in June 2019. Botanix is focusing on the development of a pipeline of product candidates that leverages the antimicrobial properties of cannabidiol, and the first product is expected to enter the market in the first quarter of the calendar year 2020.
Botanix Initiates BTX 1702 Rosacea Study
On 9 December 2019, the company announced to have secured ethics approval for the BTX1702 Phase 1b clinical trial to treat papulopustular rosacea, in addition to an expansion of the study design to enable increased data capture and provide additional insights in support of the broader dermatology pipeline.
In this study, two different active formulations of BTX1702 would be studied for examining the tolerability and safety of BTX1702 in adults during a six-week treatment period. The phase 1b clinical trial would be conducted in six dermatology clinic sites in Australia, with nearly 120 patients having moderate to severe papulopustular rosacea.
Botanix Pharmaceuticals also released its investor presentation, highlighting overview, ongoing clinical trials and additional pipeline programs.
Few highlights from the investor presentation are-
- The company’s product BTX 1503 for acne is safe and tolerable and has antimicrobial resistance as well. The Phase 2 top-line data suggests that BTX 1503 is safe and effective; all doses of BTX1503 were found to be very safe with no serious adverse events.
- The results from the phase 1b study of BTX 1204, targeted towards treatment of atopic dermatitis, support the efficacy and safety potential for the compound. The atopic dermatitis market is projected to reach approximately US$25 billion in 2027.
- Botanix has two additional products in its pipeline program-
- BTX 1702 for papulopustular rosacea.
- BTX 1801 for prevention of post-surgical bacterial infections.
Botanix near term milestones- The essential near-term milestones combine the clinical as well as other study endpoint.
- BTX 1801 antimicrobial study kick-off is scheduled for the fourth quarter of CY2019.
- In the first quarter of the calendar year 2020, BTX 1204 atopic dermatitis study data would be reported.
- Dermatology Summit and JP Morgan Conferences would be held in the first quarter of CY2020.
The BOT stock closed the day’s trading at $0.090 on 10 December 2019, down 1.099% from its last close. With a market capitalisation of $88.43 million, the stock has 52 weeks high and 52 weeks low price at $0.290 and $0.067, respectively. The company has nearly 971.76 million of outstanding shares in the market. The Botanix stock has delivered a positive return of 24.66% on a year to date basis.
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