Redx tipped to triple

Redx Pharma had a fantastic start to life as a quoted company when it floated on AIM 18 months ago. Set up in 2010, it raised £15 million at 85p, and the share price quickly surged by 50%. It's been tougher since, however, and interest has waned, but the biotech minnow is back in the spotlight this month and news on a new cancer drug is grabbing attention.

Its main cancer treatment RXC004 has a potential role in cancer immunotherapy, the biotech revealed Monday, sending the share price up as much as 13% to 37p. They were worth just 23p two weeks ago.

"Redx scientists have demonstrated that the Porcupine (PORC) inhibitor could have a crucial role in improving the immune system response of some cancer patients when used in combination with an existing immunotherapy, anti-programmed cell death-1 (anti-PD-1)," the company explained.

"Anti-PD-1 therapy activates the immune system to recognise and attack tumours. While treatment with PD-1 inhibitors, also known as Checkpoint inhibitors, is a significant breakthrough in cancer treatment, not all patients respond."

RXC004 has already shown it has potential as a stand-alone therapy for difficult to treat cancers, such as pancreatic cancer. Clinical trials on humans will begin early next year.

"It is important to note that this is a benign competitive environment with Novartis the only company currently in the clinic with a PORC inhibitor," writes house broker Cantor Fitzgerald.

"Our 'buy' recommendation is based on the potential of key assets within the Redx pipeline and valuation. Our [discounted cash flow] suggests that using a conservative discount rate of 20% generates an [net present value] of 105p, this represents our [target price]."

Redx also has compounds to treat leukaemia and the MRSA bacteria, although, as with most companies of this type, profits are still some way off.

According to Cantor, Redx could make a maiden adjusted pre-tax profit of £4.3 million in 2019. This year it's tipped to lose about £9.7 million. While prospects are exciting, Redx comes with all the usual caveats associated with any highly-speculative loss-making company.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.