SINGAPORE (Oct 2): RHB is maintaining its “buy” call on TalkMed with lower 69 cents target price despite seeing huge potential in stem cells as a way of treatment, particularly for cancer.
Cellular therapy for oncology is one of the most exciting discoveries in recent years. The latest US Food and Drug Administration (USFDA)-approved gene therapy product – chimeric antigen receptor (CAR) T-cells for blood cancers – has been priced at US$475,000 per treatment ($647,261 per treatment).
Mesenchymal stem cells (MSCs), usually found in bone marrow, are currently used in regenerative medicine and therapy overseas for aesthetics and other purposes.
TalkMed sees huge potential in this area, in which its 60%-owned Stem Med has embarked on a research and clinical programme for MSC use in the region.
Stem Med is constructing a specific Good Manufacturing Practice (GMP) lab to develop gene and cell therapies for cancer like CAR T-cells which is slated to go operational in 4Q18.
The subsidiary has also recruited a scientific team – that includes a former head of manufacturing of advanced cellular therapy at King’s College London – to lead the development.
Currently, the main sources of revenue for Stem Med come from the processing and storage of adult and cord tissue stem cells, and support bone marrow and stem cell transplant services.
Stem Med supports the Parkway Cancer Centre Singapore’s (PCC) Bone Marrow Transplant Centre – operated by TalkMed – the largest private bone marrow transplant centre in the region.
However, RHB says cellular therapy in Singapore can only be approved under the auspices of clinical trials.
“Hence, the main monetisation of these therapies domestically are likely to only come when the regulations change,” says analyst Jarick Seet in a Monday report.
Management believes this is likely to change in the next few years and it aims to be the first mover in Singapore when such changes occur.
“We do expect more costs and losses to be incurred by Stem Med going forward. Hence, we cut TalkMed’s FY17F-18F earnings by 5.5% to account for these additional losses from its subsidiary,” says Seet.
“However, we believe the stock is trading at an attractive valuation due to the temporary drop in earnings post the suspension of key man Dr Ang Peng Tiam, and accompanied by M&A activities – a near-term possibility.”
Shares in TalkMed are up 1 cent at 60 cents or 27 times FY17 forecast earnings.
