06/2020

Two investment ideas from the Polish MedTech/Biotech sector

24/06/2020

Due to the coronavirus pandemia Health- and Biotech companies have been put into the focus of many international investors. Most market participants expect that the sector will become increasingly important in the future. Below are two companies from the Warsaw Stock Exchange, which are interesting in our view:

OncoArendi Therapeutics S.A. (Market cap PLN 223m/EUR 50.2m): OncoArendi Therapeutics is a Polish biotech company, which focuses on studying the therapeutic potential of chitinases and chitinase-like-proteins (CLPs). The company develops small-molecule drugs in two areas:  (1) inflammatory diseases, and (2) cancer. Its most advanced projects are the inhibitor of chitinases OATD-01 (therapy for multiple lung diseases including asthma, idiopathic pulmonary fibrosis and sarcoidosis, as well as other fibrotic diseases such as NASH), which is expected to start Phase IIa of research at the end of 2020 (Phase I was completed in April 2020); and the inhibitor of arginases OATD-02 (is supposed to be applied in immunotherapy related to various types of cancer), which is currently in the final stage of pre-clinical studies. OATD-01 received the Orphan Drug Designation by the Federal Drug Administration in Q1/20, which among others can shorten the registration process required for market introduction in the US and thus lower respective costs.  

OncoArendi’s team consists of experienced and highly-competent managers and scientists from Poland and abroad. Its CEO Marcin Szumowski completed a Bachelor’s and Master’s degree in the US and is a serial entrepreneur in the area of Life Sciences. Members of the company’s scientific board include among others Bart Lambrecht, MD, PhD, a world-class expert in the area of immunology and inflammatory diseases; and Reynold A. Panettieri, Jr, MD, PhD, a Director of the Airways Biology Initiative and Comprehensive Asthma Program and Vice-Director of the Center of Excellence in Environmental Toxicology at the University of Pennsylvania Perelman School of Medicine. The largest shareholder of OncoArendi, which has so far gained PLN >100m in EU funds and filed >50 patent applications (3 patents granted in the US, 5 in Poland), is Mr Michal Solowow, the richest Pole.

Medinice S.A. (Market cap PLN 73.7m/EUR 16.8m): Medinice specialises in the creation, development and commercialisation of medical solutions in the fields of interventional cardiology and cardiac surgery. The company’s products, which are developed in-house or acquired from external scientists, include for example PacePress, an innovative pressure controlled device applied after implantation of electrophysiological devices to reduce the risk of hemorrhagic complications; CoolCryo, a unique medical device to perform minimally invasive cryoablation procedure; MiniMax, an innovative catheter for transcatheter ablations; and CathAIO, an electrode with universal diagnostic, electrophysiological, hemodynamic and biochemic functions that can be used for radiofrequency (RF) ablation. Regarding PacePress, in January 2020 Medinice announced the signing of a licensing agreement with a partner in India worth USD 360k plus fees (at least 10%) based on the products’ sales.

Medinice, which has c. 40 patents and patent applications worldwide, has a very competent team. Mr Sanjeev Choudhary, its CEO, is an experienced business leader and previously worked among others at the Norwegian Orkla Media Group. Members of the Supervisory and Advisory Board include among others Tadeusz Wesolowski, a successful Polish entrepreneur in the area of Healthcare; Paul Grundeman, a world renowned experimental cardiac surgeon and professor at University Medical Center Utrecht; and Piotr Suwalski, who is Professor of cardiac surgery, Manager of The Central Clinical Hospital of MSWiA in Warsaw and President of the International Society for Minimally Invasive Cardiothoracic Surgery.

Why we believe the Polish stock market is ready for a re-valuation

15/06/2020

  1. Over the last 10 years, the broad Polish WIG index has only increased by 22.4% vs. 74.2% for the Hungarian BUX and 80.7% for the Romanian BET stock index.
  2. BUT: Between 1989 and 2018, the Polish GDP exhibited the fastest growth by far of all European nations (+827% vs. for example +783.8% for Slovakia and +549.5% for the Czech Republic) and as the only one in Europe Poland did not slip into recession in 2008-2009.
  3. The reference rate of the Polish central bank NBP has recently been lowered to an all-time low of 0.1% (in CEE, only Hungary has a lower interest rate of 0.05%). At the same time, NBP launched the first Polish QE program worth an estimated EUR 15-20bn (Romanian and Hungarian central banks have also started buying government bonds due to the COVID-19 crisis).
  4. Poles‘ bank deposits and cash reached a record value of PLN 1.13tr/EUR 260bn at the end of 2019. Due to extremely low interest rates and a relatively high inflation of 2.9% (data from 01/05/2020) this money will likely be invested in more risky/profitable assets such as stocks in the near future.
  5. The Employee Capital Plans (PPK), the new pension scheme that was launched in 2019, have already accumulated PLN 610m/EUR 150m, most of which have to be invested on the Warsaw Stock Exchange.