Paradigm Biopharmaceuticals Ltd (ASX: PAR) shares remain in a trading halt after announcing a capital raise to support the next phase of its osteoarthritis trial – but is Paradigm in the buy zone?
What did Paradigm release this morning?
Paradigm’s Phase 2B clinical trial met key secondary end-points in osteoarthritis of the knee, with subjects receiving injectible pentosan polysulfate sodium (iPPS) were shown to have improved knee function and durable pain reduction for 6 months.
The positive secondary end-points and other strong results highlight the potential of iPPS to slow progression of osteoarthritis, and follows the successful completion of its phase 2b randomised, double-blind and placebo-controlled trial in December 2018.
Paradigm followed up the trial program update with a $77.9 million capital raise comprising a $51.5 million placement and a $26.3 million underwritten accelerated entitlement offer to fund the program.
The company expects to use the funds to fund its ongoing programs through to the end of its pivotal phase 3 studies, new drug applications, working capital, costs of offer, further preclinical studies and possibly further intellectual property acquisitions.
The Placement will result in the issue of 34,370,099 shares and the Entitlement Offer will result in the issue of 17,537,431 shares at an offer price of $1.50 per share.
This offer price represents a 21.1% discount to the last close on 10 April 2019 which I would expect should see the share price fall when it re-emerges from its trading halt.
Should you buy Paradigm shares?
The Paradigm share price has climbed 88.1% so far this year on the back of strong earnings and a number of successful program updates.
The company also climbed into the S&P/ASX300 Index (ASX: XKO) in March 2019 following the latest S&P quarterly index rebalancing and I would expect its upcoming trial results on 50 ex-National Football League (NFL) players to bring further attention in the second half of the year.
I’m quite bullish on healthcare, particularly given its non-cyclical earnings property, and the Paradigm share price is up an astonishing 443% in the last 5 years.
I think there’s huge potential for Paradigm to continue to capture market share and boost earnings if the trial results continue to prove successful.
In the next 3-5 years, I could easily see Paradigm challenging the likes of CSL Limited (ASX: CSL) and Ramsay Health Care Ltd (ASX: RHC) as a top blue-chip healthcare stock on the ASX.
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Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019