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Private Equity Strategies

MicroCap Monitor: DelMar Pharmaceuticals Highlights Continued Activity in Pharma at All Market Caps

Saturday, June 22, 2013

Bailey McCann, Private Equity Strategies

Founded in 2010, DelMar Pharmaceuticals is focused on clinical and commercial stage development of cancer treatment drugs. The company, which recently went public, has been talking to investors highlighting their clinical successes and pipeline projects. Co-Founder and CEO Jeffery Bacha and CFO Scott Praill recently spoke with Private Equity Strategies at the Marcum MicroCap Conference.

“We took the company public through an RTO in January, and it was generally positive,” explains Bacha. “Now we are focused on the trials and telling people our story.”

Unlike other cancer treatment companies, DelMar focuses on patients with on patients with refractory glioblastoma multiforme (GBM), the most common type of aggressive brain cancer. Treatment of this cancer has had mixed success although some drugs are showing promise where standard treatments have failed. Through clinical work in both the US and China, the company has already been awarded an Orphan Drug Designation by US FDA & European EMA for VAL- 083, one of its treatments for glioblastoma. The firm is working on clinical trials this year that look at the possibility of using higher doses of the drug in treatment for glioblastoma multiforme (GBM) and metastatic brain cancer for patients who have failed or are otherwise ineligible for currently approved treatments. This is big news for patients who are faced with a median survival of 4 ½ months from diagnosis without treatment.

The team has been here before, they previously worked at another pharmaceutical firm, NCI on oncology treatments, and brought this knowledge to DelMar. The cancer treatment market as a segment of the broader pharmaceutical market is approximately $78bn. So far, DelMar’s story tracks with other companies in terms of successful IPOs, and positive shareholder value even through turbulent economic conditions.

According to a recent study of the global health care market for private equity by Bain Capital, deal value declined slightly in 2012, even while deal volume remained consistent. This indicator may point to broader interest in microcaps like DelMar. Interest from strategics is also on the rise making it harder for large private equity firms in the US and elsewhere to find deals and deploy capital efficiently.

The report shows that top returns in the health care market will likely come from “healthcare heavy” sectors, which reward risk taking and industry-specific expertise. 70% of the buyout deals done in this space in North America last year were done by small and midsize funds with some expertise in the field. “The implication: In order to unlock top-tier deal returns, funds are going to have to work harder and more creatively in North America to find assets, price them appropriately and create value post-close,” the report says.

Based on a recent analyst report of DelMar, these market factors could be a boon for the company, as they aren’t necessarily focused on acquisition. “We can control our own destiny,” Bacha says. “We have the capital available to us now through our IPO so we can after product revenue and we aren’t dependent on being acquired.”

That said, he notes that even if they sell, the team will probably look to repeat the process again around other products they already have in the pipeline. “The orphan disease market is more profitable than people think,” he says. “It takes skill, but there are a variety of opportunities for investors and companies here.”

This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
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