Investors wait for Starpharma’s Vivagel. And wait.

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In a previous article titled “What’s happening with Obducat“, we discussed a company that attracted a great deal of attention from nanotechnology investors during the nanotechnology hype of 2004. Another such company is Starpharma (OTCMKTS: SPHRY). Starpharma, an Australian biotech company which generated a great deal of attention during the nanotechnology hype of 2004 by developing dendrimer based drug delivery systems for HIV prevention.

Company History

Founded in 1996, Starpharma listed on the Australian Securities Exchange in 2000. The company’s technology is built around a nanoparticle called a dendrimer. The company’s lead product is Vivagel, a gel-based formulation of a proprietary dendrimer. In the past the company has announced agreements with Astrazeneca, Eli Lily, Dow Chemical, and Nufarm among others. In 2011  the company raised $32 million through a share placement to institutional investors.

Interest by US investors during the hype of nanotechnology in 2004 led to an ADR listing on the over-the-counter markets.  The interest in Starpharma was mainly around the proposed HIV prevention attributes of Vivagel and an FDA approval for human trials announced in 2003:

Starpharma_Vivagel

For the next 6 years Starpharma made many announcements regarding their progress on establishing Vivagel as an HIV prevention drug. In 2009 the company announced a new application of Vivagel to treat the condition of bacterial vaginosis. In a February 2013 shareholder update, Vivagel is discussed as a preventative for recurrent BVs and as a possible novel treatment for pink-eye but no mention is made of the HIV prevention applications for Vivagel.

Revenues

Starpharma_Financials

Royalty customer and license revenue is on a downward trend and grant income is diminishing. The company has 42 million cash on hand now from their recent institutional placement which should last them 4 years if they maintain their 2012 cash burn rate of 10 million.

Stock Performance

An investor in Starpharma who purchased shares when the company listed on the ASX would have realized a volatile 18% gain 12+ years later based on today’s closing price. US investors who purchased the ADR 8 years ago when it listed would have realized a little over 31%.

Investors can and have argued the merits and potential of dendrimers for years. Starpharma investors have to ask some questions. What opportunity costs were incurred waiting for Starpharma over the past 10 years to breakthrough with a disruptive application for dendrimer technology? How much longer should an investor tie up their capital in Starpharma waiting fora breakthrough? Is an investor’s capital not better utilized elsewhere while watching Starpharma from the sidelines until an increase in revenue demonstrates the company’s potential for success as opposed to the many optimistic press releases investors have become accustomed to over the years?

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