Biotech's insider stakes convinced fundie to invest

‘Skin in the game’ – the four words bound to get most investors stroking their chins, played their part in swaying biotech investor Andrew Chapman to buy into an oncology company he believed had a good chance of making it big with big pharma.

Speaking on Reach Markets’ The Insider: Meet the Fund Manager in October 2022, Mr Chapman of Merchant Funds Management listed Race Oncology (ASX: RAC) as one of his  three favourite stocks. Watch the full The Insider: Meet the Fund Manager session.

“We’re always looking for the companies that are on the precipice of greatness, companies that are involved in what we call a megatrend type of industry,” Mr Chapman said.

“The [type of] industry is so large that if these companies get a little bit of a sniff of success in that industry then they’ll be bought out for multiple times their market cap. Race is a really good example of that at the moment.”

What initially led the Perth-based investor to buy into Race Oncology was Dr Daniel Tillett, founder and CEO of a leading Australian DNA sequencing software company, and his decision to invest in the company during its early stages.

“[Dr Tillett] bought into a company that listed at 20 cents, went to ~60 cents and then went back to around 2-3 cents,” Mr Chapman said, possibly referring in part to Race’s share price performance during January 2018 and July 2019.

“And at that stage, Dr Tillet recognised the product and the value of what was underneath the surface. He was the first one to put his money where his mouth is.”

The product Mr Chapman referred to was Zantrene®, a drug touted by Race as a ‘breakthrough discovery’ and which, in December 2022, showed encouraging results across multiple programs in both preclinical and clinical stages.

“[The company is] fully cashed up and fully funded for the trials for the next few years,” he said

Dr Daniel Tillett, Chief Scientific Officer of Race Oncology, joined Reach Markets’ The Insider: Meet the CEOs session in November 2022 where he outlined Zantrene’s® capabilities and how it gives Race a competitive edge in the industry.

With more than 40 scientific publications and granted patents in molecular biology, microbiology, genetics and biochemistry, Dr Tillett also provided a snapshot of the problems associated with cancer treatment and the challenges faced by patients. Watch the full The Insider: Meet the CEO session.

“We happen to be the first company anywhere in the world targeting a totally new area in oncology called m6A RNA (Ribonucleic Acid) in about 15% of all cancers and is driving those cancers,” Dr Tillett said.

“Cancer is a disease of dysregulation. Something goes wrong inside the cell that tells the cell to grow when it’s not supposed to grow.”

Speaking as Race Oncology’s largest individual shareholder at the time, Dr Tillett shed light on how m6A RNA dysregulation in the body leads to, among other predominant diseases, cancer growth.

“Cancer drugs are currently, the estimates are around US$180-200 billion a year and growing rapidly. You only have to capture a very small percentage of that market to have a major return, “he said.

“Drugs that can re-regulate the system become very attractive, particularly in cancer.”

An added benefit of Zantrene®, as explained by Dr Tillett, is its ability to protect patients from the cardiac damage caused by chemotherapy, allowing the drug to be used on top of other chemotherapeutic drugs.

“This is a great opportunity because there’s a very large market that exists, and we can come in with a solution that offers better treatment of the cancer and protection of the heart,” he said.

Adding to Dr Tillett’s prognosis, Mr Chapman said “Race is at that inflection point where, with results imminent now, I think this is where Race starts to be really interesting to big pharma.”

Recently, the company announced that it received human ethics approval for the initial observation stage of a planned cardioprotection program using Zantrene®. This is the first step in advancing the cardioprotection opportunity for the drug in the clinic.

Click here to view more videos from Andrew Chapman’s The Insider: Meet the Fund Manager session, or click here to view the full The Insider: Meet the CEOs session with Race Oncology Chief Scientific Officer Dr Daniel Tillett.

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