It has to be seen to be believed.
With the COVID-19 pandemic outbreak causing major stock market indexes to drop by as much as 35% from their all-time highs,
XPhyto Therapeutics has done the unthinkable.
Last month, its share price powered from around $1.70 to about $2.50 – a nearly 50% leap – while other stocks were falling like stones. Now
XPhyto (CSE: XPHY) (FSE: 4XT) has virtually doubled in price again to a high of $3.50.
So how is this small Canadian life sciences R&D company conspicuously outperforming thousands of other North American stocks with such dramatic results?
The reason is the serendipity of being in the right place at the right time. In fact, it’s not unreasonable to suggest that XPhyto is destined to help remedy the greatest health threat to humanity in living memory. The facts speak for themselves. Let me explain:
A Disruptor in the Detection of COVID-19 and Other Viruses
Even though XPhyto is headquartered in Vancouver, its burgeoning R&D-driven business interests are mostly focussed on Germany – which is where it has embarked upon several smart company-defining strategic alliances in different industry verticals, involving the collaboration of at least one renowned academic institution.
Not surprisingly, XPhyto is fast developing a devoted following among speculative German investors on the heels of these accretive company-building deals. Among the initiatives that investors have rallied behind the most is a commitment to innovate novel botanical medical formulations for such ubiquitous and difficult-to-treat medical conditions as chronic pain, epilepsy, and inflammation.
While society is in the throes of a devastating epidemic in opioid abuse in North America and northern Europe, the importance of innovating non-toxic, non-addictive plant-based pain therapies cannot be overstated. And XPhyto is at the bleeding edge of the movement to scientifically fuse holistic herbal therapies with convention pharmaceuticals to optimize outcomes without upping opioid dosages.
However, XPhyto’s story really started to heat up this year. And that’s because the gravitas of a key autumn acquisition is beginning to really resonate with investors. I’m talking about XPhyto’s wholly-owned subsidiary,
Vektor Pharma TF (Therapeutic Film) GmbH – a Munich-based manufacturer of proprietary narcotics formulations and drug delivery systems.
This key acquisition is what ultimately ignited the stock’s powerful ascendancy. And it has happened somewhat unexpectedly due to the sudden onset of a geopolitical health crisis that humankind was not prepared for. It’s a calamity that has done untold damage to most publicly traded companies so far. But paradoxically, it has thrust XPhyto into the limelight, having a very positive effect on its share price.
XPhyto’s call to action earlier this year was presaged by news that COVID-19 was on the loose worldwide. Since then, XPhyto has been manning-up to the task at hand in a meaningful way as far back as January (as evidenced by several well-received news releases).
Indeed, it soon became apparent to investors that Vektor’s disease-management skill set is well suited to the challenge of tackling COVID-19 and future pandemics head on. Until recently, Vektor has specialized for over a decade in commercializing precision drug delivery systems for brand-name pharmaceutical opioids. These products take the form of pain-relieving ultra-thin sublingual (oral) wafers and transdermal patches.
This commercially successful technology ensures that the percentage of a drug dose that reaches the bloodstream is optimized, thereby providing the maximum therapeutic effect. In comparison, conventional orally digested pharmaceutical drugs tend to have a low percentage of bioavailability (uptake of the active drug into the bloodstream). Furthermore, sublingual and transdermal delivery systems offer a much faster absorption rate, too.
Vektor’s proprietary manufacturing technology producing therapeutic film
Investors realized that Vektor’s therapeutic drug delivery products could be used in the detection of COVID-19. Plus, their dissolvability makes them ideal for the treatment of patients on ventilators, or even ones who are unconscious.
Most importantly, Vektor has thereby demonstrated that it already has the expertise and depth of experience to develop disruptive anti-viral and antimicrobial treatments therapies.
However, the overarching significance of Vektor’s role in forging XPhyto’s future success did not come fully into focus until earlier this week. This was when XPhyto announced an agreement to team-up with a German medical biosensor company that develops low-cost, real-time, oral pathogen screening tools.
This milestone agreement involves XPhyto acquiring the global licensing rights to combine the two companies’ platform technologies to innovate next generation screening tools for a diversity of infectious diseases, including COVID-19 (also future mutations) and other coronaviruses.
3a-Diagnostics GmbH is developing a portfolio of gum-based biosensors consisting of specially formulated pathogen-specific peptides linked to an extremely bitter compound. In plain language, when these “smart gums” are chewed, they can quickly indicate the presence of certain infectious diseases, including influenza.
This means that they are accurate enough to constitute real-time qualitative screening tools, which can help determine if a person is likely infected and needs to undergo more in-depth testing at a centralized medical triage facility. But they are not meant to be substitutes for full diagnostic tests, which reveal quantitative data, such as white blood cell and antibody counts.
That said, full diagnostics are relatively costly procedures that have to be conducted in a laboratory by skilled technicians and can take up to several days to provide definitive results. This is why the innovation of on-the-spot screening devices is of such paramount importance.
The one key drawback to 3a’s oral screening tools is that many COVID-19 patients and people afflicted with other infectious diseases may find it hard to chew. Also, the most seriously ill ones – those on respirators – do not even have the option of chewing.
Addressing this shortcoming, 3a’s enzyme-based biosensors can now be adapted to become ultra-thin dissolvable wafers or film strips that quickly dissolve on or under the tongue, thanks to XPhyto. With this in-development screening test, a positive indication for a virus would be indicated by way of a bitter taste, rather than a pleasant one.
Vektor’s managing director, Professor Thomas Beckert, sums up the significance of this pivotal development for XPhyto as follows:
“An accurate, low-cost, rapid decentralized screening test that provides immediate pathogen detection would be a powerful and disruptive tool in the fight against pandemics. Such a tool would allow for testing on a scale that is not currently possible.”
“Identification and isolation of infected individuals…is critical to effective pandemic management. The potential applications for an effective screening test would include homes, hospitals, schools, workplaces, transportation services and border services, just to name a few.”
XPhyto is aiming within the next 6-18 months, depending on the product, to begin mass producing these oral screening tools with a view to selling them at affordable prices to a mass consumer market in pharmacies and other key locations.
In this eventuality, the company’s global licensing agreement with 3a offers the prospect of an early-market-entrant competitive advantage in a fast-emerging multi-billion-dollar industry for inexpensive, real-time point-of-care screening and diagnostic tools. This alone is a very compelling reason to envision plenty more upside for XPhyto this year.
Dissolvable, thin-film, point of care screening tests may prove to be one of the best ways to contain COVID-19 and other coronaviruses
Why We Need New Rapid Detection Screening Tools
One of the primary reasons for the industrialized world’s failure to prevent a deadly global COVID-19 pandemic has been the relative lack of rapid diagnostic tools in the medical community. This failed containment effort is estimated to have resulted in hundreds of thousands of otherwise avoidable infections and the loss of around 170,000 lives worldwide to date. This is mindful of the fact that the pandemic is far from over, and COVID-19 may yet mutate into other equally threatening new coronaviruses.
Furthermore, COVID-19 is already having a devastating effect on global economic stability. And the almost certain outbreak of other lethal future pandemics is sure to continue to trigger more Black Swan economic crises. And salvation is unfortunately not at hand.
Truth be told, a vaccine for COVID-19 is probably at least 18 months away, according to medical experts. Meanwhile, there are very few pre-existing treatments for viral infections, especially exotic ones like COVID-19. And frontline antibiotics aren’t the solution either; they only work well in treating bacterial infections.
So, the innovation of new, on-the-spot screening devices promises to become our new first line of defence – and arguably our most important one – against future threats. This will help to ensure that future pandemics are more effectively contained, managed and ultimately mitigated.
Investment Summary
In summary, XPhyto promises to continue be an uber-powerful performer in 2020 as the global battle to combat coronaviruses like COVID-19 via biotechnological innovation is sure to herald some brilliant breakthroughs. XPhyto is apparently well-positioned to be among a vanguard of successful commercial innovators.
Accordingly, the company’s impressive track record to date as a life sciences innovator has been well reflected in the quadrupling of its market capitalization – all within a few months of its public listing. This now stands at around CDN $180 million.
This is in spite of the fact that XPhyto still boasts a tight share structure with only about 54 million shares outstanding. Nonetheless, the company seems to have the best of both worlds by also benefiting from consistently large daily trading volumes on both the CSE and Frankfurt stock exchanges.
As for downside risk, there are no imminent near-term threats of major profit-taking events among shareholders of less expensive restricted stock. This is because there have been no private placement equity financings since the company’s IPO last summer. Instead, XPhyto has shrewdly followed a strategy of incrementally self-financing via the exercise of shareholders’ warrants issued during the IPO. And there is ready access to plenty more of this kind of working capital, according to CEO Hugh Rogers.
With regards to the company’s rising star in the capital markets, it seems that XPhyto is fast accruing legions of increasingly loyal investors in both North America and Germany – some of whom are becoming evangelists for the company on social media and elsewhere. However, this is far from surprising. So far this year, investors have been enjoying what is proving to be an exhilarating ride to the upside.
In the likelihood of continued positive news flow over the next few months, this dramatically ascendant company promises to outperform this year. All the while, it will surely win over forward-thinking investors while rising to the challenge of helping to fight the biggest health care crisis of the modern era.
ABOUT THE AUTHOR: Marc Davis has a deep background in the capital markets spanning 30 years, having mostly worked as an analyst and stock market commentator. He is also a longstanding financial journalist. Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, The Times (UK), Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post, AOL, City A.M. (London), Bloomberg, WallStreetOnline.de (Germany) and the Independent (UK). He has also appeared in business interviews on the BBC, CBC, and SKY TV.
Marc Davis enthusiastically owns shares in XPhyto and his opinions have been reflected accordingly since he initiated coverage last summer at $0.50.