Growth Focus: Bionomics Ltd (BNO)

by Patrick Taylor

Date of Data Capture: 16/11/2016


Classification: Biotechnology

Current Price: $0.38

Market Capitalisation: $188M

Forecast EBITDA Growth: 227%

Gross Yield: 0%

Consensus Price Target: $1.63

# Covering Analysts: 3

Discount at Current Price: 329%

Price Target Trend: Increasing Flat

Signal Time Frame: Quarterly-Daily

Trend Bias: Up-Flat Long-Short

Short-term: Positive
Medium-term: Positive Neutral
Long-term: Positive

Recommendation: BUY
Focus: Capital Growth

Set up Notes:
• BNO are just starting to move out of a long-term downtrend in place since early 2014, backed up by very strong fundamentals.
• Technically the stock looks very good also with strong multi-timeframe momentum building behind positive news flow.
• We have some overhead resistance above, clustered around 40-45c - but the excellent long-term correlation (and aggressive price targets) raises our sights to resistance targets of 55c, 65c and 85c above this.
• Any pullback from here will find structural support around 35c, 30c and 25c, show-casing a favourable risk/reward ratio.

Growth Focus: Bionomics Ltd (BNO)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

We all go through down periods and patches where we feel like our value is underappreciated, but rather than avoid these situations we seek them out - they are precisely the kind of investment opportunities we look for. Bionomics Ltd (BNO) is just such a case where we believe the dark clouds are giving way to bluer skies and it is just a matter of time until they realise their full potential.

The company began operating in 1998 and are headquartered in Thebarton, SA and their business focus is developing novel therapies to treat cancer and nervous system disorders like anxiety and depression. Despite the huge markets and potential of this biopharmaceutical company their performance over the last few years has seen shareholders downcast and their share price cast down after their licensing deal with Ironwood Pharmaceuticals flopped in 2014.

Things have been on the rise since then as they self-progressed development in this same therapeutic through trials and have recently shown excellent results (outperforming a major market player with no significant side-effects and lower dosage) and seem to be on the cusp of emerging from their lows. They have been banging the drum in the US recently and we wait to see what my arise from these stirrings.

This adds to their already impressive results regarding their vascular disrupting cancer therapy seen as having good potential to extend checkpoint inhibition and indicates huge scope and potential. Merck is the first big international partner on board but with strong results we would be surprised if there weren’t more deals in the pipeline as they look to partner out for this next stage of growth.

Their price targets are also starting to jump ahead, now sitting at $1.63 and currently showing a discount of over 300% to aggregate estimates (the highest target recently rose to $2.60) and have good growth forecasts to back them up. A new trial has begun for application into treating PTSD (Post Traumatic Stress Disorder) which could add yet another string to their already heavy bow.

The price history reflects events closely but doesn’t really show much more than the normal evolution of a promising biotech company progressing through its development, things go slowly at first and then tend to speed up on positive results and price momentum. We believe we have that here with our long-term signals converging to the positive following the recent results driven surge in September.

The charismatic CEO of BNO described their recent results as “Kick-arse” on live TV and she was right, they are – and the price reacted accordingly. The stock doubled from 25c to 50c before pulling back towards support at 35c, which is just below where we find them now. The recent pullback should be a good buying opportunity and if you like growth stories that aim to reward both patients and patience then this is the one for you for you.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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