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Ovoca Bio shares taking a beating: can they recover?

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Biopharmaceutical company Ovoca Bio’s [LSE:OVB] share price has taken a beating in the last week, despite an initial surge following good news for its “female viagra” nasal spray. The stock was down more than 49% over five days to 13p at close on 28 February, as the markets punished companies with Russian connections.

Ovoca Bio, founded in Ireland, is led by chief executive officer Kirill Golovanov. In addition to Ireland, it has operations in the UK and Russia. According to its interim results for the six months to the end of June 2021, the company had €9.3m in cash and cash equivalents.

Ovoca Bio, which has a market capitalisation of £11m, is a clinical stage biopharmaceutical company. What that means is although it currently doesn’t have any therapies on the market it is also not in the very early stages of development.

The group’s treatment for hypoactive sexual desire disorder for women just received marketing authorisation. On 22 February, the Russian Ministry of Health approved Orenetide, a nasal spray to treat premenopausal women. The news sent the group’s shares up nearly 140% that day.

So what’s the problem with Ovoca Bio then?

At the time of the announcement, the directors of Ovoca Bio said discussions regarding partnerships for commercialisation of Orenetide in Russia were ongoing. They also added that they expected to start production of the nasal spray this spring at a manufacturing site operated by manufacturers Nativa and OncoTarget.

While the approval of the drug is a welcome development for the company, the fact that this is in Russia is sure to have caused investors some concern. In addition, the uncertainty created by Russia’s invasion of Ukraine last week could cause delays to any partnership discussions Ovoca Bio is conducting in the country. Whether it affects the production of the nasal spray remains to be seen.

Are there any other markets for its treatment?

The same treatment is currently in phase II trials in Australia and New Zealand, which has reached over 70% of participants’ enrolment. Its approval there will be crucial for the company, determining whether it has a place in wider international markets.

Ovoca Bio is focusing on women’s health and in areas of high unmet medical need. This is a big market. Hypoactive sexual desire disorder specifically affects on in ten premenopausal women, according to The Society for Women’s Health Research in the US. A successful international roll-out of the treatment would mean significant revenue. But although it has received approval in Russia, there is no guarantee that it will be approved in other countries. Add to that the impact of Russia’s invasion of Ukraine and the future remains uncertain.

In addition, Ovoca Bio held 125,000 shares in previous metals mining group Polymetal International. The company, which is listed in London and operates mines and processing plant in Russia and Kazakhstan, lost half of its market value on Monday after the EU, UK and US announced new economic sanctions on Russia.

According to Ovoca Bio’s interim results, “the group is relying on its equity investments to raise the funds required to further develop its pharmaceutical program”.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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