Small-cap mining stock Regent Pacific Group (00575.HK) acquired British pharmaceutical firm Plethora Solutions Holdings in November last year.
Earlier this month the UK firm launched a drug that treats premature ejaculation, driving up its share price several times within a few days.
However, investors should wait for the drug’s actual sales performance since the technical threshold for the drug is not very high.
The company is deemed unlikely to achieve market dominance like Pfizer did with Viagra.
Listed in Hong Kong in 1997, Regent used to invest in coal mines.
However, the company has been hurt badly by falling coal prices in recent years. It has suffered years of losses and its market cap hovered below HK$500 million for years.
Regent has moved to restructure its business and acquired the stake in Plethora from the company’s founder for 120 million pounds (US$149 million).
It decided to offer such a price tag as the company was developing a new drug for treatment of premature ejaculation.
The drug, Fortacin, was approved for production in Europe in May, and Plethora announced its launch in the UK early this month.
The share price of Regent soared multifold following the news, and the market cap spiked 144 percent to nearly HK$1.1 billion at the close of trading on Thursday.
Viagra, of course, is the most popular drug for erectile dysfunction. It’s estimated more than half of men aged between 40 and 70 suffer from this condition.
The drug has worked for 70 to 80 percent of its users.
On the other hand, Fortacin treats premature ejaculation, one of the most common male sexual problems with prevalence higher than erectile dysfunction.
Fortacin is a topical spray containing low doses of two anaesthetics – lidocaine and prilocaine – that take effect almost immediately upon application, giving users more control without reducing the pleasure, according to the firm.
Data shows that more than 85 percent of men using the drug are able to delay ejaculation time by more than a minute.
Fortacin retails at 220 pounds in the UK, and each unit can be used around 20 times. That means each use costs around HK$100, compared with HK$10 for one Viagra pill.
If Fortacin is as effective as it claims to be, it would open up the market quickly after its launch in the UK.
However, the two anaesthetics that make up Fortacin – lidocaine and prilocaine – are commonly used drugs, and other pharmaceutical companies can easily develop a similar drug using those anaesthetics.
By contrast, Pfizer has applied for patent for Viagra’s sildenafil.
Also, Fortacin is a prescription drug in the UK, which means sales will depend heavily on how doctors view the drug.
Investors, therefore, should wait for Fortacin’s initial sales data and announcement of Regent’s future plans.
This article appeared in the Hong Kong Economic Journal on Nov. 25.
Translation by Julie Zhu
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Regent Pacific shifts focus to pharmaceuticals from minerals (Nov. 16, 2015)
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