Australian healthcare company Stirling Products (ASX:STI) has signed a final agreement for the highly promising High Density Aerosol (HDA) technology with partner Zodiac Capital and Sheiman Ultrasonic Research Foundation Pty Ltd.
Under the agreement, the Stirling/Zodiac joint venture has acquired the rights to commercialise a patented new class of drug inhalation device that represents a breakthrough platform in drug delivery.
Managing director Peter Boonen said “This HDA technology is absolutely unique in its effectiveness and potential.
It will provide a platform for the Company to potentially enhance its own product lines and also to leverage the technology into some of the world’s most valuable drugs that are off-patent or coming off-patent."
Major benefits of drug administration (via inhalation) through the HDA technology, is that it promises to provide the same efficacy as drugs taken orally - with far less active drug content.
Subject to formal trial validation, using the HDA technology, this would increase drug safety and substantially lessen any side effects for patients.
The major prize for Stirling Products and the HDA technology is its potential use in drug administration (and revenue potential) in some of the world's major blockbuster drugs, as they come off patent over the next three years.
The HDA delivery platform provides a point of entry into this massive multi-billion size market for the company.
And, can potentially be used for administration of most drugs.
According to the company, over over 36 major drugs will come off patent in the year to 2012.
Importantly, an early, single-dose nebuliser using Sheiman Ultrasound Research Foundation HDA technology device had 510K approval by the US Federal Drug & Administration (FDA).
The new devices will incorporate newly patented technologies and capabilities.
The HDA technology uses focused ultrasonic energy to form a fountain of liquid to be nebulised that produces an aerosol from the walls of the jet that self-propels at several meters per second up a chimney-like intake tube.
Atomisation of the liquid occurs at the base of the jet inside the intake tube. The micro-particle aerosol is then transported to the user by positive dynamic pressure derived intrinsically from the kinetic energy of the jet. It therefore does not require any compressed gas or fan driven airflow to transport aerosol to the user.
This significantly increases the aerosol concentration by both eliminating the gas/fan dilution effect and reducing the drug loss associated with aerosol condensation inside the nebulisation chamber.
Compared to oral administration, testing has shown substantively less active drug could be required. While providing the same benefit, also potentially increasing safety and lessening side effects.
The financial terms of the agreement are as follows:
- Stirling/Zodiac Capital will each pay $250,000 to the Sheiman Ultrasonic Research Foundation, payment has been satisfied by issue of shares
- Stirling/Zodiac joint venture to pay the staged funding costs of the commercialisation process commencing immediately
- The first stage over the next 12 months shall be the pre-production development of the first HDA devices which has budgeted costs of circa $600,000
- The joint venture will arrange a working budget of $5-6 million, via a series of grants, for testing of targeted off-patent drugs for human use, planned to commence in 12 months
- Stirling and Zodiac will own 65% of the gross profits derived from the sale of all HDA devices and 65% of gross profits from the sale of any or all off-patent drugs adapted for use in the new HDA platform.
"Through this technology we can effectively have the exclusive rights to, subject to trial validation, the improved version of each of the off-patent drug candidates that we undertake," said Peter Boonen.
Clearly, the potential revenue opportunity for Stirling Products with the HDA technology with off-patent blockbuster drugs, subject to trial testing, could be a potential company maker.
While funding risk would generally be a factor in moving the technology through development stage, the company and the technology has its admirers, both locally and abroad.
By side-stepping this funding risk, it would enable the company to focus on fast-tracking trial validation and device testing. An earlier version of the technology will assist the development curve. Neatly leveraging Stirling into the multi-billion dollar revenue market of blockbuster drugs off-patent and major global pharma companies.
Once through this milestone and the keys to the kingdom are within reach for Stirling Products. The current market valuation would then seem like pocket change in years to come. That said, volatility is always a factor in emerging company investment.