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Pharmaxis Ltd: DEEP DIVE
OVERVIEW

Pharmaxis well funded as potential partners assess its anti‐fibrotic mechanisms

CEO Gary Phillips says Pharmaxis’ healthy cash balance gives it time to choose between in-house and partnering options.
Scientists in a lab
OVERVIEW: PXS The Big Picture
Prospective partners are undertaking scientific review

Pharmaxis Ltd (ASX:PXS) (FRA:UUD) (OTCMKTS:PXSLY) has attracted the attention of large pharmaceutical companies, with several potential partners conducting scientific reviews of the company’s phase 2 study-ready program of two LOXL2 inhibitors with anti‐fibrotic mechanisms.

The well-funded company ended the December quarter with $43 million cash after receiving €28 million ($42 million) of milestone payments in the 2017-18 financial year from the structured deal for SSAO/VAP-1 inhibitor BI 1467335 (formerly PXS‐4728A) it signed with developer-buyer Boehringer Ingelheim in 2015.

READ: Pharmaxis LOXL2 program phase 2 ready after completion of 13-week toxicity studies

Pharmaxis chief executive officer & executive director Gary Phillips confirmed the company had been focusing on its upcoming milestones this month which have been outlined in the company’s quarterly shareholder update.

Mr Phillips, a former Novartis senior executive of many years, acknowledged the company’s two lysyl oxidase like 2 (LOXL2) inhibitors had reached an important development stage.

That turning point involved deciding on whether Pharmaxis should move into phase 2 studies for LOXL2 program which has anti‐fibrotic mechanism or take the partnering track.

The LOXL2 enzyme is fundamental to the fibrotic cascade that follows chronic inflammation in the liver disease non‐alcoholic steatohepatitis (NASH), cardiac fibrosis, kidney fibrosis, and idiopathic pulmonary fibrosis (IPF).

LOXL2 enzyme also plays a role in some cancers.

READ: Pharmaxis partner Chiesi resubmits new drug application for Bronchitol in the US

Pharmaxis’ anti‐fibrotic programs are a drawcard in the pharmaceutical industry, given they are one of a small number in clinical development and demand is strong.

The Sydney-based company has studied its LOXL2 inhibitor compounds in preclinical studies of NASH, IPF, kidney and cardiac fibrosis before putting them through phase 1 studies and three-month toxicity studies.

 

Pharmaxis has previously targeted NASH with BI 1467335 (PXS‐4728A), a Pharmaxis drug discovery that excited Boehringer Ingelheim and is bringing in significant milestone payments for Pharmaxis.

The company’s LOXL2 program is also now attracting attention for its potential for use in NASH but also IPF.

Phillips has been clear about the strategic options for the LOXL2 inhibitors, saying: “We could move directly into phase 2 ourselves and push for the clinical proof of concept that would add further value to the program.

“Alternatively, we could find a large pharma partner to drive the drug discoveries into phase 2.

“It is obvious from the number of licensing and collaboration deals for early stage NASH programs in recent months that demand is strong in this indication, and we also know from our own discussions with pharma that our program is equally attractive as a treatment for idiopathic pulmonary fibrosis (IPF).

“Our healthy cash balance puts us in a strong position to take our time, choose the most appealing option and negotiate the best deal for our shareholders.

“The next step is to commence the commercial partnering discussions and assess the range and type of deal structures on offer.”

READ: Pharmaxis reveals first sales of Aridol in the US after successful relaunch

The Pharmaxis CEO had previously spoken to Proactive Investors’ Stocktube video channel about progress on the LOXL2 program, acknowledging the company had been speaking to potential partners that were following a due diligence process.

Phillips said: “Our team is on stand-by, we’ve been having face-to-face meetings … and conference calls.

“The next stage is commercial discussions once they’re comfortable.”

Revenue generators

Pharmaxis’ $1.7 million in revenues for the December quarter and $3 million revenue for the December half-year came from a variety of sources.

Among these was $232,000 net in revenues in the December quarter from its long-time pipeline product Bronchitol in Australia, Western Europe and Russia and Eastern Europe.

Sales in the three regions were $657,000 in the December 2018 half-year.

READ: Pharmaxis receives positive results from clinical trial of treatment for fibrotic diseases

The inhaled dry powder for the treatment of cystic fibrosis, Bronchitol is approved and marketed in Europe, Russia, Australia and a number of other countries.

Bronchitol was added to the essential drugs list in Russia and was granted national reimbursement status in what is an attractive market on January 1 this year.

The milestones come exactly a year after the Australian Government widened its approval for the drug, positively affecting sales which grossed $294,000 in the December quarter in Australia and $543,000 in the December half-year.

READ: Pharmaxis moving into phase I clinical trial of its small molecule LOX inhibitor

Pharmaxis commercialisation partner Chiesi Farmaceutici SpA is working to secure Bronchitol approval in the US market, resubmitting an application rejected by the US Food and Drug Administration (FDA) in 2013 after an additional Phase 3 study and answering queries raised in a complete response letter from the regulator.

The Australian company is expecting a six to 12-month regulatory approvals process will be followed with the FDA and hopes for an approval that would prompt a US$10 million milestone payment on commercial launch, high-teen royalties and exclusive supply to the US market.

Another income earner for the company in the December quarter was the Aridol lung function test to help doctors diagnose and manage asthma.

Aridol has Australian, major European, US and South Korea approvals.

Sales in the four regions grossed $1.1 million in the December quarter, with December half sales sitting at $1.6 million.

Broader pipeline

Pharmaxis has an oral lysyl oxidase (LOX) program where the drug candidate inhibits all LOX family members and has potential anti‐fibrotic application in severe fibrotic indications.

Studies in animal pre-clinical models have shown promise for use in myelofibrosis and pancreatic cancer.

A phase 1 clinical trial in healthy subjects is expected to start this quarter.

Another pipeline candidate is a dual-acting drug-inhibiting SSAO and myeloperoxidase (MPO) for treating inflammation.

Quarterly results and expected cash outflows

Pharmaxis had $1.3 million of revenues in the quarter, spent $2.7 million on new drug development and $1.3 million on product manufacturing and operating costs.

The company used a total of $4.1 million in cash on operating activities and $229,000 for investing activities with the bulk of that investment going towards property, plant and equipment.

Pharmaxis ended the quarter with $42 million cash with no debt or financing facilities.

Major shareholders

Pharmaxis had 394,291,298 shares on issue on December 31, with the company’s top 20 shareholders holding 68.6% of the company at year’s end.

BVF Partners LP was Pharmaxis’ largest shareholder with a 22% stake.

Arix Bioscience Holdings Limited was the second largest shareholder, with 11%, followed by Australian Ethical Australian Share Fund on 7%.

— with Danielle Doporto

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