a good company update

New spin off company in Cambridge UK to exploit new market opportunities

Phylogica has been working for three years with one of the world?s most prestigious cancer research groups, the MRC/ Hutchison group at the University of Cambridge, one of the world?s top three universities according to independent ranking measures.

The objective has been to use the Phylomer peptides as probes, seeking the weak points in a selected disease-producing mechanism. Those weak points then become new targets for new drugs.

This application of Phylomer libraries to the discovery of new ?drug targets? has been so productive and such an advance on previously available search tools, that Cambridge University and Phylogica have agreed to form a spin-off company to be named ?Phenomica.?

Based within the Cambridge biotech community, Phenomica will be situated in the same hub that has generated hugely successful companies such a Cambridge Antibody Technology (CAT), eventually purchased for over one billion dollars by AstraZeneca.

This joint venture is an exciting additional validation of the global unique value of the Phylogica assets and the performance of the R&D team. The future contribution of this new entity to Phylogica?s commercial life is hard to quantify, but is likely to be substantial both in terms of money and of international presence, based on the validation of the technology and the pedigree of the team being assembled to drive the venture.


Phylogica as an Oasis for big drug companies

Major pharmaceutical companies are facing patent expiries on their blockbuster drugs and margin pressure on their sales.

Over the past five decades they have grown into international giants, releasing new drugs every year or so, and generating billions of dollars in returns.
But more recently, the flood has declined to a flow, then to a trickle and now it is almost a desert. Fewer and fewer new drugs being approved and many of those showing only small incremental benefits over existing treatments. This dearth of new drugs has not abated in recent years, despite massive investment in research and development.
So now the big guys are starting to reduce their R&D staff as they look outside their glass palaces for fresh inspiration, searching for the best and most creative ways to replenish their dry pipelines of new drugs.

Phylogica is being recognized as one of the small and burgeoning oases to source new ideas and opportunities. Three major contracts have been signed within 12 months ?Roche, MedImmune (the biologics unit of AstraZeneca) and Pfizer. Each is in a quite distinct area of drug discovery. Phylogica is now in advanced discussions with a number of other major companies who see Phylogica providing a fresh approach to challenging questions.


What makes Phylogica an Oasis?

Some of the best and most important drugs have been derived from natural sources, often microorganisms. For example penicillin, streptomycin and other antibiotics came from fungi and bacteria; digoxin for heart failure from a plant foxglove, aspirin from willow bark, and a number of cancer drugs such as paclitaxel are derived from plants and microorganisms.

Phylogica has a patented source of billions of potential drugs from diverse natural organisms. When organisms survive and evolve in nature, over billions of years, the compounds that they produce show serious survival value and ability to interact and modulate biological processes. This selection process produces an enriched source of potential drugs. To use a West Australian analogy ? it?s a very rich ?mine?.


Billions of options ? which one to choose?

Having such a rich mine is one thing, but how to find the right stuff from among the billions of possibilities is quite another challenge. This requires having the right screening, enriching and matching processes to sort out the best choices to match the client?s needs. Our Phylogica team have created a series of innovative process that reduce the search for the right compound to a few weeks rather than years.

Phylogica as a one stop shop for peptide drug discovery
To further cut time lines, Phylogica has moved to take their selected compounds to the next stage. To achieve this Phylogica has been building a series of collaborations with international companies to enhance the potency and stability of these prototype drugs. Internationally, several companies that follow this specialist discovery model have grown enormously with some, such as Morphosys in Germany, reaching annual incomes of over 100 million Euro, with capitalisations of many hundreds of millions of Euro, while accumulating a treasure chest of potential milestones in the billions.
How is Phylogica replenishing its deal pipeline?
Phylogica is not standing still. Certainly, it has successfully gained its first three major contracts, but now the company anticipates at least another three new partnerships this year, based on existing leads with Pharma companies with which Phylogica has already entered intoadvanced discussions about the precise work plans and terms. In January, at the international JP Morgan Healthcare conference of major companies in the global drug area, Phylogica consolidated its position in talks with multiple prospective clients.. This meeting was followed up more recently by a partnering meeting La Jolla, San Diego which also generated multiple new leads.
Before and after that Dr Paul Watt has been visiting and working closely with different prospective clients. It also seems that the validation from three of the world?s biggest drug companies may be adding major impetus for new contracts.


Working internationally and at home

Dr Paul Watt is now based in Oxford UK as he meets with prospective clients in Europe and the US. Dr Watt continues to be busy with primary presentations to these companies, then detailed interactions with their R&D teams as projects are designed and matured.

These early proposals then come back to the team in Perth where our VP of Research, Dr Richard Hopkins, and his colleagues construct the R&D plans for agreement with the Pharma client. In the current working model, the Phylogica R&D teams hold regular teleconferences with clients to fine tune the research and to refine outcomes.


The business model gains traction

Phylogica generates increasing revenue from fee-for-service R&D for its clients. The business model also generates long term value with income from accumulated milestones and royalties which mature as each Pharma partner carries a drug prototype forward at their expense..

Phylogica?s objective is to become cash self-sustaining in 2012. The Board remains confident in achieving this goal based on the Company's prospective deal flow and the continued progress of its current partnerships.