The following was published by the Western Australian Business...

The following was published by
the Western Australian Business News 5/08/10

hylogica wins $1.5m deal
News: 5-August-10 by Emily Morgan


Perth-based drug discovery and biotechnology company Phylogica has signed a deal with major pharmaceutical operator AstraZeneca and its biologics unit MedImmune this week, a positive step for an industry that has had underwhelming investment and returns in the past few years.

The 12-month deal is worth $1.5 million and if MedImmune is successful in its research, Phylogica will receive milestone payments worth US$98 million in addition to worldwide sales if the drug is commercialised.

As part of the deal Phylogica ? which was born out of the Telethon Institute for Child Health Research ? has made its protein banks available to MedImmune for research into hospital acquired infections that can be life threatening.

Phylogica chief executive Paul Watt likened the company?s protein libraries, or Phylomer peptide libraries, to owning the rights to a well or mine for oil and gas exploration.

?Drug discovery is analogist in some ways to mining or exploration for oil or gas, in the sense that one screens a resource, which in drug discovery is called a library of candidates, in order to identify prospects which can be exploited by larger companies,? he said.

?Phylogica owns the world?s most structurally diverse library of a particular type of drug candidate, peptides. Because we own the resource, we can charge a premium for access to the resource by the large pharmaceutical companies.?

In a country where biotech investment has been dwindling in its attraction, Phylogica has changed its investment structure to lower the risk for investors and increase the attractiveness of the ASX-listed company.

?We are adopting a business model that is different to the model most Australian investors will be familiar with ? the standard biotech model which frankly has been very disappointing for investors,? Mr Watt said.

?The standard model is where a biotech company aspires to be a mini pharmaceutical company ? they want to not only discover drugs but take them through clinical development and either license them or take them to market.

?We think that is an incredibly high risk strategy, at the end of the day only one in nine drugs on average make it through the clinical development process.

?What we have done is come up with a discovery focused model ? rather than staking the company on one or two clinical candidates Phylogica has concentrated on the discovery stage.

?We are focusing on the exploration side rather than the development of the resource.

?What we do for the pharma company only takes a year and yet the obligations of the pharma company to pay us continue into the future after our own activities are finished.?

Mr Watt said he was also in discussions with 20 pharma companies and has several deals in late discussions with two other top 10 multinational pharmaceutical companies.