Avexa shares crushed
* CRITERION: Tim Boreham
* From: The Australian
* May 10, 2010 1:01PM
IF investors need evidence of the inherently risky nature of drug development -- and they probably don't -- Avexa has delivered crushing proof.
Avexa, which was developing the HIV drug ATC, this morning said it had scrapped the program after failing to strike a licensing deal with a pharmaceutical company.
Given Avexa essentially was a one-trick pony, that's akin to Woolworths announcing it would quit retailing or BHP declaring that digging up iron ore, coal and such was all too messy.
Avexa shares tumbled 78 per cent, or 9.4 cents.
The aftermath of the stunning announcement has also seen CEO Julian Chick fall on his sword, with a group of discontents gunning for chairman Nathan Drona.
Intriguingly, the company stresses ATC's clinical milestone were "consistently achieved and the trial results, both in terms of safety and efficacy, were excellent".
"Unfortunately for ATC, the compound's successful development did not translate into a commercial deal to partner the program ... and as a result the program is no longer viable."
The problem, it seems, is that while ATC worked there are already other HIV drugs on market, so building a slightly more refined mouse trap wasn't going to cut it with backers who would need to commit hundreds and millions of dollars to market the drug.
As Avexa notes, it's unclear how ATC could be effectively used in combination with other new drugs on the market.
Biotech watcher David Langsam of Biotech Daily surmises there was no material difference between ATC and 3TC, the main rival drug (developed, by the way, by Avexa chief scientist Jonathan Coates).
"Why repackage for just a little bit better," he says.
Avexa had $26.6 million of net cash as of March 31 and expects to have $23m -- equal to its trashed market cap -- at June 30 balance date, after the inevitable redundancies.
Criterion had Avexa as "an avoid" at 8.9c but then reverted to a "speculative buy" in May at 9.3c, on promising collaboration talks. It's called rope-a-dope, but then again the stock rallied to peak at 23c in November.
Our call is under review as we trawl the train wreck for salvageable value.
Avexa's failure is likely to put a dampener on the whole sector, but it's a case of swings and roundabouts: less than two months ago Acrux unveiled a circa $1 billion licensing deal for its testosterone treatment.
[email protected]
http://www.theaustralian.com.au/business/opinion/avexa-shares-crushed/story-e6frg9lo-1225864531475
Add to My Watchlist
What is My Watchlist?