chemgenex an increasingly attractive target

ChemGenex Seen As An Increasingly Attractive Target
FN Arena News - December 09 2008

By Chris Shaw

For some time ASX-listed biotech hopeful ChemGenex (CXS) has been delivering solid trial results with its omacetaxine mepesuccinate drug compound. It is used in treating chronic myeloid leukemia and in particular a certain mutation of the disease known as the T315I mutation.

ABN Amro Morgans analyst Scott Power notes interim data relating to the trial continues the run of good news. Overall, the results on the 44 patients enrolled in the trial to date have been positive. Recruitment for the trial is expected to be completed by the end of this month, with completion of the trial expected by the middle of next year.

Details of the results to date show less cancer cells in the blood of 80% of chronic phase patients, while 20% of patients recorded a significant decrease in disease from the blood marrow. Power notes the other good news from the results is that the drug appears to be generally well tolerated, while the most common side effect, myelosuppression, only rarely produces serious clinical complications.

In Power's view, the latest data continue to support the expectation the group's omacetaxine compound will be registered either late in 2009 or early in 2010. This fits in well with the fact the company's cash on hand is enough at current burn rates to fund at least another year of development work.

Power expects the results and ensuing registration of the compound will make the company increasingly interesting to larger players in the pharmaceutical sector. This is even more the case following the re-negotiation of the Stragen Pharma alliance in 2007, which left ChemGenex a more focused company with a clean structure. The ABN Amro Morgans analyst believes all this makes the company a more attractive corporate play, something he suggests management has deliberately attempted to achieve.

Post the latest trial data Power retains his Buy rating, with a valuation-based price target of $1.17. The FNArena database shows Aspect Huntley as providing the only other coverage on the stock, with the group's latest rating of several months ago also being a Buy recommendation.

Today, shares in ChemGenex are slightly weaker and as at 1.05pm the stock was off 1c at $0.48. This compares to a trading range over the past 12 months of $0.41 to $1.25.