first broker upgrade: 5.10, page-14

By Simeon Bennett
Aug. 30 (Bloomberg) -- Pharmaxis Ltd., the second-best
performer among Australia's 18 biggest health-care stocks this
year, expects as much as $900 million in annual sales from its
lung disease drug, Chief Executive Officer Alan Robertson said.
Pharmaxis may start selling its Bronchitol medicine as
early as 2009, Robertson said in an interview yesterday. The
Sydney-based company plans to seek regulatory approval from the
European Medicines Agency after a patient study showed the
inhaled treatment helped fight a respiratory disease affecting
as many as 600,000 people worldwide, Pharmaxis said yesterday.
Approval of Bronchitol would give bronchiectasis patients
their first new treatment in decades, Pharmaxis said. The
chronic, incurable, degenerative lung disease affects more than
110,000 people in the U.S., causing more than $630 million in
annual medical costs, the company said.
``It's a high unmet clinical need,'' Robertson said. ``And
you have no competition.''
Pharmaxis fell 4 percent to A$3.87 on the Australian Stock
Exchange, paring this year's gain to 30 percent, trailing a 51
percent gain by Melbourne-based CSL Ltd. Pharmaxis surged 9.2
percent yesterday, its biggest gain in more than a year, after
results of its phase-three clinical trial were announced.
The stock may reach A$4.91, according to the average 12-
month price target of four analysts surveyed by Bloomberg. All
four analysts rate Pharmaxis a ``buy.''
Pharmaxis plans to use its A$76 million in cash reserves to
market Bronchitol in Australia and overseas, Robertson said. It
will be sold through a network of distributors in Europe and
Asia, he said.

$6,000 Treatment

Bronchiectasis is the permanent dilation of the lower
airways because of chronic bronchial inflammation or infection,
the company said. The lung tissue-destroying ailment can be
caused by repeated lung infections or childhood pneumonia.
The market for medications for chronic obstructive pulmonary
disease is worth A$4.6 billion ($3.8 billion), ABN Amro Morgans
estimated in a July 17 report. Bronchitol may reach the market
as early as next year, analyst Tanya Solomon said.
Bronchitol, which hydrates the lungs and helps patients
clear mucus more effectively, may cost about $6,000 per patient
per year, Robertson said.
At that price, the drug could earn $300 million if the
company can sell it to 10 percent of the 500,000 people known to
have bronchiectasis in developed nations. It could earn as much
as $900 million, a ``more realistic'' estimate, if it's used by
30 percent of sufferers, he said.
Pharmaxis has applied to the U.S. Food and Drug
Administration to start a six-month trial of the treatment there,
which may start as early as next year, Robertson said. He plans
to spend A$15 million building a new factory capable of
producing enough Bronchitol for 35,000 patients a year, he said.
The nine-year-old company is also studying Bronchitol as a
treatment for cystic fibrosis and chronic bronchitis.