Stark lessons for biotech investors Olga Galacho From: Herald...

Stark lessons for biotech investors

Olga Galacho From: Herald Sun March 24, 2010 2:54PM

THE carnage meted out to cancer drug developer Chemgenex's share price yesterday provided those who best understand the Food and Drug Administration's modus operandi with a great buying opportunity.

Overnight the US regulator announced that, before it considered approval for the biotech's drug to treat a rare leukemia, it wanted to ascertain whether a standardised test should be used to detect the specific mutation in patients that the Chemgenex drug is meant to target.

Investors blind-sided by the ruling and impatient with Chemgenex's seemingly drawn-out journey towards commercialisation of the drug, Omapro, queued to sell out yesterday morning, forcing a drop to 28 in the opening price from the previous day's close of 69.5.

The shares eased further to 26.5 in early trade before starting a climb back to 46.5, ahead of finishing at 44, or nearly 37 per cent lower than the previous day.

More than 64.8 million shares, or nearly a quarter of the issued stock, were traded yesterday.

The value of that volume, which was up 12,600 per cent from the previous day's trades, was nearly $23 million.

A typically bullish Greg Collier, Chemgenex's chief executive, insisted he was committed to making Omapro available to patients as soon as possible.

Dr Collier will meet the FDA again on April 9 to review the diagnostic strategy.

The development signalled to Australian biotechs inexperienced in late-stage dealings with the grand-daddy of regulators that, if they are not thoroughly prepared when fronting up for reviews, they will be slapped down.

Late last year respiratory disease specialists Pharmaxis also struck an FDA pothole just when it thought it was on the verge of receiving marketing approval for Aridol in the US.

Its chief executive, Alan Robertson, played down the regulator's extra inquiries over supplier issues as nothing more than a request for detailed information about packaging.

One of these two biotechs will be the first Australian company to navigate the most stringent of regulators and take its own drugs all the way to commercialisation in the world's biggest market under its own steam.

Yesterday's Chemgenex disappointment is likely to be nothing more than teething problems for an embryonic biotech sector that is starting to realise that, when you front an FDA review committee, you need every "i" dotted and every "t" crossed.

As one analyst told Fully Frank, the FDA don't allow mistakes.

Preferring to remain anonymous for fear his wife might question his purchase, the analyst snapped up the shares when they tanked and happily watched them climb through the afternoon.