Huntley's Recommendation: ChemGenex Pharmaceuticals...

Huntley's Recommendation: ChemGenex Pharmaceuticals Ltd

Recommendation: Buy

By focusing on validated targets in diseases with genetic components, CXS seeks to bring therapeutics to market that address chronic diseases with high unmet medical need. The companys clinical pipeline of cancer drugs, coupled with its discovery and development programs, provide it with the potential to meet these objectives. CXS has two molecules in clinical trials in the U.S. and a pipeline of pre-clinical anti-cancer compounds in development. CXS lead compound for leukaemia is likely to reach market in 2010. The Board of Directors and Scientific Advisory Board are highly experienced.
Investors should view the stock as high risk both because drug candidates could ultimately fail or be displaced by a better drug, and because a further weakening sharemarket may hurt it more than the broader market due its lack of income.

Event: 26-Mar-2010

The FDA said CXS needs to provide validation of a well-characterised diagnostic to identify patients with the mutation and which is correlated to clinical trial results, before it will approve OMAPRO.

Business Impact: The unfavourable announcement on 24 March and the resulting violent market reaction underlines the speculative nature of biotech investing.
Our interpretation is that the FDA needs to be confident CXS used a valid method of detecting patients who have the mutation and evidence that such diagnostic was used effectively in the trial.
The company says it has been working with the FDA on the T3151 diagnostic matter and the FDA has confirmed it will meet with CXS to review the diagnostic strategy on 9 April 2010. While management says it does not expect to have to redo trials, we consider that to be a possible outcome which would delay drug registration quite significantly and probably require another small capital raising.

Forecast Impact: --

Recommendation Impact: No change to our triggers, which already reflect the potential for material delays to the registration process and a small (5%) probability of rejection by US and European regulators.

Event Analysis
The unfavourable announcement on 24 March and the resulting violent market reaction underlines the speculative nature of biotech investing.
CXS is seeking registration of OMAPRO for treatment of chronic myeloid leukemia (CML) patients that carry the T3151 mutation. The mutation renders their leukemia resistant to Gleevec, the most popular drug for CML sufferers.
In our last review we detailed concerns the US Federal Drug Authority (FDA) had with CXS New Drug Application (NDA) submission for OMAPRO. One was the lack of a commercially available assay for the detection of the T3151 mutation, another that CXS did not submit any data regarding the assay methods used in clinic trials to detect the mutation.
The FDA said CXS needs to provide validation of a well-characterised diagnostic to identify patients with the mutation and which is correlated to clinical trial results, before it will approve OMAPRO.
Our interpretation is that the FDA needs to be confident CXS used a valid method of detecting patients who have the mutation and evidence that such diagnostic was used effectively in the trial.
The company says it has been working with the FDA on the T3151 diagnostic matter and the FDA has confirmed it will meet with CXS to review the diagnostic strategy on 9 April 2010. While management says it does not expect to have to redo trials, we consider that to be a possible outcome which would delay drug registration quite significantly and probably require another small capital raising. Although the Oncologic Drugs Advisory Committee (ODAC), which advises the FDA on cancer drug NDAs, did not vote on the efficacy and safety of the drug, the company said several of its members commented favourably on these attributes.
The company does not expect the diagnostic issue to materially impact OMAPROs time to market. It also said it does not expect the issue in the US to impact the European strategy, where in December 2009 CXS signed a licensing deal with Hospira for Europe, the Middle East and parts of Africa.
No change to our triggers, which already reflect the potential for material delays to the registration process and a small (5%) probability of rejection by US and European regulators.