Herald Sun December 21, 2010 12:00AM John Beveridge
IT seems any biotechology company can do a deal with a large pharmaceutical firm.
Maybe even two.
But when a third one is announced in a year - this time with Viagra-driven giant Pfizer - it seems there's something special going on.
Phylogica uses the time-honoured idea of looking to nature to develop new drugs to treat a variety of ailments.
Its specialty is peptides and it has grabbed a couple of billion of these protein fragments produced by bacteria in some of the harshest places on earth: read volcanoes and geysers.
The concept is that a large pharmaceutical company comes along with a target within or on the outside of cells that it needs to find a perfect "match" for.
Phylogica runs that target against its library of peptides until it finds several likely candidates for a bonding match, which are then tested as the basis of a new drug.
The company makes money once every new drug jumps a testing hurdle, until the real gold mine arrives if and when it earns low percentage royalties on a blockbuster drug.
Should that happen, Phylogica will either become a takeover target for a large pharmaceutical company or will finally reward shareholder faith with some serious revenue streams.
At the moment these alliance research deals are with Pfizer, Roche and Medimmune (a division of AstraZeneca) and chief financial officer Nick Woolf is confident of another three or four similar deals next year.
I rate Phylogica a speculative buy based on the massive upside should a blockbuster drug be literally pulled out of a volcano.
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