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Pharmaxis flicks the switch to self-funded trial program


Sydney-based drug developer Pharmaxis (ASX:PXS) is moving through a pivot that the market is taking its time to understand, as it takes its lead drug candidate PXS‐5505 firstly through a Phase 1/2a trial for the treatment of the rare bone marrow cancer myelofibrosis, and secondly, into pre-clinical efficacy testing for glioblastoma (GBM), the most common form of brain cancer.

  • Both are nasty conditions. Myelofibrosis, a rare bone cancer suffered by one in 500,000 citizens, is a scarring of the bone marrow that interrupts the body’s normal production of white and red blood cells and platelets. 

    This leads to fatigue, reduced immunity, clotting and bruising and bleeding. Myelofibrosis sufferers typically are aged 50 to 80 years and can expect to live an average of only five years. About 10% typically go on to develop leukaemia.

    Glioblastoma, for its part, is the most common form of brain cancer, with an average survival of just 15 months from diagnosis. 

    The aim is to make Pharmaxis a global leader in myelofibrosis, and flowing from that, to develop PXS‐5505’s potential in several other cancers, including liver and pancreatic cancers.

    PXS‐5505 inhibits all the lysyl oxidase (LOX) family of enzymes, which play a crucial role in the development of severe fibrosis, as well as cancers to which fibrosis contributes. The drug is being targeted for first-line treatment of myelofibrosis, a rare cancer in which normal bone marrow tissue is gradually replaced with a fibrous scar‐like material. Over time, this leads to progressive bone marrow failure preventing the production of adequate numbers of red cells, white cells and platelets.

    The drug works differently than any other potential treatment, by targeting the formation of the inflammation “matrix” in the bone marrow. 

    Because there is no effective treatment on the market, in July 2020 the FDA granted Pharmaxis “orphan drug” designation for PXS‐5505 for myelofibrosis.

    This is a special status granted to a drug to treat a rare disease or condition; the designation means that PXS‐5505 can potentially be fast-tracked, and receive tax and other concessions to help it get to market. The FDA has also given Pharmaxis Investigational New Drug (IND) approval to proceed to Phase 2 trials with PXS‐5505.

    It’s here that a common paradox of Australian life science companies rears its head: a seeming inability of the market to appreciate them properly.

    As Pharmaxis CEO Gary Phillips points out, Pharmaxis is not alone in tackling myelofibrosis: there are at least four other companies with Phase 2 or Phase 3 programs in this area. They are: Keros Therapeutics (NASDAQ: KROS), with a market cap of US$1.2 billion ($1.5 billion); Constellation Pharmaceuticals (NASDAQ: CNST), valued at US$931 million ($1.2 billion); Kartos Therapeutics (privately owned, but Pharmaxis estimates a value of US$700 million [$897 million] based on its last funding round); and Geron Corporation (NASDAQ: GERN), which is capitalised at US$426.9 million ($547 million).

    Against this, Pharmaxis, at 8.1 cents a share, has a market capitalisation on the ASX of $37.5 million.

    Compounding this frustration for Phillips is that “all of the myelofibrosis drugs in development, and on the market, suffer from poor tolerability” – whereas PXS‐5505 appears to be well-tolerated. “We expect PXS-5505’s unique mechanism of action to deliver additional efficacy on top of existing standard of care and/or known pipeline drugs without adding to tolerability issues,” he says.  

    Further out, Pharmaxis believes that PXS-5505 can be an adjunct to best-standard-of-care in multiple cancers. In May, the company announced that a grant from Australian charity Charlie Teo Foundation will fund the drug into pre‐clinical efficacy testing for GBM, to be conducted at The University of Texas MD Anderson Cancer Center. Again, LOX enzymes play a crucial role in GBM because they attract inflammatory cells that accelerate tumour growth and reduce survival: as a potent inhibitor of LOX enzymes, PXS‐5505 should stop these processes.

    Effectively, Pharmaxis has pivoted its focus toward PXS‐5505, and the rest of its anti‐fibrotic LOX program – first in myelofibrosis, and flowing from that, in several other cancers, including liver and pancreatic cancers. But crucially, this pivot is funded by its secondary business, in respiratory conditions.

    In that business, Pharmaxis has two respiratory products from its mannitol platform approved and supplied in global markets, and these products supply the cash flows that bankroll the company to take PXS-5505 through its planned Phase 2 trials.

    Both of the respiratory products are approved by the FDA.

    The company’s first FDA approval from the mannitol platform was for Aridol, a lung function test designed to help doctors diagnose and manage asthma, by detecting active airway inflammation. Aridol is also approved in Europe, Australia and certain Asian countries.

    The second – and more important – product is Bronchitol, which won FDA approval last November, as an add‐on maintenance therapy to improve pulmonary function in cystic fibrosis (CF) patients 18 years of age and older. A spray-dried form of mannitol that is delivered to the lungs by a portable inhaler, Bronchitol works by rehydrating the airway/lung surface and promoting a productive cough. Bronchitol is also approved and marketed in Europe, Russia, and Australia.

    Pharmaxis has worked with Chiesi USA, the American affiliate of Italian global pharmaceutical company Chiesi Farmaceutici, as its development, regulatory approval and commercialisation partner. FDA approval for Bronchitol triggered a US$7 million ($9.9 million) milestone to Pharmaxis in December 2020, with a further US$3 million ($4.2 million) following in March 2021, on the product’s actual commercial launch.

    Subsequently, Pharmaxis topped-up that case infusion with a $4.4 million placement and the sale of the Russian distribution rights for Bronchitol, for $2 million, a deal that also took $1 million a year of marketing and regulatory expenses out of the business. All up, Pharmaxis ended the March 2021 quarter with $16.2 million in cash, down from $18 million at December 2020. 

    Existing substantial shareholders supported the placement, while Hong Kong-based fund manager Karst Peak Capital – a healthcare specialist that has a fund focused on investing in Australian and New Zealand listed companies – invested $3.2 million to take an 8.9% stake post-capital raising.

    Phillips says the cashflows from the mannitol business segment will go from “cash burn” (FY20 EBITDA loss of $4 million) to cashflow positive from FY 21 onwards, and by FY26, he expects the mannitol business to be generating EBITDA of more than $10 million.

    Pharmaxis will earn royalties in the high-teens from US sales, which, combined with a long-term supply contract, is forecast to deliver about 20% of Chiesi’s US Bronchitol net sales directly to the Pharmaxis mannitol business segment’s EBITDA. Three sales milestones totalling US$15 million are also payable on achieving annual sales thresholds.

    This cashflow situation, he says, enables the company to “move confidently ahead with the development of PXS-5505.”

    The company also announced in March that a drug it discovered in its laboratory had entered a world-first clinical trial aiming to stop scars forming after trauma, particularly following burn injuries. The Pharmaxis discovery, known as PXS‐6302, has shown promising pre‐clinical results in blocking the underlying fibrosis that causes scar tissue, and carries the potential to transform trauma recovery. It will now go into human trials in topical (cream applied to the skin) form in a program led by distinguished surgeon and burns expert Professor Fiona Wood AM and a group of researchers from the University of Western Australia (UWA) at Perth’s Fiona Stanley Hospital.

    “We’re very excited to see our expertise in fibrosis being applied to help patients with scarring,” says Phillips. “We have had a long and productive collaboration with researchers at UWA and this important trial of our drug PXS‐6302 will establish whether the remarkable results seen in the pre‐clinical models can be replicated in patients.”

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