Bronchitol Phase III Clinical Trial Results

Pharmaxis can breathe easy, say the bullish

DAVID SYMONS June 24, 2010

IT WAS a case of shoot first and ask questions later when Pharmaxis shareholders responded to clinical results for Bronchitol, a drug that improves lung function in cystic fibrosis patients by reducing mucus.

For many years a darling of the biotech sector, Pharmaxis shares fell as much as 47 per cent on the announcement that the company's second phase-three study of Bronchitol fell fractionally short of recording a statistically significant increase in the amount of air that patients could exhale over one second, as compared with a control group.

But the data was otherwise impressive, building on studies showing that Bronchitol increases lung function by 6 to 8 per cent.

This is important as the greatest cause of death for cystic fibrosis patients, who have a life expectancy of about 37 years, is the cumulative effect of lung-function decreases of 1 to 2 per cent a year.

What's spooked investors is the possibility a statistical quirk will mean Bronchitol fails to receive US Federal Drug Administration approval without a further clinical study.
It's a legitimate concern, particularly in light of spectacular failures from a clutch of biotech hopefuls already this year.

However, there's little reason to think Pharmaxis is going to join the ranks of fallen stars such as Chemgenex, Avexa, and Novagen. For a start, there's universal acceptance that Bronchitol is an effective drug that will obtain FDA approval.

The only question is whether another clinical study will be required, setting the timetable back from current plans for a US market launch in early 2012 and costing about $10 million to complete.

However, sector analysts reckon there's a good chance that Bronchitol will receive FDA approval based on the data already produced.

The most pessimistic view approval as a 50:50 proposition, while others are more bullish.
Shaw Stockbroking analyst Matthias Smith left his Pharmaxis share-price target unchanged at $4.30 after drilling into the data, commenting that he would be ''very surprised if further data is required for FDA approval''.

Key to the conclusion is the demonstrated safety of Bronchitol, and an expectation that the FDA has a strong desire to find an improved treatment for America's 30,000 cystic fibrosis sufferers.
Smith sees Pharmaxis's profits growing strong once Bronchitol is launched in Europe and the US, hitting $180 million in 2015.

After staging a modest recovery in afternoon trade, Pharmaxis shares closed yesterday at $2.10, down 33 per cent, and valuing the company at about $470 million.