Phylogica leads biotechs

Perth drug discovery company Phylogica has become Australia’s top biotech stock this year, with its share price up by about 250 per cent over the past five months.

The strong gains compare favourably with the rocketing share price of many mining and energy companies and contrast with the lacklustre performance of most other biotech stocks.

The investor support for Phylogica reflects developments with the company’s operations and inter-national trends in the biotech sector.

In particular, several biotech stocks operating in similar market segments have attracted big takeovers from large pharmaceutical companies, which are on the lookout for future growth opportunities.

The latest big-ticket transaction was AstraZeneca’s £702 million pound ($A1.7 billion) acquisition of Cambridge Antibody Technology Group plc, which is active in the discovery and development of new biological-based therapeutics.

“That has created a lot of excitement in our sector,” Phylogica chief scientific officer and WA Business News 40under40 award winner Paul Watt said.

“A lot of people were skeptical about biologicals a few years ago.

“Instead of being on the periphery of drug discovery, it is definitely centre stage.”

Phylogica was founded by the Telethon Institute for Child Health Research and the Fox Chase Cancer Centre in the US and listed on the Australian Stock Exchange last year.

It is using its core phylomer technology as the basis for developing new drugs.

Dr Watt said Phylogica planned to commercialise its lead drugs through licensing deals, typically with large international pharmaceuticals.

This was similar to Cambridge’s strategy and contrasted with many other biotech companies, which have sought to complete clinical tests before negotiating licencing deals.

Dr Watt said Cambridge concluded more than 40 alliances since 1990, generating substantial revenue. Its pre-clinical licencing strategy meant Cambridge shared the cost and risk of validating its own technology.

Phylogica has established a series of strategic collaborations with Australian and international research institutes to develop phylomer drugs for inflammatory diseases such as stroke, rheumatoid arthritis and diabetes. It is also working with the McComb Foundation, which played a pivotal role in the formation of Clinical Cell Culture, on burns treatment.

Phylogica’s latest deal was with Irish biotech company Opsona Therapeutics.

Dr Watt said Opsona’s capabilities gained strong endorsement recently when it completed a deal with multinational drug company Wyeth Pharmaceuticals.

Another recent deal was a collaboration between Phylogica and Melbourne’s Baker Heart Research Institute, which is regarded as one of the world’s leading organisations involved in heart research.

Opsona and Baker both said they were attracted to Phylogica because phylomers were seen as providing a novel way of developing new treatments.

Similarly, AstraZeneca said its Cambridge acquisition was central to its plans to establish a major international presence in the research and development of novel biological therapeutics.

The strong rise in Phylogica’s share price to about 85 cents has seen it ranked as the top performing stock in the Intersuisse biotechnology index, which tracks about 80 listed Australian biotech companies.

The index overall has risen by just 3.3 per cent during the 2006 calendar year. Most of the WA stocks included in the index have recorded negative returns this year.

This includes Chemeq, Clinical Cell Culture, Advanced Ocular Systems and pSivida, which is currently conducting a one-for-eight rights issue at 60 cents per share to raise $29 million.

The proceeds will be used to fund clinical trials of its Medidur product for treating certain eye diseases and its lead BioSilicon product BrachySil, which is being developed for use in the treatment of pancreatic cancer.

pSivida said it expected to receive a significantly greater return by funding the Medidur trials under a co-development agreement with Alimera Sciences.

This would enable pSivida to receive a share of profits rather than a straight royalty, which would be payable if it did not co-fund the trials.