Not surprisingly, Pharmaxis (PXS: $0.035) will sell off its mannitol drug business. The acquiror is Australian-based Arna Pharma.
The mannitol business includes the cystic fibrosis drug Bronchitol and the respiratory function test Aridol. In FY2023 the two products generated sales of $5.8 million, however the business has been loss making over the last three years, with an average EBITDA of -$4.5 million, which excludes the $2.5 million the company is paying for rent at its Sydney offices and manufacturing facility.
The existing distribution deals Pharmaxis has in place will remain although will now be between Arna Pharma and the distributors. There was no upfront sale fee. Pharmaxis will be paid a percentage of net profits from the mannitol business (high single digits) and net profit from other products coming out of the Arna Pharma business (mid-single digits).
Pharmaxis expects to save around $14 million a year by not operating the mannitol business. Manufacturing will be transferred to another facility operated by Arna Pharma, with the sale including the manufacturing equipment, including the spray dryer. Pharmaxis will relocate its offices and R&D labs to a new facility, with the lease on its current site expiring in May next year.
Because the Pharmaxis name needs to remain with the mannitol business, Pharmaxis will change its name to Synatra Ltd pending shareholder approval at the end of November.
The downsizing of the company also includes a smaller board, with company chairman Malcolm McComas retiring. Staff numbers at Pharmaxis will be reduced from around employees 70 to just 25.
Core Focus - Clinical Development Program
Pharmaxis will now focus on its core drug discovery and development business. The most advanced of those programs is a Phase II study due to commence in the coming weeks with PXS-5505 for the treatment of myelofibrosis.
Following positive Phase IIa results in a monotherapy trial, Pharmaxis will shortly start a Phase II combination study of PXS-5505 with a JAK inhibitor (ruxolitinib) which is one of the current treatments for this disease. That study will seek to recruit 15 patients in an open label format.
Changes in spleen size, improvement in symptom score, and blood composition, including platelet levels, will be measured. Pharmaxis CEO Gary Phillips expects a synergistic effect from combining the two therapies, with JAK inhibitors not addressing the underlying disease which PXS-5505 is seeking to address.
The study is expected to be fully recruited in the first half of 2024 with results by the end of the calendar year. Being an open-label study, it is possible that early interim results may be released, in Bioshares' view.
Other studies due to start are two trials with its topical pan-LOX inhibitor for the removal and prevention of scars, and a Phase II study with PXS-4728 in neuroinflammation disorders funded by Parkinson's UK. PXS-4728 was previously licensed by Boehringer Ingelheim and returned to Pharmaxis following extensive development work.
Pharmaxis finished June with a proforma cash balance of $14 million. With a more focussed business on drug development, the expectation is that value within the business will be better recognised combined with a smaller cash burn.
Pharmaxis is capitalised at $28 million.
Bioshares recommendation: Speculative Buy Class A
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