AGT pipeline boosted in merger with US firm

AGT Biosciences (ASX:AGT) has merged with US company ChemGenex Therapeutics to create a genomics-driven pharmaceutical company with two products in Phase II clinical trials.

Under the terms of the agreement, AGT and its major shareholders will acquire all of the issued shares of privately held ChemGenex Therapeutics, through the issue of 28 million shares to ChemGenex shareholders. The deal is subject to the approval of AGT's shareholders, and is expected to be completed by mid-June.

The new company, ChemGenex Pharmaceuticals, will focus on developing small molecule therapeutics with capabilities spanning discovery and validation of novel genetic targets, chemical genomics and drug screening to identify novel agents, drug optimisation and development, and early stage clinical trials.

AGT CEO Prof Greg Collier said that the merger would bring together the complementary capabilities of the two companies, allowing them to pursue the development of new drugs in a broad range of areas.

"We've ended up with a fully integrated biopharmaceutical company," he said. "We will still partner big disease areas with big pharmaceutical companies, but we will be able to go after smaller niche markets and personalised medicine opportunities."

"It has brought together all of the pieces to discover and develop drugs," said Dennis Brown, CEO and president of ChemGenex Therapeutics.

The new company will retain ChemGenex's Menlo Park, California operations and AGT's Australian operations in Geelong and Melbourne, as well as its Centre for Statistical Genomics in Texas. Collier will take the position of CEO of the combined company, while Brown will be president.

AGT has identified and filed patents on some 80 genetic targets for diabetes and obesity, with four of those targets validated and the subject of commercialisation and license agreements with long-time partner Merck-Sante, in addition to similar programs in anxiety and depression. It is also part of a collaboration with US group The Institutes for Pharmaceutical Discovery to develop OTC drugs for obesity.

ChemGenex Therapeutics has two oncology drugs in Phase II clinical trials, and another three drugs in late stage pre-clinical development. Ceflatonin (homoharringtonine), a plant-derived molecule which appears to target histone deacetylase with effects ranging from up-regulating apoptosis genes and inhibition of angiogenesis, is being tested at the MD Anderson Cancer Centre in Houston, Texas as a potential therapeutic agent for chronic myeloid leukaemia and myelodysplastic syndrome. Quinamed (amonafide dihydrochloride) is being tested at the Sarah Cannon Cancer Centre in Nashville, Tennessee against a variety of solid tumours, and the company has developed genotyping methods to optimise dosing schedules based on the patient's metabolic genotype.

While there are no immediate plans to raise more capital for the new company, Collier said they would seek to upgrade from its current level 1 ADR status on Nasdaq to level 2 in the next 12 months, which will open the door to investment by US institutions.

The Australian market reacted positively to the announcement, sending AGT's share price up almost 10 per cent to AUD$0.56 by press time.