Amrad abandons hep B compound after poor trials

Amrad Corporation's (ASX:AML) horror year plumbed new depths today when the company revealed poor results had led it to abandon its chronic hepatitis B compound.

Investors scurried from the stock, which at 1.30pm today was almost 12 per cent lower at 59 cents.

Analysts described the news as terrible for a company already battered by a barrage of negative announcements. But Amrad's recently reconstituted board said that while the outcome of the AM365 trial was disappointing, it was not the end of the world for the portfolio driven Melbourne company.

Managing director Dr Sandra Webb said a recent strategic planning retreat by the board had put on the table a number of options for the company moving forward. Webb said these were currently under review and would be put to investors at the company's annual general meeting in October.

"I think the best thing to say is that we really are looking deep and long and hard at strategic development and coming up with ways forward to improve extraction value for investors over the next 12 to 18 months," she said.

"It is also important to mention that Amrad has a portfolio approach to manage against early failures."

Amrad's Phase IIa trial of AM365 in chronic hepatitis B patients failed to show sufficient antiviral activity, despite positive results in animal tests.

The human trial, run over 14 months, involved patients in Australia, New Zealand and Asia being treated with different doses of the compound for a month before having blood virus levels measured.

"Despite showing good antiviral activity in the gold standard animal model and successfully completing Phase I trials in healthy volunteers, AM365 did not demonstrate sufficient antiviral activity in HBV-infected patients to warrant further development of this compound," Webb said.

The company's run of bad news began in February when it reported a consolidated loss of $6.9 million in the six months to December 31, compared to a profit of $2.6 million in the previous corresponding period.

Later that month it raises $15.5 million through an institutional placement at $1.15 a share.

In March it announced that its Phase II trial of emfilermin had failed to reduce peripheral nerve damage in cancer patients, prompting major shareholder Circadian to call for the dumping of three board members.

That disruption was exacerbated in April when the market learned that two early-stage research projects - stroke compound AM36 and components of the SOCS discovery platform - revert to Amrad after collaborators DevCo and GlaxoSmithKline decide they no longer wish to pursue them.

Then on May 22 a planned extraordinary general meeting was cancelled after Circadian and Amrad agreed on a last-minute compromise that saw corporate recovery specialist Olaf O'Duill step in as chairman.

At the time of the changes analysts had said investors would wait for Amrad's next major results announcement - its hepatitis B compound - before reassessing the stock.

Solomon Smith Barney biotech analyst Rosemary Cummins said that after the latest announcement, there appeared to be no short-term drivers for the company.

"It's just been an ongoing stream of bad news, which is terrible in a sector where news drives a company," Cummins said.

Since peaking at $1.49 in February, Amrad's shares have slipped 58 per cent.

'Not the end of the world'

New chairman O'Duill said the failure of the trial was an enormous disappointment to the company's scientists and to the board.

"There are strategic options still under review by the board [...] whether it's collaborations with other like-minded companies in biotech or large pharma types to help with some of these products, it is all about how we become a bigger and better company over the next couple of year," he said.

"This is a major setback but it is not the end of the world."

Amrad's chief scientist, Dr Jonathan Coates, said the AM365 program, which began in 1998, had cost the company about $4 million, which he said in relative terms was "quite inexpensive for this type of project".

Coates said the other projects in the company's portfolio were progressing well, with the AM36 stroke compound about to enter pre-clinical trials and the SOCS platform abandoned by Glaxo set to progress in-house.

The company also reported that its AM336 compound for chronic severe pain had completed Phase I and II trials, while the emfilermin focus had now shifted to reproductive health in collaboration with Serono, with a phase II trial now scheduled.

Amrad is also partnering with Aventis subsidiary, Gencell, over its AM132 and AM133 cardiovascular compounds, and with Cambridge Antibody Technology to co-develop human antibody drugs neutralising GM-CSF receptor activity in inflammatory diseases such as rheumatoid arthritis.