Avexa in-licenses Shire HIV drug

Melbourne drug developer Avexa (ASX:AVX) has taken the bold step of in-licensing a promising late-stage developmental drug for HIV/AIDS from international specialty pharmaceutical company Shire Pharmaceuticals Group, seeking to create a strong revenue stream to fund its growth.

Shire (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ), Britain's third largest drug-developer. has licensed out its SPD754 compound to Avexa after a successful Phase IIa trial in 63 HIV-infected patients.

The drug, a nucleoside reverse transcriptase inhibitor (NRTi), blocks synthesis of the HIV reverse transcriptase enzyme, which replicates the virus' genetic blueprint.

Avexa already has its own promising HIV drug in development, which targets the integrase enzyme that splices the virus' genetic blueprint permanently into the DNA of its host cells.

Avexa CEO Dr Julian Chick said the company had decided to take a licence on Shire's late-stage drug candidate because of its potential to generate 'significant' revenues -- hundreds of millions of dollars -- and to reduce the overall risk involved in developing new drugs.

Chick said all 29 HIV drugs that entered Phase III trials between 1982 and 2002 made it to market. "On the assumption that SPD754 is successful in the Phase IIb study, our objective is to take the drug into Phase III and for SPD754 to reach the market by 2009," he said.

If the new drug makes it to the clinic, and generates the revenues expected, Chick said it will strengthen Avexa's internal clinical capabilities and complement the clinical development of its integrase inhibitor, and other pipeline drugs for Hepatitis B and multi-drug resistant bacteria.

Asked why Shire would decide to license out a potentially lucrative drug to a small Australian company, Chick said that six years ago, Shire acquired Canadian anti-infectives R&D company Biochem Pharma, in the process acquiring a royalty stream from GlaxoSmithKline's market-leading anti-HIV drug 3TC, a reverse transcriptase inhibitor.

The company had used Biochem Pharma for its in-house research program, and researchers had developed SPD754 as a candidate drug to treat drug-resistant strains of the virus.

In about 50 per cent of AIDS patients, the virus eventually mutates around 3TC, as well as a rival reverse-transcriptase inhibitor, FTC, made by Californian biopharma Gilead. The virus also becomes resistant to 3TC/FTC combination therapy.

Shire then decided to focus on launching new drugs, and went seeking a partner to take over development and commercialisation of SPD754.

Avexa first flagged its interest in the second quarter of last year, and after 'extensive discussions', the deal has now been consummated -- Chick says it validates his company's expertise in R&D and clinical trials.

Chick says the clinical results to date have reinforced the in vitro promise of Shire's SPD754 for controlling 3TC/FTC-resistant strains of the virus. Given the market dominance of the two drugs, there is a potentially lucrative market for a second-line therapy.

Under its deal with Shire, Avexa has taken on full responsibility for worldwide development of the drug, and will market it worldwide.

Subject to shareholder approval and "certain conditions", Shire will take AUD$2 million equity in Avexa, with an option to acquire 4 million more shares on successful completion of the Phase IIb trial. No milestone payments are involved, and a joint Avexa-Shire development committee will oversee development and marketing.

Avexa also announced it has retained Wilson HTM Corporate Finance to assist in a capital raising for the Phase IIb trial of SPD754. Chick would not reveal the target, but said some of the revenue would go to fund development of its own integrase inhibitor.

"We want to build a large company, focusing on anti-infectives," he said. "We decided to bring in something in late-stage development, under a 50:50 sharing arrangement with our partner, on the basis that it's preferable to have 50 per cent of something than 100 per cent of nothing.

"It should raise our profile, and generate significant revenue -- not tens of millions, but hundreds of millions of US dollars -- allowing us to retain more value in our other projects.

"Many North American companies have licensed in de-prioritised drugs from big pharma, as a stepping stone to developing into big companies. Gilead did it, and the drug it licensed in is now generating sales of US$1.2 billion in the US market. It's now capitalised at US$14 billion.

"By becoming one of the first Australian companies to in-license a late-stage project, we de-risk ourselves and have a much higher chance of success."