Inhalix rethinks after funding crunch

Promising medical device start-up company Inhalix has reassessed its strategy and has temporarily parked the company while it reviews its future options, according to CEO Graeme Woodrow.

Problems over funding have caused the rethink.

Venture capital company SciCapital has already invested about one million dollars into Inhalix and originally indicated that it would be prepared to commit additional funds in future, based on milestones being met.

Indeed, in a statement released at the time the company said, "SciCapital has made an initial investment of $500,000 in Inhalix, with a commitment to provide a further $1,500,000 in three increments linked to achievable milestones."

Last week, however, according to Woodrow, SciCapital indicated to Inhalix, "that the balance sheet doesn't look nearly as good as they'd hoped it would when they invested in Inhalix".

In order to preserve the viability of the company, Woodrow said they have been able to park the people out of the company and put them back into the Institute of Respiratory Medicine, the company's major shareholder. He stressed that actions with respect to staff are no reflection on their performance. "That's the process we are going through at the moment." He described the situation as delicate and complex.

"Yesterday we were sitting at a table with SciCapital and we were discussing it together to work out the way forward. There is an issue of cost constraint during the period of review and now we have to work out how we are going to proceed. By taking the steps we have taken the value of the technology platform, together with the advances of the past 10 months, is preserved."

SciCapital is believed to own about 15 per cent of Inhalix. Matt McNamara, CEO of SciCapital, who is on the Inhalix board, said,"Inhalix future options are currently under review. Prudent management has required that costs be greatly reduced during the period of review."

McNamara said "Actions with respect to staff are no reflection on their performance.

"The value of the technology platform, together with advances of the past 10 months, is preserved," he said

Woodrow was a speaker at a medical devices conference in Sydney last week. "It's a snap shot of a start-up company in progress" he told his audience.

Speaking generally on venture capital arrangements, Woodrow told the young start-ups in the audience to be careful in the use of milestones.

"I believe in milestones but when drawing down capital is tied to milestones you have to be careful as it can put the company financially at stake".

"We are within a year of moving our first product to market providing the clinical trials go well and have made great progress in product development," he said, but post September 11, he indicated, things were more difficult.

"The way we would like to go is to license now our most advanced technology," he told Australian Biotechnology News after his presentation. "Our strategy would therefore be to find a partner to take the product, and the launch date would be in their hands," he said.

Clinical trials using the disposable nasal filter to protect against pollens, especially ragweed, a grass allergen, are being carried out in Lismore and will be completed by June this year.

Ragweed is one of the most common allergens in North America. "This is an enormous market" he said.

Inhalix products are targeted at allergens associated with asthma, rhinitis and eczema such as those from pollens, dust mite, cat or dog. The nasal device has been designed to put up your nose to filter out the pollens that cause hayfever.

"For a nasal device our latest designs are very very sexy" said Woodrow.