■ Failure of Cogane in Parkinson's treatment
■ Management waits on strategic review
■ Running as a cash shell
Long-time observers of the biotech industry will sympathise with the predicament of Cambridgeshire-based company
A phase II trial failure is usually peripheral to a drug's success - large pharma companies will run several at a time to determine the dose range for a medicine - but Phytopharm's CONFIDENT-PD trial for Cogane had clearly been designed to provide data for a potential development partner, so the failure to show any efficacy for human patients effectively rendered the drug's further development redundant, ruling out any further experimentation with Cogane in motor neurone disease. The pressure for Cogane to succeed was all the more greater after Phytopharm's Hoodia appetite suppressant failed to make any headway as an additive to dieting products. The company will now undergo a strategic review to assess the best way forward, but to all intents and purposes, it is currently running as a cash shell. The one comfort, as one analyst put it, is that the trial result was unambiguous, so precluding any costly attempt at salvaging something from the data.
Analysts at Edison Investment Research believe that given a lack of viable alternative pipeline options, the company’s key assets are its cash reserve (£5.5m at 31 January 2013), a full-listing on the London Stock Exchange and £55m in accumulated tax losses, which could be utilised by a company within the healthcare field looking to do a reverse takeover. As a result the broking house values Phytopharm at no more than its cash reserve of £5.5m.
Brokerage Peel Hunt notes that the comprehensive nature of the failure raises questions over the relevance of the pre-clinical models used, and the size/expense of the trial that was required to prove that Cogane was futile. They also point out that this outcome should have been reached at a lesser loss for shareholders. The wider implications are that reaching this point sooner remains a key challenge for the pharmaceutical industry. Until companies are better able to select for specific genetically defined patients for targeted drugs, UK pre-revenue drug development companies will remain a lottery.
Phytopharm has been a binary event for a while now and is a salutary lesson in not getting too worked up about successful pre-clinical results - some investors may recall that the shares tripled after successful early trials for Cogane. The biggest loser appears to be Invesco, which held 56 per cent of the shares in Phytopharm. Sell at 1.83p.
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