Insight journal - Dealtalk

Xenome, once heralded as a star for Queensland’s biotechnology industry, suffers major setback

Posted on 20 August 2013

Tags: ,

Dealtalk: Plans to develop Xenome's molecule, derived from shellfish venom, to soothe acute post-surgery pain, have been shipwrecked.

It failed to meet safety targets set by US regulators, a $20 million blow for Xenome, according to dealtalk.

The unlisted company started in 1998 with University of Queensland technology and was mentioned more than a dozen times by Labor administrations highlighting ambitions for a Smart State life-sciences industry, according to dealtalk.

The trial failure illustrates the harsh reality of pharmaceuticals development. Only 9 per cent of drugs moved successfully from first-round clinical trials to US regulatory approval, according to dealtalk in 2011.

Successful drugs, however, can be big money-spinners, such as CSL's Gardasil, which was derived by UQ researchers.

Xenome's backers included QBF, a biotechnology fund of the State Government-backed QIC, private fund GBS Venture Partners and US-based Amylin Investments, according to dealtalk.

Its latest accounts from June 2011 show Xenome had raised almost $27 million in contributed equity, had loans of $29 million and accumulated losses of almost $58 million, according to dealtalk.

But in a letter to shareholders last week, Xenome said only $20 million had been spent on the latest strategy for acute post-operative pain, which started in 2008, according to dealtalk.

Xenome faces tough hurdles to stay in the game, according to dealtalk.

Directors say the molecule potentially could be developed for use in severe chronic pain but that would mean going back to more preclinical work and then human trials.

That's a costly exercise and current shareholders have decided against reinvesting.

Rumours of Xenome hitting difficulty has surfaced in industry. Its website was down and emails bounced back.

Dr Hirst said Xenome, based in Indooroopilly in Brisbane's west, remained viable although it had no staff to save money.

The company once employed 20 across Brisbane, Melbourne and San Diego.

Xenome's early years were troubled.

In 2004, two longstanding shareholders sold their stakes following a long-running board dispute with QBF, which was then under different management.

Xenome's chief executive officer departed at the time and trials took too long.

There were occasional stumbles later, such as not announcing the departure of another CEO even after pledging to disclose information in a manner similar to a stockmarket listed business.

But Xenome overall progressed, winning patents and switching tactics to focus on acute post-operative pain.

That focus meant the painkiller went to middle-stage trials but the critical regulator, the US Food and Drug Administration, sought additional safety data and the molecule failed to meet the targets.

Random, neurological side-effects had been identified.

Dr Hirst, who runs QBF and a former chairwoman of successful skin-cancer gel developer Peplin, maintained the Xenome drug failure was a technical one.

It was not related to a management failure or poor funding, she said.

Analysts at Bioshares in April looked at lessons learned from years of following the Australian biotechnology sector, and found three reasons for companies' flopping - technological development failure, poor commercialisation by management and bad market research.

Other hurdles can trip up biotechs. Recruitment of patients can be slower than hoped, a competitor can make a speedy, major breakthrough, or regulators can change assessment processes, stalling progress.

The analysts also identified a bright side, listing entrepreneurs who had made millions on biotech, including scientist Jim Aylward, Peplin's founder.

Queensland's own sector shows that the path of success is littered with the burnt funds of investors.

Locally developed drugs now selling in the key US market include Peplin's gel (now owned by Leo Pharma) and Alchemia's anti-clotting drug.

But the likes of Occupation and Medical Innovations, which tinkered with safety needles, have collapsed while an example of costly setbacks is at CBio, which encountered poor results from 2011 trials of a drug targeting arthritis.

The State's life-sciences industry accounted in 2011 for an estimated 14,106 jobs and $4.36 billion in income, according to the QLD Life Sciences Industry Report 2012.

Those numbers were down on two years earlier as the GFC devastated the sector.

Still, the lure of a finding a blockbuster drug bubbles along. Picking that winner among the potential carcasses remains the long, risky job.



View: Current Partnering’s Partnering Scorecard – view top life science partnering deals by value

View: Current Partnering’s Deal Metrics – the latest deal trend infographics for life science deal making

View: Current Partnering’s Big Pharma Deal Making Scorecard – latest trends in big pharma deal making activity

View: Current Partnering’s Big Biotech Deal Making Scorecard – latest trends in big biotech deal making activity

Signup: Current Partnering Dealmakers Update – weekly newsletter providing the latest life science industry deal news, deal making trends, partnering events – sign up now

Signup: Current Agreements Deals Review – monthly newsletter - reviewing the previous month’s life science deal making – partnering, M&A and financing – sign up now

Subscribe: Current Agreements life sciences partnering, M&A and financing deals database – find out more

Follow us on: LinkedIn Current Partnering | LinkedIn Business Development Network | @Currentpartner on Twitter

Print Friendly, PDF & Email

Leave a Reply