The hard sell of PI-88
Liam Walsh
May 17, 2006
JUSTUS Homburg is one of a new breed among stockmarket-listed biotechnology companies.
He's a new face in a sector which has undergone an exceptional shake-up in terms of chief executive officers.
Homburg is also in the hot seat after yesterday's announcement by his Brisbane-based company Progen Industries.
It stated that trials for its tumour-fighting compound PI-88 could be accelerated after guidance from the US Food and Drug Administration.
That could potentially shave off three years – meaning earlier sales if PI-88 proves marketable.
But shares in Progen fell 19¢ to $3.85 yesterday, after a heady run from $3.08 in April.
Such fluctutations have happened a lot in Progen's history (its shares were worth $12.98 back in 1997).
That kind of sting is one Homburg knows. He was CEO, from 2000, of Melbourne-based unlisted biotech Chirogen, a venture developing alternatives for synthesising some compounds.
"It wasn't going to be commercially viable," the Chicago-accented Homburg says. "It's very disappointing, I lost a good amount of money and a lot of time.
"But I learned a lot and I got to know a lot more about what goes on in Australia and biotech."
He thinks that Australians have a much stronger academic or creative research foundation.
"Most science (in the US) gets done in industry, so it has a ... very practical orientation to it," he says.
"It probably has a higher probability of success ... (but) things get killed very, very rapidly."
Australians look at creative ways of solving problems, which might mean a higher failure rate.
"But you're also more likely to find a real paradigm-breaking technology."
Homburg already had sector experience, including 11 years in senior management at US-based group Monsanto.
Failure is a risk he highlights.
"Six out of 100 compounds that go into clinical development actually make it to the (drug) market," he says.
So why should Progen, with accumulated losses of $66 million, prove different?
"It has a really good solid biological basis for its core technology," he argues. "The ability of PI-88 to restrict the formation of new blood vessels around tumours is a very sensible, very logical, very sound approach."
Homburg started in March after the sudden resignation of the well-regarded Lewis Lee. Progen had missed guidance for completing a partnership deal but Lee cited family reasons for quitting.
Analyst David Blake at industry newsletter Bioshares thinks several factors including the deal, share price and personal reasons were at play.
He also argues Progen has corporate governance issues including whether executive chairman Stephen Chang is really the chief executive officer.
"The company's got to clarify that," he says.
Homburg maintains that he is the CEO.
Bioshares this week calculated a biotech CEO turnover rate in 2005 of about 25 per cent, above the 11 per cent average in recent years.
The shake-ups were "arguably reflective" of investors angered with poor stock prices, although a minority of CEOs "left on their own terms".
Homburg, married with two teenage daughters, says he is committed to Progen.
He's got a place at Cleveland, where he sails a 7-metre Norwalk Island Sharpie on Moreton Bay. It's a hobby inspired from his Dutch Navy father, he explains.
At work, he'll have to satisfy shareholders.
"The market's really waiting for some sort of licensing deal," ABN Amro Morgans analyst Scott Power says.
Markets often judge companies harshly which miss timetables.
"That's where Progen (with the partnership deal) has perhaps fallen down," Power says.
Homburg keeps his cards covered – rejecting suggestions that signing a deal is vital.
"You never take that kind of strategy off the table. You should keep your options open," he says.
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