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Dow Jones Newswires -- September 24, 1998
Chiroscience Shrs Up 7.1% As Loss Narrows
By MICHAEL REID
Dow Jones Newswires
LONDON -- Shares in the U.K.'s Chiroscience Group PLC (U.CCC)
have gained 7.1% in early trading Thursday after the aspiring drug company unveiled a narrowing loss and a mountain of cash in its coffers.
Because alliance partners bore more development costs, Chiroscience was able to cut its external research costs, reduce its cash burn and narrow its half-year loss by 21% to GBP11.4 million from GBP14.4 million in the year-earlier period.
By 0923 GMT, Chiroscience shares were up 16 pence, or 7.1%, at 240
pence.
Not only was the loss smaller, the company's cash reserves were boosted to almost GBP59 million by the GBP30 million sale to Ascot PLC (U.ASC) of 30% of its ChiroTech division, a unit which provides chiral technology services to drug companies.
Cash reserves are vital to emerging drug companies which have no revenue stream while trying to develop new drugs to sell. It can often take 10 years for newly-formed biotechnology companies to make their first profits, so they survive on the cash while waiting to hit the jackpot with one of the drugs they have spent years developing.
Chiroscience is upbeat about its key drug Chirocaine, a long-acting local anesthetic which it has licensed two companies to market - Maruishi Pharmaceutical Co in Japan, and Britain's Zeneca PLC (ZEN) in the rest of the world.
Swedish regulators are in the final stages of a Chirocaine review and are expected to grant the first registration shortly. Once granted, Chiroscience said it will begin applications for other European licenses via the "mutual recognition process", probably in the fourth quarter of its fiscal year.
It expects U.S. approval from the Food and Drug Administration in 1999.
Chief Executive John Padfield told Dow Jones Newswires the approval and marketing of Chirocaine will make Chiroscience one of the U.K.'s first biotechnology companies to develop a major product through to full registration.
Padfield praised the group's financial strength: "Revenues are up 24%, losses are down 21%, which is good because losses had been increasing in recent times...clinical trial costs were a major expense," he said.
"But they've mainly stopped, with the costs being borne by Zeneca," he said. "We are looking at a strong position for the group going forward."
He said the company is still on target to be profitable by the fiscal year ending February 2001.
Chiroscience said it will earn "significant royalties" on Chirocaine sales worldwide, except Japan. Maruishi, the company which has been granted the Japanese marketing license, will pay GBP3 million upfront in license fees plus some milestone payments. After that, Chiroscience will get a royalty payment on Japanese sales of Chirocaine. Maruishi will fund the aftermarket development.
Chiroscience said its ChiroTech division continues to flourish and its first-half GBP2.5 million profit doesn't "fully reflect the potential of the business." With an order book of GBP35 million, the company expects ChiroTech's full-year profit to "significantly" exceed last year's GBP7.1 million.
Among the "excellent prospects" for ChiroTech, it said, were sales of
(-)lactam, the unit's key compound. Among other things, (-)lactam is a key intermediate for Glaxo Wellcome PLC's (GLX) anti-viral drug abacavir, one of the new generation of lower dosage anti-HIV "cocktail" drugs. Abacavir is on fast-track registration with the regulators, with approval and launch slated for later this year.
"We have the patents on (-)lactam, so Glaxo has to come to us," said
Padfield.
With much of the hard work on Chirocaine largely done, Chiroscience said it is now looking for more niche developments, either in-house or with partners. It said its current development programs underway with other partners are proceeding well.
It has begun clinical trials for a needleless, pain-free anesthetic it is developing with Powderject PLC (U.PJP). With Bristol-Myers Squibb Co. (BMY), it is developing inhibitors of the MMP families of enzymes for cancer, in which it said clinical trials are showing "great promise". And its oral asthma treatment program with Schering-Plough Corp (SGP) continues to meet its targets, it said.
It will give a full research and development update on Tuesday.
-By Michael Reid; 44-171-832-8163; mreid@ap.org
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