PXS--Pharmaxis Ltd

[buns]

This is a fisher funds holding to right?

Will ber her last bio tech i suspect

[Arbitrage]

Yes it is a Fisher holding. See the discussion under BRM Barramundi on the Sharetrader NZX forum.

[derek.zoolander]

From the fisher funds website-

Obviously the drop the in the Pharmaxis share price yesterday was a tremendous disappointment to us and a massive surprise to many investors in the company.

In short it seems that the European Medicines Authority (the regulator) is unlikely, at least at the first hurdle, to grant marketing authorisation for Pharmaxis to market its drug Bronchitol for Cystic Fibrosis in Europe. As the share price response indicates this was a massive negative surprise not only to us but to the analyst and investor community at large.

Assuming that Bronchitol receives a formal negative decision when the regulator meets again in late June (not definite), we believe Pharmaxis will probably appeal the outcome.

This appeal process would represent a delay of 6 months on the original timetable for a European marketing approval, assuming a successful outcome.

The chances of success in the appeal process are difficult to ascertain. Since January 2009 8 drugs have appealed negative decisions, with 3 of those appeals proving successful. PXS believes it will eventually prevail and receive European marketing approval.

The challenge for us right now is to assess what this means for the company’s future. Clearly the risk of ultimate failure to achieve this marketing authorisation has gone up although the key issues raised would seem to be addressable in any review process.
Unfortunately, for now though, the risk faced by PXS has risen substantially we have decided to exit our position in the company and watch the review process from the sidelines.

Whilst the balance of probabilities suggests the company may be successful a major negative shock of this scale leads us to believe this is the prudent approach.

Frank

[winner69]

From the fisher funds website-

Obviously the drop the in the Pharmaxis share price yesterday was a tremendous disappointment to us and a massive surprise to many investors in the company.

In short it seems that the European Medicines Authority (the regulator) is unlikely, at least at the first hurdle, to grant marketing authorisation for Pharmaxis to market its drug Bronchitol for Cystic Fibrosis in Europe. As the share price response indicates this was a massive negative surprise not only to us but to the analyst and investor community at large.

Assuming that Bronchitol receives a formal negative decision when the regulator meets again in late June (not definite), we believe Pharmaxis will probably appeal the outcome.

This appeal process would represent a delay of 6 months on the original timetable for a European marketing approval, assuming a successful outcome.

The chances of success in the appeal process are difficult to ascertain. Since January 2009 8 drugs have appealed negative decisions, with 3 of those appeals proving successful. PXS believes it will eventually prevail and receive European marketing approval.

The challenge for us right now is to assess what this means for the company’s future. Clearly the risk of ultimate failure to achieve this marketing authorisation has gone up although the key issues raised would seem to be addressable in any review process.
Unfortunately, for now though, the risk faced by PXS has risen substantially we have decided to exit our position in the company and watch the review process from the sidelines.

Whilst the balance of probabilities suggests the company may be successful a major negative shock of this scale leads us to believe this is the prudent approach.

Frank

WOW .... not taking the punt on the near 50/50 chance of getting approvals

Now they concentrate on investing in soemthing new .... or buying more of what they have

Some would say this is the time to buy PXS -- esp the multitudes who believ Fisher has a track record of buying high and selling low

Suppose Roger not impressed

[buns]

Put it all into ACL/another bio tech to get your 70% back instantly!

[buns]

I'm kind of joking

And hoping a little bit as an ACL shareholder.

[Stranger_Danger]

Carmel has been great to me over the years, but I don't know about this one.

I find it really hard to see a stock like PXS as anything other than a gambling chip. I don't know the science, I'm not wired into what a regulator may decide in a year, I don't know whats going on in other labs around the world that may be doing a similar thing, better.

I'm interested by the magnitude of the fall, but haven't got a clue how to value it or get a strong clue about their future prospect. I think Carmel can keep this one.

[derek.zoolander]

Yeah agree that the stock looked like one glorified gambling chip- surprised that an investment fund such as fisher would buy so much into a stock like that, where essentially the majority of the value was hinged on one, non market ready drug. Easy to say all this in hindsight though...

[buns]

Again, some ticked off (unlucky investors) are getting away from the point.

FF knew the risk in PXS. And they were not at the ‘gambling’ stage at all. It is really the only hit or miss stock in their portfolio, its risk profile coupled with the safety of its other holdings allowed it to hold this.

Don’t discount Bio techs all together, a lot do, hence the great investment opportunity. They can really get smashed at times for no reason (right now) and really give investors great risk reward opportunities. I hope Fisher buys undervalued Bio techs going forward IF THEY FIT the portfolios risk profile.

You should read over how a listed bio tech goes from A to B.

I would say a drug with anything below a stage 3 success is a gamble. PXS was past this.

The reward in a bio tech can quite often be an instant monopoly.

An example of another bio tech. ACL (I’m not trying to market my holdings, but it’s the only one I know well enough to use an example)

Background:
• ACL have developed fondaparinux (Fonda), the first generic version of the near half billion dollar (US) drug Arixtra, an anti coagulant used to treat blood clots
• Fonda is a copy (generic) of a branded drug by GSK called Arixtra. Arixtra has global sales of USD450m annually and is growing at 15-20% pa in the US. Sales should reach 500m is 2011 and it has the potential to reach 1b over time. While first generics normally take 40-50% market share form the branded product, ACL can expect to take +50% market share from Arixtra. Late 2012 the Euro patent is free, hence Fonda can be sold to larger markets again.

Approval
• ACL submitted an ANDA giving it rights to quicker approval
• Both ACL and Dr Reddy’s (marketing partner) have publicly announced that they believe all steps in the FDA ANDA process are complete satisfactorily and that the next communication they will receive will be the approval letter.
• Interestingly there are 10 steps in the ANDA approval process that the FDA staff must follow. And the final of these is to check the manufacturing plants to ensure they meet various safety standards. This was completed in January 2010 and as such there are no more steps in the process. Theoretically ACL are now simply waiting on the FDA’s internal decision making process.

Monopoly
• The 2011 average ADNA approval time its expected to hit 35 months. So assuming someone knew how to replicate this very hard and expensive to make drug, the 2 in the market right now will enjoy a monopoly for at least 4 years.

Valuation
• I don’t want to sell ACL in this post, but instead show the upside in these bio techs. ACL for instance is trading at 60c, using a PE of around 12 or EBITDA/EV around 5/6 they should hit about $1.50 just on the fonda revenues. Taking this into account, if Fisher had a portfolio of different stage bio techs instead of just one, she would only need maybe 1/3 (late stage 3+ companies) to come to break even.

[Stranger_Danger]

Yeah agree that the stock looked like one glorified gambling chip- surprised that an investment fund such as fisher would buy so much into a stock like that, where essentially the majority of the value was hinged on one, non market ready drug. Easy to say all this in hindsight though...

I'm not saying it in hindsight. I've never had this stock on my radar before.

I'm saying it looking forward - ie, forgetting the fall and the past, the business at todays price looks like a gambling chip. And I don't mean that as an insult - to me, they're in the business of "finding a business", and that finding effort is utterly dependant on binding rulings by third parties.

If you haven't guessed already, biotech isn't really my thing.