Fintan Walton:

Hello and welcome to PharmaVentures Business Review here in Brisbane in Australia. On this show I have Pete Smith, who is the CEO of Alchemia based here in Australia, welcome to the show Pete.

Peter Smith:

Thank you very much indeed.

Fintan Walton:

Alchemia is a company that was founded in 1995 it was listed on the ASX in 2003. It's a company with origins of carbohydrate chemistry, how has the company evolved since 1995?

Peter Smith:

Well it was originally founded to exploit particularly chemistry capability and that is really the holy grail of carbohydrate chemistry the ability to take a carbohydrate ring and basically chemically put what we want, where we want on that ring and we were able to do that at scale. And the origins of the company is really to take that ability and create nice three dimensional drug like molecules and build rational libraries which move typical binding elements like the positive charges negative charges lipophilic (indiscernable) groups , amidic groups into different positions in three dimensional space so basically you know taking lock and key analogy to build a library of lots of keys that would be highly likely to fit a lock.

Fintan Walton:

So the competence was in the chemistry basis and obviously was a drug discovery company?

Peter Smith:

Yes that was the origin from the 3D centre which is part of the University of Queensland here in Brisbane.

Fintan Walton:

Right, okay. So now how do you take a company like that because you've taken oversea or just recently this year in 2007, May of 2007 clearly the company has already have already developed some of the molecules where you entered into some of the relationships that it had, so one of those relationships was with Dr Reddy's [PharmaDeals ID = 31887], [PharmaDeals ID = 27123], [PharmaDeals ID = 27084] can you explain that relationship?

Peter Smith:

Well moving on from the origins of the company in that carbohydrate chemistry some bright spark in the company realized that ability to rationally build molecules in the carbohydrate space meant that we could come with our own synthetic pathway to build one of the most complicated molecules in the drug world and that is a molecule called fondaparinux, which is an anticoagulant or antithrombotic. It actually took Sanofi the best part of the decade to scale up the manufacture of the API (Active Pharmaceutical Ingredient) using our technique which was being out of simple saccharides in a rational way we've come up with what we believe to be a much more streamlined high yielding lower cost synthetic pathway. Fondaparinux sold by GlaxoSmithKline today as Arixtra is now off patent with (indiscernable) market but we don't believe that anybody else can actually manufacture this drug, so we are going to be in the unique situation in the generics industry of having a patent protected process to manufacture a generic against an off patent branded drug.

Fintan Walton:

Right and the role of Dr Reddy's is the manufacturer?

Peter Smith:

Yes Dr Reddy's, we've originally had an agreement with Dow Pharmaceuticals [PharmaDeals ID = 27123], [PharmaDeals ID = 27124] for the manufacturing and scale up and for various reasons we moved that process to Dr Reddy's in India, in fact we've had a long standing relationship with Dr Reddy's that be making a lot of the building blocks that we use for our drug discovery capabilities as well as the building blocks that we use to manufacture fondaparinux.

Fintan Walton:

Okay, so clearly that's a in a way now you've more or less described yourself as a generics company will that be, is that correct?

Peter Smith:

I think I described it as generics with a twist. We've got the intellectual property protecting fondaparinux and we think Arixtra it's a rapidly growing molecule it was very late into the heparin space because it was so difficult to scale up. We are going to be the only generic in that space for we believe the foreseeable future because we don't think that anybody would be able to copy because it's currently used to manufacture Arixtra.

Fintan Walton:

Right, so the other I suppose piece of kit that you've got is your hyaluronic-acid competency so you were kind of describing that and that was done through a deal which you did in acquisition with Meditech [PharmaDeals ID = 23646] is that correct?

Peter Smith:

Yes its right.

Fintan Walton:

And then could you tell us about it hyaluronic-acids has been around for years there was a company called Hyal Pharmaceutical in Canada so was there a relationship between Hyal and Meditech and Alchemia?

Peter Smith:

Yes a lot of the technology from Hyal Pharmaceutical ended up with Meditech and just sort of to backtrack a little bit we have our new chemical entity drug discovery capability that we are building up, we have a generic drug fondaparinux which is quite close to market, we should be getting revenues in '09 from that product and what we realized was there was this yawning gap in our portfolio, so the acquisition of Meditech was to acquire its oncology platform, so we are using hyaluronic-acid to deliver drugs to tumors and we've just completed Phase II study which was started by Meditech, we then bought Meditech and then much of owners delight we got a very, very impressive clinical trial is out from that Phase II study.

Fintan Walton:

So what is the role of you said it helps to target the chemical entity?

Peter Smith:

Yes it's right, part of the disregulation that takes part in the growing tumor is disregulation in hyaluronic-acid synthesis and also an over expression of activated receptors for hyaluronic-acid so it's like a feedback loop that's accelerating the growth of the tumor. We are really taking advantage of the fact there are these activated receptors on the tumor cells and what we find is if you infuse the hyaluronic-acid that you'll get accumulation of the hyaluronic-acid at the tumor site it gets access through the (indiscernable) but then there is an active receptor-based mechanism for being there.

Fintan Walton:

So is this hyaluronic-acid actually attached to the molecule itself ?

Peter Smith:

No this is the interesting thing a lot of people have tried using that receptor-based mechanism to target drugs and Tracey Brown the originator of this technology at Monash had tried this and had very terrible problems with hepatotoxicity there is a very high turnover hyaluronic-acid in the liver, what we found was that hyaluronic-acid is a mesh like you know quite a viscous gel like substance and when it's diluted you get these (indiscernable) pockets within it it's an (indiscernable) molecule and what we find is that if you mix that particular formulations of hyaluronic-acid with cancer kind of therapeutic drugs it's sort of getting, get some trained in the metrics and that's enough to be able to carry more drug to the tumor and in preclinical models we are show that we get between 2 and 4 fold concentration of the cancer drug at the tumor site.

Fintan Walton:

Okay, so it's a formulation competency you've developed around hyaluronic-acid?

Peter Smith:

Yes, yes I mean I think it is being a cancerdrug delivery technology and we've shown this works with a number of different agents so (indiscernable)doxorubicin, navelbine, carboplatin is quite a long list and very, very interestingly it also works with antibodies which I have to admit we are not quite sure what the mechanism is there and we are doing some studies to try and work that out. But I think I can summit very interesting commercial opportunities there.

Fintan Walton:

So what is that do with antibodies does it actually prolong the half-life of the antibody or it improves the specificity?

Peter Smith:

We are actually doing some studies to see whether we are altering the amount of antibody at the tumor side whether we are affecting the signaling pathways or whether we are increasing or decreasing internalization so those studies are ongoing. In the animal models what we find is we just increased the efficacy of the antibody now we've shown that we can take small molecule in the first case or in the (indiscernable) combining with hyaluronic-acid and get better effect in man as we did in mice, we're yet to prove that the increase in efficacy that we've seen in mice with antibodies is going to translate into man, but obviously we are very excited to go and try that and as I say there is you know we haven't decided strategically which way we are going to go we got some conversations ongoing, but it all opens up the opportunity for our life cycle management there are number of antibodies that there are getting longer in the two with patent expiries coming up and may be not in distant future, so we could do life cycle management at a classic (indiscernable) type arrangements or we could think about working with some other biogenerics companies, companies that are developing antibodies they gonna have to do clinical studies you know why show prevalence if you can actually go for superiority claim. So we think that we are right in a very interesting position if we can show in man we can get proof of concept for that technology.

Fintan Walton:

So just going back to the small molecules anti-cancer molecules that you do develop in hyaluronic-acid what is the advantage? What sort of end point that you are trying to achieve with that formulation?

Peter Smith:

Originally Meditech it's going back to the Phase I results and also some of the animal results. Meditech was originally focusing on improving the side effect profile. I've had experience in oncology before and you go for efficacy every time if you can actually keep patients alive longer without unexpectable or increasing side effects then that's the commercial opportunity. So we actually thought that in the Phase II study we are entering with an equivalent dose of irinotecan in both arms just one was formulated with our hyaluronic-acid, we thought that you know really what we should have been doing even that we thought we would have the safety the increase safety margin is actually to push the dose up and then we probably have to go back into a novel study much to our surprise we actually didn't see any difference in safety between the two arms were we actually had statistically significant increases in efficacy. So 116% increase in progression fee inspite over the P value 0.014 and that's out of the 80 patients study, so we are very, very excited about that time to treatment failure, disease control and the recesses criteria and also cure criteria again it's a disease significant. So these were secondary end points and there is interestingly the market in Australia didn't really respond to that result, what I saw was we missed our primary end point which was the safety end point and already know the fact in which we have this really quite phenomenal efficacy into it.

Fintan Walton:

Right, yes that can often happen not just in Australia so the key thing here I suppose is you know you've describe yourself you know as a biotech company, I wouldn't necessarily to say that I'd probably say you are more of a chemistry kind of company I suppose where there may not be a sexy name as biotech, but the other clear thing that's clearly gonna happen, because you got this molecule coming on to the market shortly you're going to have revenues you've more or less described you as a generics or super generics company where you are going with this company is that were you are parking this company in terms of the pharmaceutical space this super generics company or do you still see yourself as a drug discovery company coming with new patent protected drugs?

Peter Smith:

I think the latter I think you know the excitement in the company in the long-term is this drug discovery technology, we think it sits beautifully between rational drug design fragment base or rational drug design were you know this structured would target and large library random screening you know we are occupying the space in between I call it rational diversity may be you need to come up with a snappier name for it, but that's I think where we've already see that has been the golden goose. I think we are in the situation where we have the potential revenues coming through in '09 we have also some lower risk oncology opportunities which are in late phase. And then later further back we have with this higher risk blue sky new chemical entity engine. I think if you look at the successful biotechnology companies they always started with and may be at the slightly preserved type of deal or may be a small product and Gilead had Vistide. And Genentech had the deal with Lilly on insulin they all had some sort of means of keeping their valuation up and their source of revenue. And I think that's the sort of that's the oil or the fuel, but I think it will enable us to drive some of the higher value products forward and yes we can choose where to go with the oncology platform we can, we could look at drugs that have failed because they were sufficiently efficacious or they had side effect problems and see if we can resolute them. We can do deals with companies who got very early stage molecules and just incorporate hyaluronic-acid in this part of the formulation so there are many, many different ways we can go.

Fintan Walton:

But I suppose the other thing with this pipeline of drugs coming through particularly the hyaluronic-acid based drugs are you going to be marketing those drugs yourself are you doing deals with other companies, I mean what's your commercialization for that?

Peter Smith:

We are looking at that, I mean obviously the holy grail for any company once you take a product all the way through and everyone talks about oncology is being the area where or one of the areas where is possible to do that. I think where we are at the moment we don't have clinical development capability in the US and I think it will be increasing the risk of the product failing we'll need to try and do it ourselves you know particularly from a base in Brisbane. So we are looking at different configurations combining assets with another oncology company, licensing deals there are number of different things we are looking at the moment these results we've only you know just completed the clinical study reports so we are really now in a position to talk in earnest with big pharma partners, big biotech or smaller biotech's who've got interesting portfolios. So we are out there now having those conversations, we are also starting to have those conversations about the antibody, lifecycle management or generics as well.

Fintan Walton:

Okay, so where does that know place you going forward, I mean this you're obviously focused on the existing products that you've got about to get on to the market, but when you'd refer to the discovery program and going back to the original origins of the company in some ways when looking at that, that could become a distraction, do you agree with that or is it danger?

Peter Smith:

I do agree with that. I think it is a danger it's something that we've discussed internally and then really we have hopefully we can think of fondaparinux our generics has been the source of cash, so we just park that there is no activity within the company apart from project managing the relationship with Dr Reddy's. If then look at the rest of the portfolio we have drug discovery and we have oncology and I see those really has been two quite separate business units. In my previous role with a company down here called Amrad we had a lot of different technologies and while I was there we cleaned that up when we spun out a company called Avexa that's focused in antivirals. We created a stand-alone antibody company which was then acquired by CSL [PharmaDeals ID = 24790]. And I you know I do think that the company has to have an identity in the focus, I think we don't have that yet, but I can see in the future that you know getting forward with some of the milestones in the drug discovery side also progressing may be doing some deals on the oncology side that we can you know potential create a specialty oncology company, we can create a stand-alone drug discovery capability.

Fintan Walton:

And is the location you've been in Australia has that been a positive thing or neutral or does that a negative effect, what's your view on that?

Peter Smith:

I think it presents challenges we have some good science in Australia and also that's the foundation of the company we have to run a lot faster and lot harder to really maintain our position, so I'm gonna speak to you know Australian executives here they spend a lot of time flying across the Pacific and around the world, we already do around the world trips to India that seeing our friends Dr Reddy's in Hyderabad, we went on to Europe we have a collaboration with GPCR company Euroscreen [PharmaDeals ID = 3146], [PharmaDeals ID = 0495] in Belgium and then obviously on to the US and we are gaining to access UScapital markets as well we've raised some money in the US earlier this year. So I think we have advantages here and it's a fantastic place to work and so relatively easy place to attract people to, but you know we call it returning of distance it does mean that we have to get up very early in the morning to talk to East Coast, we have to start late to talk to Europe and we have to be on the planes very regularly. And I think you know one of the strategic elements we are looking at is or may be with the oncology company may be we should at some point establish that as a US based, US managed, US financed company in order to really make that work without maintaining a shareholder. So we are looking at different models, my background before being in biotech was an investment banker in healthcare so I am always looking at different configurations.

Fintan Walton:

So deal making is in your blood as well?

Peter Smith:

Yes, I am also a recovering investment banker. So I think we will be focusing on that and I am very well aware, I think any company gets known for one thing and you might as all identify well that's going to be and start building the company so it looks like that, that's my philosophy.

Fintan Walton:

Okay. Well Pete Smith, thanks a lot for coming on the show and for us to learn more about Alchemia. Thank you very much indeed.

Peter Smith:

Pleasure, thank you.

CEO of Alchemia