e-therapeutics

Professor Malcolm Young, the founder of drug discoverer e-therapeutics, is nearing the sort of development partnership or licensing deal that could take the company into profitability.

The Newcastle University spin-out, whose super-computers calculate which chemical compounds will work most effectively and safely on the human body, has so far fired eight potential silver pharmaceutical bullets into clinical and pre-clinical trials, mostly re-profiling known drugs to new disease indications. But, while lower in risk and cost, re-profiled drugs are less attractive to the worlds drug giants – Big Pharma – as they perceive the intellectual property (IP) position to be too weak.

However, a ‘patent cliff’ looms in 2012 as many blockbuster patents run out and the market is expecting many deals to be done as pharma companies reload their drug pipelines. ‘The cash mountain is going to have to go somewhere,’ laughs Young, who says mid-pharma companies like repositioned drugs as they are more cost-effective.

Young delicately explains it would be ‘most surprising’ if there were not a development partnership or out-licensing deal sealed in the near future for one of the group's re-profiled products, which would create ‘the possibility of being profitable in that year’. Further forward, he says e-therapeutics needs to itself acquire or in-license the ability to develop new chemical entities (NCEs), which are much more attractive from an IP perspective.

In the long-term he sees the maximum shareholder value coming from a mixed model, where later integrated drug development is funded by cash raised through earlier licensing and development partnerships, rather than via dilutive fundraisings. But for now, clinical newsflow in 2010 will see developments for the company's re-profiled treatments for MRSA, asthma and depression with its Indian partner, with the latter two expected to enter Phase III trials imminently, trials which could perhaps be completed within the calendar year.

The shares, floated in 2007 at 67p but mostly oscillating between 30p and 40p since, have the potential for considerable gains if Young’s multi-billion-pound dreams come anywhere near fruition. Speculative buy.