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BioCryst flu failure puts Presidio move in doubt

Date November 09, 2012

The phase III failure of BioCryst Pharmaceuticals’ flu drug peramivir, coming as it does close on the heels of last week’s hepatitis C debacle, raises more questions over management decisions at the troubled company.

Worse, it could also threaten its planned takeover of the private biotech Presidio Pharmaceuticals. After the double-whammy of bad news BioCryst is now valued at just $74m – a market cap that throws into doubt the financial metrics behind the all-stock acquisition and the company’s ability to raise cash. Presidio investors have yet to vote on the move, although some have already committed to back it.

The failure of peramivir in a phase III US government-funded study prompted a 40% crash in BioCryst’s share price, which had already lost 29% on October 31 after the hepatitis C setback. BioCryst stock is now trading at a third of its value on October 18 when the Presidio takeover was announced, and the company has barely a year’s cash in the bank.

On a call yesterday management would not say whether the takeover contract contained a get-out clause for Presidio, although it is normal for one to be included in the event of a material change of circumstances. BioCryst intends to honour the deal, it said.

The takeover involves the issue of 24.5m new BioCryst shares, which three weeks ago valued the deal at $101m. The fact that at the current share price Presidio is worth just $34m is one reason why the target company might now seek to pull out.

Certain Presidio shareholders had earlier committed to buy $25m of a $60m fund-raising that formed part of the 24.5m equity issue – but given the current BioCryst share price these financial metrics now make no sense. As well as Presidio investor approval, the takeover was subject to completion of this $60m financing.

Peramivir flops

Enrolment into the phase III study of peramivir was suspended after a planned interim analysis found scant improvement over the control group, and the data-monitoring committee recommended stopping it for futility. Development had been funded by a $235m contract with the US Department of Health and Human Services.

The pivotal trial will most likely now be terminated. It had been comparing 600mg iv injections of peramivir plus standard of care to standard of care alone in patients hospitalised with serious influenza.  Peramivir is sold by  Shionogi in Japan for outpatient use, but has failed to set the market alight in this setting.

Last week one of BioCryst’s hepatitis C antivirals, BXC5191, had its US IND withdrawn on safety concerns (BioCryst suffers early stumble in hep C chase, November 1, 2012).

Remarkably, the company is pushing on with the compound, saying it will now press on with additional preclinical work in an attempt to change the FDA’s mind and start clinical development. It also aims to move BCX4161, a project targeting hereditary angioedema, into phase I by the year-end.

Presidio has two new hep C candidates in its portfolio, and this was thought to mitigate the BCX4161 setback somewhat.

Even without the risk to the Presidio takeover the failure of peramivir is an embarrassment for management, which had long touted the drug’s applicability in multiple influenza strains, including H1N1 and avian flu, and stockpiling possibilities.

At the end of the third quarter BioCryst had $44m in the bank, and cash burn was running at $37-43m a year. Licensing out its phase II gout project, ulodesine, to bring in much-needed funds remains a distant possibility, although right now BioCryst probably has more pressing worries.

It really could have done without a second setback so soon after the first. Management might struggle to survive a third.

Study  Trial ID 
Phase III, 600 patients hospitalised owing to influenza  NCT00958776 

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com

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