Chemgenex Pharma (OTC:CXSPY): Late-Stage Pipeline, Low Price Print E-mail
Monday, 20 July 2009 17:16

Chemgenex Pharma (OTC:CXSPY) (ASX:CXS) is an Australian pharmaceutical company developing personalized oncology medicines.  The company is based in Geelong , Australia (just outside of Melbourne ), with an office in Menlo Park, California. While Chemgenex may have flown under the pharmaceutical industry and market radar, that is likely to change in the coming months.   


The Company and its Drug Pipeline:

The Company's lead drug is omacetaxine, which is an oncology drug that has the potential to positively impact the lives of leukemia patients. Omacetaxine is currently in global Phase 2/3 clinical trials for chronic myeloid leukemia (CML) and has been granted Orphan Drug designations by the FDA and European Medicines Agency (EMEA) as well as Fast Track status by the FDA. ChemGenex has a second anticancer compound, amonafide dihydrochloride (Quinamed), which is in Phase 2 clinical development for various solid cancers.  The Company also has a portfolio of assets in pre-clinical development.

The Company is on track to complete the submission of its NDA to the FDA during 3Q09 for omacetaxine with the European submission to the EMEA expected during 4Q09. Chemgenex anticipates a U.S. launch of its lead drug during 1Q10, pending FDA approval with a strategic plan of retaining product rights in the U.S. market. The Company plans to out-license the rights for its lead drug in other territories to fund product development.  The Company hopes to launch omacetaxine in Europe during 3Q10 with a goal of securing a European partner by the end of 2009.

Chemgenex Senior Management:

I have followed Chemgenex closely for the past four years.  I have found their senior management to be remarkably accessible.  As an example, I had emailed their CEO, Dr Greg Collier, for clarification about a drug trial hours after the announcement was released to the market.  I received a response from him within an hour. Try getting that from any other company. I have found their CFO, Dr James Campbell, to be just as accessible to questions about recent company announcements. Just this week, Chemgenex announced it has strengthened its management team by appointing Thomas DeZao as its Chief Commercial Officer.  Mr. DeZao will help with the launch of omacetaxine.  He has solid experience with other successful pharmaceutical product launches.

The Investing Opportunity:

Despite being just 6 - 9 months from likely commercialization in the United States, Chemgenex is still trading at half the share price it was in late July 2008.  That's a huge share price discount despite there being no adverse news about the Company or its drug trials. Chemgenex has a market cap of about A$155 million with about A$20 million in cash. Chemgenex is traded as a level 1 ADR on the U.S. OTC market under the ticker symbol CXSPY.  Each CXSPY traded on the OTC is an ADR equivalent to 15 underlying shares of ticker CXS traded on the Australian Stock Exchange (ASX).

This month Chemgenex voluntarily delisted itself from the Nasdaq (it had been listed as a level 2 ADR).  While this may have spooked some American investors, the reason for the voluntary downgrade was to save on listing fees. I have had communication with Chemgenex's CFO, Dr. James Campbell, about this issue, and I am very comfortable with the Company's decision to downgrade to the level 1 ADR. 

Pharmaxis (NASDAQ:PXSL) is another quality Australian biotech  also downgraded from a level 2 ADR to a level 1 ADR just this past week for the same reasons, with a planned de-listing to take effect at the close of trading on 8/3/09. I have also discussed this with Pharmaxis' CFO, and I understand both Company's strategic decision for the voluntary downgrade.  Incidentally, Pharmaxis' CFO has told me that he has a high regard for Chemgenex.

CXS currently trades at roughly A$0.59 on the ASX while its OTC level 1 ADR (CXSPY) is currently trading at roughly $8.20. On a personal level, I have tremendous confidence in Chemgenex as an investment at these prices as the Company has many expected milestones for the remainder of this year and going into 2010. If the Company continues to successfully advance its drug compounds toward commercialization, the current share price will not be available at such a discounted price for long. Biotech investors who have an appetite for risk and seek potential large gains might want to take a closer look at Chemgenex. 

Disclaimer: This article contains the author's own opinions, and none of the information contained therein constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in the article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Contributed By Mike Rabe

Disclosure: Long Chemgenex

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