THE Australian biotechnology industry has been dealt a blow after advisers to US regulators negatively reviewed drug maker Pharmaxis' cystic fibrosis treatment, sending shares in the company plunging more than 45 per cent.
Pharmaxis closed on Thursday at 68¢, losing 45.6 per cent in intraday trading, after an independent expert advisory panel to the Food and Drug Administration unanimously voted negatively on three areas of a review for Bronchitol, developed in Australia to treat cystic fibrosis patients with lung difficulties.
"I was surprised," said BBY's healthcare and life sciences analyst Dennis Hulme. "Getting past the regulators is very challenging. It's tough and it's certainly very disappointing."
The negative review means it is likely the FDA will not approve Bronchitol for marketing in the US when it meets on March 18, analysts said.
The news came as Pharmaxis said it had signed a financing agreement with NovaQuest Pharma Opportunities Fund III to invest up to $US40 million in Bronchitol for the European Union and US markets.
The setback was the latest in a string of disappointments to hit the sector in Australia. Last month, QRxPharma said it would resubmit its pain drug MoxDuo for approval by the FDA, after being knocked back in June.
Biota also stumbled at the FDA approval hurdle for anti-flu medication Relenza before eventually gaining approval from the body.
RBS Morgans' healthcare and biotechnology analyst Scott Power said the review was a "disappointing result" for Pharmaxis and it was not yet known what further requirements the FDA could set out for the company.
"Until we know what they need to do, the share price is going to struggle to move ahead," Mr Power said. "If they need another trial done, it could take another 12 months or more. If they want to recap the data and restrict the label to 18 years and older, that might take less time. It's really hard to say."
Mr Hulme said it was possible Bronchitol could be approved only for adult patients, a move that would match the same conditions set out for the drug in Europe.
In May 2011, Pharmaxis shares crashed after European health regulators initially rejected its marketing application for Bronchitol. But the shares regained some ground after the company won an appeal.
Mr Hulme said the decision reflected the difficulties encountered by the biotech industry, adding that the big pharmaceutical companies also had their run of failures.
Analyst Graeme Shaw, of fund manager Allan Gray, said while biotech companies in Australia were often small, liquid and had a high risk of failure, there were very few large investors specialising in the biotech sector.
"We thought it was a space where there may well be opportunities that would have been overlooked," he said.
Mr Shaw said while significant value in Pharmaxis was lost on Thursday, he said there was still value in the company given its cash reserves and sales of Bronchitol in Europe.