Starpharma's big breakthrough in cancer treatment

Alan Kohler here with today’s CEO, and it’s Jackie Fairley, the CEO of Star Pharma. Star Pharma has a longstanding loyal group of shareholder supporters that have maintained the share price at about $1.30 for a while and it’s got a very solid market capitalisation. For a company that doesn’t make any money, it’s almost $500 million dollars, still losing money. It’s got two main products. One is what’s called VivaGel which is a treatment for bacterial vaginosis which is a common problem for women. It’s on sale in Australia as Fleurstat, it’s about $35-45 dollars per treatment. They’ve priced it to sell a lot. It’s over the counter, usually they’re prescription products, and so it’ll be competing with prescription products but we’ll see how they go. A lot of people are very excited about it so we’ll see how they go.

The other product is a cancer delivery technology. It’s not actually a cancer drug in itself but according to Jackie Fairly, it better delivers chemotherapy and also prevents side effects like hair falling out. They’re a long way from actually selling the stuff and getting it onto the market, but that’s the proposition, that it doesn’t cause bone marrow toxicity, it better treats the cancer and it stops the hair falling out. Obviously, if they get it up, it’ll be quite appealing, which a question obviously which is unable to answer at this point, what’s it going to cost? But they don’t know that yet. So, as I say, this is an expensive company.

There’s a lot built into the share price so you need to be very careful when considering Star Pharma because it’s so expensive, but there’s a fair bit of upside there as well and as I say, a lot of people are quite excited about it. Here’s Jackie Fairley, the CEO of Star Pharma.

Jackie, you’ve just made some announcements about VivaGel and also you’ve done a deal with AstraZeneca for your oncology treatment. I just wonder if we could take them one at a time – firstly, what’s happening with VivaGel, you’ve launched it in Europe?

We have. In fact, in the last few months we’ve actually launched it in both Europe and Australia. It was launched in Australia as the first launch of anywhere in the world, which is I guess a pretty unusual thing but perhaps a nice thing to happen for an Australian developed product. And so, our partner, Aspen, have launched it in Australia, it’s available in pharmacies throughout the country and in all the sort of major pharmacy chains.

In Australia is it branded VivaGel?

No, it’s actually branded Fleurstat in Australia, Fleurstat BV Gel, and it’s marketed by Aspen. It’s a pharmacy only product, so it’s available for women to go into a pharmacy and purchase over the counter. That’s the first time that women who suffer from bacterial vaginosis or BV as we call it, have been able to get a product over the counter. Previously, they’d always have to go to the doctor and get a prescription and then go to the pharmacy and because it’s a very recurrent condition, women who suffer from BV, usually having had it once they’re pretty confident they know what it is next time around. They’re less happy going back to the doctor repeatedly, so it’s great that they can get it directly from a pharmacist now.

Fleurstat is the first and only over the counter treatment for bacterial vaginosis, is that what you’re saying?

That’s correct. It’s the only over the counter product in Australia and it’s a novel non-antibiotic product. The other therapies for bacterial vaginosis in Australia that are registered are all conventional antibiotics, so this is the only non-antibiotic and it’s also the only product available over the counter.

Is it possible for a woman to self-diagnose and therefore buy over the counter or do they have to go to the doctor? Is that the usual thing, to go to the doctor, or not?

In this instance, they won’t need to go to the doctor. They do need to speak with the pharmacist. It’s a pharmacist-only medicine, a bit like some of the cold medications you see when you go into the pharmacy – they have some products in the front of the shop and some that are behind the counter. This is a behind the counter therapy like some of the stronger pain medications and cold medications. But the woman essentially can self-diagnose, can go to a pharmacy, can have a conversation with the pharmacist and then is able to get the product without having to go to the doctor, which based on the market research that’s been done by Star Pharma and others, is a highly desirable situation.

Is it equally effective as the prescription medication?

Comparable in terms of efficacy. I mean, that’s a sort of complex question because ideally you’d have to do head to head clinical trials, but when you compare the rates across the trials that we’ve done and the antibiotics have done, they’re comparable in terms of efficacy.

But you haven’t done blind clinical trials that establish it clearly?

Absolutely, we’ve done very large double-blinded clinical trials that establish the efficacy of our product, but what we haven’t done is a direct head to head comparison with the antibiotics because that’s not really a question that’s of so much interest to us. But absolutely, we’ve done large, well-controlled, double-blinded clinical trials that establish the efficacy of the product.

How does the pricing compare with the prescription products?

Well, it is completely different because some prescription products will be covered by the PBS, and so obviously that’s subsidised by the Government. The pricing of the Fluerstat product in Australia is probably – it depends upon the chemist. The pharmacy has a reasonable degree of control in terms of the final price. It’s not an absolute recommended retail, but it’s typically between about $35-45 dollars for a course of treatment. Depending upon the antibiotic that’s prescribed to you, if it’s a PBS-covered or a generic product it would be less than that, but you’d have the cost obviously of going to the doctor. If it’s a branded product it could well be a similar sort of price. To be honest, I’m not 100% sure of all those pricing issues.

What does your deal with Aspen mean? What do you get out of Aspen’s Fleurstat?

The confidentiality provisions of the agreements don’t allow us to disclose all of the fine details, but we supply product to Aspen, which we make under contract or we have made under contract, and we receive both a royalty on net sales from Aspen and we also have a transfer price to Aspen. We haven’t disclosed the magnitude of the royalty, in that particular deal we haven’t. I guess, maybe let’s talk more broadly about deals that we’ve got…

Is the deal in Europe similar to the one in Australia?

It’s a slightly different structure. In Europe, you’re right, it’s called Betadine BV Gel or [Betagine]. It’s also been launched in Europe and it’ll be rolled out across – there’s more than 160 countries that our partner Mundipharma have licenced from us. It’ll be rolled out across a whole variety of regions, commencing with Europe. That deal is actually a slightly different structure. That’s a revenue share so again the product is provided by Star Pharma and so we manufacture it under contract and then supply it to Mundipharma in that case or Aspen in the case of Australia, and in that deal it’s a revenue share. But I guess in many ways that’s similar to a royalty on net sales. Essentially, Star Pharma is getting a proportion of the in-market selling price in that case as opposed to a royalty calculated on net sales.  

But it sounds like you’re not getting the cash that you are in Australia. With Aspen, you get cash for selling the stuff to Aspen as well as the royalty, right?

In fact, it is very similar, it’s probably hard to sort of simplify and to do so without contravening the limitations on what we can say about it. But it is actually similar, we do provide product essentially with a transfer price and then there’s an additional component. It just happens to be calculated as a percentage of in-market selling price.

And are you also selling the stuff in the US now?

Not yet. The US market has been partnered, so we signed a deal in December for the US, which in that case it is a straight forward royalty arrangement. That’s a double-digit royalty which is escalating as the product becomes more successful. That also incorporates milestones as the Mundipharma deal does as well where there are some milestones payable on product approval and launch. But the US milestones total about $100 million US dollars.

Can you share with us to some extent some idea about what you expect to make from VivaGel, both in US, Europe and Australia? What sort of magnitude are we talking here in terms of potential sales?

We haven’t provided at this stage a detailed guidance in terms of the revenue numbers, as I guess we launch in more markets and as we actually have the product on the market in more markets, we will be providing guidance. At this stage we haven’t, although maybe the best way of, I guess, providing some background to that is the VivaGel BV product is essentially being sold into two markets. One is the BV treatment market which globally is a $750 million dollar market, then the prevention of BV market which is globally around $1 billion dollars.

And so they’re the addressable markets, if you like, for a product of this kind. The treatment market has conventional antibiotics in it and other BV therapies which can be things like acid modifying products and other products which perhaps have significantly lesser levels of data behind them. We haven’t provided guidance in terms of our revenues. It would be typical in a pharmaceutical product of this kind to be getting double-digit royalties and we’ve disclosed that in relation to the US market, and as I mentioned, they’re escalating double-digit royalties. But we haven’t actually provided guidance in terms of the magnitude of revenues.

Are you saying that it’s both prophylactic and a treatment?

Yes, it can be used in two different ways. It can be used as a preventative product, every second day to prevent a recurrent BV, and it can be used in two completely different ways – in one way it’s used to treat a current conditions, so treatment once a day for seven days, and that’s what happens now with antibiotics. But the other way that this product can be used, and this product is sort of on its own in relation to that, is that it can be used to prevent a recurrent bacterial vaginosis. After a woman’s acute case has been treated with either the VivaGel product or with a conventional antibiotic, then they go onto a maintenance therapy essentially which prevents recurrent episodes.

This applies to US, Europe and Australia – is it a product for poor people or what? Is it going to be priced for mass consumption or not?

Well, the Australian situation, it’s available over the counter so people don’t have the cost of going to the doctor. And while some people can access bulk bill doctors, not everybody does. Many people, when they go to the doctor, there’s quite a substantial out of pocket component. But I think it is – I mean, it’s a far lower price than many pharmaceuticals are. I think it is priced at such a level that it will be accessible to women, but I guess each individual would need to make that determination. The pricing in Australia that I’ve described as $35-45 dollars a unit, compares with pricing in Europe which is probably comparable I guess once you convert that into Euros, and I think that that is the kind of pricing which exists today with other vaginal therapies. There aren’t products in Australia for BV but for instance, vaginal candidiasis or thrush, therapies for that condition would be not dissimilar pricing.

And it’s a common thing, I mean speaking as a man here I just don’t know how common it is. Is it something that women often get?

Absolutely. This is the most common vaginal infection world-wide. It’s twice as common as thrush, which is probably a little bit better known and it occurs in about roughly one in three women, so it is a common condition and unfortunately for some women, it’s a very recurrent condition, so they don’t just have it once, they have it over and over again. It has a very significant impact on their lives, if it’s not treated then it can have quite severe consequences in terms of infertility and pelvic inflammatory disease and other effects.

Just moving onto the oncology treatment, can you tell us what it is you’ve got exactly for oncology?

Sure. Star Pharma has a proprietary delivery technology which utilises a kind of polymer called a dendrimer. We call that delivery technology our DEP delivery technology and that delivery technology can basically be applied to many different products. We have three products in our own internal portfolio that utilise that delivery technology and each one of those are existing cancer drugs which we’ve delivered with our own technology and we’ve created a novel patented improved version of them. Those products are DEP Docetaxel, which is an improved version of the cancer medication, Taxotere, Cabazitaxel – which is an improved version of the prostate cancer medication, Jevtana and DEP Irinotecan – which is an improved form of the colorectal cancer medication which is known as Camptosar.

We’ve got three candidates which are either in clinical trials now, in the case of Docetaxel and Cabazitaxel and Irinotecan which is just about to start, and those products we will develop to proof of concept stage and then licence them to a third party to market. Basically, what we can do is we can create an improved version of an existing cancer medication with 20 years new patent life and improved efficacy and reduced toxicity. That’s essentially the sort of summarised proposition and we have those products internally, but we also have a number of partnered products with companies including AstraZeneca, with whom we signed a new deal quite recently where we allow them under licence to access our delivery technology for their own products.

AstraZeneca has several programs running, probably the most important ones are one which is a novel cancer medication that’s about to go into the clinic later this year, and another one which is an existing successful cancer medication where they’re using our technology to improve it.

Is that the sort of deal you think your IP is going to be used for, that you’ll basically do deals with cancer drug companies to provide your delivery mechanism?

Yes, so that’s the structure of them. Essentially, if you think about our delivery technology as a pie that we can slice up into many small slices, we can use that intellectual property pie – each slice generates milestones and royalty incomes for our shareholders and because the technology can be applied widely to lots of different products, our commercial strategy is to have some internal products, which I’ve just mentioned, those three which are either in the clinic or about to start, and then a portfolio of other products that are partnered programs where we don’t pay for the development of them. We have the ability to earn milestones and royalties which are very substantial. So, you’re talking about milestones of more than $100 million US and royalties of hundreds of millions, if not billions, US, in terms of our receipts. The beauty of it is we can have many of those programs running in parallel, they’re not mutually exclusive.

And so your delivery technology, is it fair to say that it targets the cancer more effectively?

It does. What it does is it creates a larger particle, what’s called a nanoparticle from the original drug when you put it onto our polymer or our dendrimer, it creates what’s called a nanoparticle and those particles target the cancer tissue. They accumulate in the cancer tissue and then when they’re in the cancer tissue, they release the drug to have the anti-cancer effect. That tissue targeting gives you two things. It gives you better efficacy because you’ve got better delivery, but it also means you’ve got less toxicity on the other tissues in the body that you wouldn’t want to affect like bone marrow and hair follicles and things like that where a lot of the cancer drugs cause very severe side effects.

Are you saying if a producer of chemotherapy uses your dendrimers, then their patient’s hair won’t fall out?

Yes, in fact one of our internal candidates, the Docetaxel product which I mentioned, which is the improved version of the breast cancer and lung cancer medication, Taxotere, normally that drug makes people’s hair fall out. I think it’s at least 75% of patients will lose their hair. In our clinical studies we’ve had more than 60 patients treated and we’ve only had a single patient who’s had some mild loss of hair, but certainly they haven’t lost all of their hair, they’ve just lost some hair. Much reduced hair loss, but more important medically than that hair loss is actually significant reductions in bone marrow toxicity, which causes the white cells in your blood to be at low levels and it can actually be a life threatening situation. A number of other side effects, particularly those bone marrow side effects, we don’t see or we see it at much lower rates or at a much lower severity.

What does your treatment do to the cost of the chemotherapy?

We’re still a ways away from the market and I guess it won’t be up to Star Pharma to determine the ultimate pricing of the product. I guess you’ve got to look at the cost of the drug, but also you’ve got to look at – typically, in pharmaceuticals you look at pharmacoeconomics, so you look at not just the cost of the drug but you look at the cost of the hospital admissions and the other medications and the rescue medications that you need to give a patient when they have a bone marrow toxicity event, so they have to be readmitted to hospital because their white cell counts are so low there, potentially they could die from what might be a very minor infection. You tend to look at that whole thing, you don’t just look at the cost of the drug.

We’re a way away from pricing. It will be a patented medication, so it would be higher than a generic anti-cancer, but the dendrimer does require additional manufacturing steps, obviously, because you’re attaching the drug to the dendrimer, but it’s not something which would make it prohibitively expensive.

We’ll have to leave it there, Jackie, it’s been great talking to you, thanks.

Yes, thanks very much.

That was Jackie Fairley, the CEO of Star Pharma.