Starpharma Holdings (QX)【SPHRF】株式ニュース

New Nano Protection Against HIV And Herpes
Josh Wolfe, Forbes/Wolfe Nanotech Report
June.13.06, 10:50 AM ET

Long-time readers of my newsletter, Forbes/Wolfe Nanotech Report, may remember my bullish comments on a small Aussie company called Starpharma Ltd. I described the development of its lead product, VivaGel, as one of the top five nanotech breakthroughs of 2004, and added its stock to my Nanosphere portfolio in January 2005. Despite the recent drop in its share price, Starpharma's prospects are burning even brighter today.

Starpharma (nasdaq: SPHRF - news - people ) is a pharmaceutical company that works with nanoparticles called dendrimers--macromolecules with branching, treelike structures. Dendrimers are remarkable for their incredibly precise architecture and broad applicability, from industrial plastics and ship coatings to biological weapons combatants and medical imaging contrast agents. Starpharma is interested in their pharmaceutical applications, specifically in their ability to stop viruses in their tracks. Dendrimers can be custom designed to latch on to other molecules such as viruses, preventing them from latching onto the body's cells and wreaking havoc.

Starpharma's lead product is VivaGel, a dendrimer-based microbicide gel that can be applied internally to a woman's vagina to prevent sexually transmitted infections, including HIV and genital herpes. It can also be used as a condom coating. VivaGel had good results in Phase 1 human clinical trials: it appears to be non-toxic, non-irritating, and successful at preventing these STDs. Studies also show that viruses are not evolving resistance to the microbicide. The product is now in expanded phase 1-2 trials, being tested around the world in various populations. It's still got a ways to go, but all signs point in the right direction.

Microbocides, which are topical, do not carry the same risk of unforeseen setbacks or hidden side-effects as do internal drugs, which have to navigate through the body's entire system, so if VivaGel has made it this far, it's hard to imagine a real failure further down the line. Starpharma estimates the U.S. market for VivaGel products at approximately $4 billion.

Another great sign is that support for VivaGel development is largely coming from the U.S. government. The NIH's National Institute of Allergy and Infectious Diseases (NIAID) signed a $20.3 million contract to fund VivaGel development in October 2005, specifically for HIV prevention. Then, two months ago, the NIAID signed another agreement to fund clinical trials of VivaGel aimed to study its application for genital herpes prevention. The FDA has granted VivaGel fast track status, which has had little impact so far, but will really kick in at the phase 3 trial level, usually cutting the time it takes to get a product registered and on the market in half. The FDA's support of VivaGel has been something of a landmark: the product is the first dendrimer to go through the FDA system.

All of this government support means that Starpharma's spending is at a minimum. The NIAID is funding these trials directly, rather than giving the cash to Starpharma as a grant. Starpharma, of course, retains full commercial rights. "We have three years' cash in the bank," says CEO John Raff. "We're not burning very much money because everyone's supporting our work." At present, the company has $11.4 million on hand.

Despite all of this, Starpharma's stock has languished on the Australian Stock Exchange where its stock trades under the ticker "SPL.AX." It took a turn for the worse in late April--surprisingly at the same time the NIH decided to fund the genital herpes studies--dropping steadily from A$0.50 to its present A$0.38.

Starpharma began trading in America as an ADR level 1 sponsored by the Bank of New York (nyse: BK - news - people ) in January 2005. While these are illiquid pink sheet shares, Raff is optimistic. The company's aim is to move to a Nasdaq ADR 3 (virtually indistinguishable from Nasdaq companies) as quickly as possible, but that requires raising $25 million to gain the backing of bankers and gain liquidity in the U.S. market.

I think they will have no trouble getting the capital. Earlier this month, Starpharma announced that animal studies at Johns Hopkins University showed that besides preventing HIV and genital herpes, VivaGel may be a potent contraceptive as well. The studies were done with rabbits, which were given the same dose of the active ingredient SPL7013 that is found in VivaGel. The results showed a 75%-95% reduction in the number of embryos produced as compared to control groups. Rather than destroying sperm, as other contraceptive formulas do, VivaGel's dendrimers prevent the sperm from attaching to the egg much in the same way that they prevent, say, HIV viruses from attaching to the body's T-cells. By protecting against STDs and pregnancy, it can compete with the condom market. Even without the contraceptive bonus, VivaGel would be attractive to large potential markets such as the 38.6 million people worldwide infected with HIV or the one out of every five Americans that has genital herpes.

Don't expect cash flow until the end of 2008, when Starpharma expects to have VivaGel on the market. However, the company expects revenue from milestone payments and licensing within a year. The challenge for Starpharma will be to limit its ownership dilution as it partners with other major drug companies that it needs to get to the next level. "We need someone with a very big distribution network," Raff says. "It's not realistic for us to take it to market ourselves."

Starpharma is also in an enviable position, holding broad-based patents on various dendrimer applications. Starpharma holds 33% equity in the U.S.-based privately--held Dendritic Nanotechnologies Inc. (DNT), which Raff, who is a molecular biologist, co-founded with chemist Donald Tomalia. Tomalia himself discovered dendrimers back in 1979, when he was working at Dow Chemical (nyse: DOW - news - people ); Dow Chemical now holds 30% equity in DNT.

Starpharma's relationship with DNT links it into a much larger intellectual property space, as Tomalia retains many dendrimer-related patents. It potentially provides a direct connection to major pharmaceutical and biotech companies that DNT already deals with, including Pfizer (nyse: PFE - news - people ), Sigma-Aldrich (nasdaq: SIAL - news - people ) and Lumera (nasdaq: LMRA - news - people ).

When will the stock price move in the right direction? I think patience is still the key. As VivaGel hits its milestones, investors will warm to its shares. I continue to rate the stock a buy and believe its stock has suffered mostly because of liquidity issues as a Nasdaq 1 ADR. Starpharma's market capitalization is still a meager $41 million. When its ADR status and liquidity in the U.S. firm up, I believe many of us will be wishing we bought in at current depressed prices.

Excerpted from the June issue of Forbes/Wolfe Nanotech Report. Click here for more analysis by Josh Wolfe and to subscribe to Forbes/Wolfe Nanotech Report