Biotech profile: Pharmaxis

2009 has been a big year for Sydney-based specialist pharmaceutical company, Pharmaxis (ASX:PXS). Not only is it celebrating its 10th birthday, but it also threw open the doors of its new company headquarters and factory in Frenchs Forest, 30 minutes north of the Sydney CBD. Even with the expense of building the factory and running clinical trials, it also managed to begin the year with a reassuring $125 million in the bank. All this in the midst of the worst economic downturn in decades.

In fact, despite Pharmaxis's share price taking a hit along with the rest of the stock market at the end of 2008, the company saw considerable growth even through the worst of the global financial crisis, says CEO, Dr Alan Robertson. "While our asset value had been severely damaged, the asset itself was still intact, so we continued to grow the business through 2008. We put on an extra 40 employees, our investment in research and development increased by around 45 per cent, and we took the decision to build this building," he says, tapping the polished new boardroom table in front of him.

Much of this growth was fuelled by the cash that Pharmaxis had accumulated via various capital raising exercises through its 10 year history - a deliberate strategy on behalf of Robertson. "I like to see forward at least two years and be conscious that not everything works to plan. For example, you have complex regulatory and safety issues to work with. If you have a three month regulatory delay, that's three months worth of cash that needs to be taken care of."

But it's not just about having a few spare bills squirreled away in case of a rainy day - or an economic downturn. Robertson deliberately pursued investment above and beyond the immediate requirements of the business. "People have often asked me: 'why are you raising so much money when you don't seem to need so much money.' And the answer is complex, but it's essentially to get to the next level, not just the next milestone," he says.

What is that 'next level' for Pharmaxis? It's to fulfil the reason why Pharmaxis was founded in the first place, says Robertson: "To answer once and for all: can Australia build a profitable research-based pharmaceutical company?"

"Nobody had ever done that before. So we thought: why not just generate sufficient interest from the capital market, raise enough money from the capital market, invest it in our suite of products and take them to the market ourselves? And as we become profitable, invest that revenue that we get from that endeavour in promulgating research and bringing new products through from our own endeavours."

Pharmaxis's first commercial product, Aridol, is a lung function test for identifying bronchial hyperresponsiveness and is used to diagnose and manage asthma. It's already for sale in 20 countries around the world. But Pharmaxis's flagship product - and the one that Robertson hopes will enable him to fulfil his vision of producing a profitable Australian pharma company - is Bronchitol. This will be used primarily to treat cystic fibrosis and bronchiectasis by restoring normal lung hydration and helping to clear mucus.

Bronchitol is composed of mannitol, a naturally occurring sugar alcohol, although Pharmaxis transforms it into tiny 3 micrometre spheres that can be inhaled. Much of the expense involved in building the new factory in Frenchs Forest has been the construction of an enormous spray drying machine - one of the largest in the world - which will be able to produce enough Bronchitol to treat around 40,000 patients per year.

Bronchitol is currently undergoing the final stages of clinical trials and regulatory approval and is expected to hit the market in the next two years, say Robertson. "We're shortly to file our marketing applications in major territories, the first one being Europe. We look forward to getting our marketing approval, and then launching the products, firstly in Europe then the United States. That'll take us to a position where we're profitable," he says.

So even the global financial crisis was no barrier to Pharmaxis growing the company - pushing onward to the 'next level'. But Robertson acknowledges that things could have been different if Pharmaxis was just starting out today. His advice for small early-stage biotechs: "Don't go public too early. For a drug development company such as ours you should not be accessing public funds until you at least have some human data. If you're a private company today and you still don't have your human data, stay private."

He also warns against the temptation to give away too much of your business to venture capitalists while times are tough. "If you're an early start up company and you've got a good idea, then don't give it away. Eek out those resources that you have and when the venture capital industry does start to invest again, you'll be well placed."