Virionyx hoping to clinch $70m

By DANIEL RIORDAN biotechnology writer

An Auckland company developing a drug to combat HIV-Aids hopes to clinch a single investment which would meet all its future capital needs - estimated at more than $70 million.

Virionyx recently obtained clearance from the US Food and Drug Administration to step up its clinical trials of the drug HRG214 to Phase II of the approval process, after the successful completion of Phase I trials at Harvard Medical School.

An unnamed investment syndicate has already given the company $2 million and is about to begin due diligence before taking what Virionyx hopes will be a cornerstone stake.

Independently of that process, Virionyx is spending $3 million to expand its Penrose laboratories and pilot plant so further development - and ultimately production - of the drug can be carried out.

The company received $450,000 from Technology New Zealand last year, and Prime Minister Helen Clark, who visited it yesterday, was keen to laud its achievements as an example of the potential for local biotechnology.

Virionyx hopes to keep its manufacturing in New Zealand, although a cornerstone shareholder will have a major say in such a decision.

The drug is an antibody sourced from goat plasma. Goats, unlike humans, can fight the HIV virus.

The Phase I trials - designed to test the product's safety and toxicity rather than its efficacy - were conducted on 18 people with HIV.

Phase II trials will involve injecting 40 HIV patients at Harvard Medical School with the drug twice-weekly over the next eight months.

Virionyx's founding director and the drug's inventor is Dr Frank Gelder, an American with a PhD in pathology and post-doctoral training in immunology. He settled in New Zealand eight years ago with his Kiwi wife.

He says HRG214 differs from existing anti-HIV drugs that seek to slow viral replications. These drugs are ineffective in preventing HIV from infecting healthy cells, but HRG214 has shown the ability to destroy the virus and prevent further infection.

HRG214 is the most advanced of several drugs Virionyx has in its development pipeline that are aimed at treating infectious diseases.

The earliest the company could get its product to market, if it safely negotiates the rigorous FDA approval process, is the beginning of 2005, although Virionyx chairman Peter Sullivan admits that is optimistic.

The company employs 18 staff, including nine scientists, and has international alliances, one with the Westmead Millennium Institute in Sydney.

Sullivan said it had been more difficult to get credibility locally than internationally, "but that's about to change".

While the syndicate does its due diligence, Virionyx will continue to seek investors, in New Zealand and overseas.

Commercialisation, or striving for it, does not come cheap. Completing the Phase I trials cost Virionyx $18 million.

The company has about 660 shareholders, most of them New Zealanders, spread evenly between the North and South Islands, with the humanitarian nature of HIV-Aids research seen as an extra factor encouraging many to invest.

Until two years ago, the company was effectively known as Probe Pharmaceuticals and was managed by Robin Johannink's Phoenix Management.

Johannink, whose other companies Vortec Energy and Ilion Technology promised much but ended up delivering little, is no longer involved in Virionyx's management and is not a director, although he retains a 9 per cent stake.

Johannink last year talked about Virionyx seeking a Nasdaq listing, but company management said yesterday it was too early to make those kinds of decisions.