Cash-Starved Pharming Spins Out DNage; But is it Enough?
By Cormac Sheridan
BioWorld International Correspondent
With its lead product Rhucin (recombinant C1 inhibitor) under regulatory review in Europe and its cash balance dwindling rapidly, Pharming Group NV is battening down the hatches by spinning out DNage BV, a firm it acquired in 2006.
DNage, of Rotterdam, the Netherlands, was spun out of the Erasmus Medical Center (EMC) at Erasmus University, in Rotterdam, in 2004 to commercialize research on aging disorders conducted by scientific founders Jan Hoeijmakers, Bert van der Horst, Wim Vermeulen and Roland Kanaar. Leiden, the Netherlands-based Pharming acquired the firm in 2006 for €e15 million in stock plus undisclosed milestone payments. (See BioWorld International, March 29, 2006.).
Its lead product, Prodarsan, is in clinical trials in Cockayne syndrome, a rare inherited disorder caused by defects in transcription-coupled DNA repair. This week, Pharming said that in lieu of earnout payments of up to €€10 million, it would grant former DNage shareholders 5 million Pharming shares plus a 49 percent stake in DNage.
However, with a quarterly cash burn of around €e6 million (US$7.4 million), Pharming is facing into stiff head winds as it seeks to raise more funding. Spinning out DNage "is not going to be enough to preserve the cash. The company's cash position is very low," Jan De Kerpel, of KBC Securities in Brussels, Belgium, told BioWorld International.
Pharming reported net cash of e€3.3 million at the end of the first quarter. It subsequently received an undisclosed up-front payment from Stockholm, Sweden-based Swedish Orphan Biovitrum AB, on the strength of a European distribution deal for Rhucin in its lead indication, treatment of acute attacks of hereditary angioedema (HAE). The deal also covers additional indications, which are at an early stage of development.
The company has more than e€15 million in convertible debt on its balance sheet, which is a major disincentive for would-be investors.
"It's a very high hurdle for new investors," De Kerpel said. For that reason, the company is not in strong negotiating position. "They have to accept anything that is being offered."
A decision on Rhucin is expected by September, and so far the indications are that the review is proceeding smoothly, he said. However, that in itself may not bring salvation. Successive delays in the program – an initial filing was rejected in December 2007, as was an appeal in March 2008 – mean that the company has lost its lead on the competition.
Two HAE products are now on the market in Europe – Firazyr (icatabant), marketed by Basingstoke, UK-based Shire plc, and Berinert (human C1-INH concentrate), marketed by Marburg, Germany-based CSL Behring GmbH. Sales of the former have been "very disappointing," De Kerpel said..
Moreover, Viropharma Inc., of Exton, Pa., has filed for approval of Cinryze (C1 esterase inhibitor) as an acute and prophylactic therapy in Europe, having successfully launched the product in the U.S.
"It's become quite crowded over here," De Kerpel said. "I'm having some concerns on the economic potential of the product."
Nevertheless, he has a "hold" rating on the stock, with a target price of €€0.50, which represents a significant uptick on its current price of €0.30. And the company does have one card up its sleeve – a €€30 million standby equity distribution agreement with Yorkville Advisors LLC, of Jersey City, N.J.
So far, it has only drawn down a fraction of the funds available under the deal.