West Coast Editor

A month after disclosing positive top-line Phase II/III data with its compound for chronic myeloid leukemia (CML), ChemGenex Pharmaceuticals Ltd. is spinning out its efforts in diabetes and obesity in favor of the cancer push.

ChemGenex's stock (NASDAQ:CXSP) closed Monday at $16.80, up $1.10.

The Melbourne, Australia-based firm, upon shareholder approval, plans to spin out by early December the metabolic assets of its Autogen Research branch, which it will rename Verva Pharmaceuticals and merge with Adipogen Pharmaceuticals Pty. Ltd., an early stage Queensland, Australia-based company focused on inhibiting the growth factor FGF-1 to control body fat.

In the merger, ChemGenex shareholders will get one share in Verva for every five ChemGenex shares. Adipogen's CEO Vince Wacher will take over that post at Verva. Greg Collier, CEO of ChemGenex, will accept a board position with Verva.

Already pledged to finance the new firm are Adipogen investors, including the Queensland BioCapital Fund, GBS Venture Partners and UniSeed.

"Obviously, metabolic disease is a huge enterprise and a huge opportunity," said Dennis Brown, president of ChemGenex. "It just takes a lot of time and resources."

The firm's discovery-stage diabetes program has identified presenilins-associated rhomboid-like protein, or PSARL (CXS-203), as a novel mitochondrial protein associated with insulin resistance, and Verva is expected to pursue that research. The metabolic-disease push could enter the clinic in the next 12 months, ChemGenex said.

Meanwhile, the deal paves the way for ChemGenex to work further with omacetaxine mepesuccinate, formerly known as Ceflatonin, the CML therapy that yielded positive preliminary Phase II/III data disclosed about a month ago at a scientific meeting in France.

Results suggested the small-molecule drug could benefit CML patients with T315I point mutations. Data from four Gleevec-resistant, chronic-phase, T315I-positive CML patients showed hematologic response, disease stabilization and dramatic reductions in the levels of the T315I mutation.

Gleevec (imatinib), from Basel, Switzerland-based Novartis AG, was approved for CML in 2001.

"The drug is active for patients who are failing tyrosine kinase inhibitors" such as Gleevec, Brown said, noting that Ceflatonin was found to have CML activity before the Gleevec era, and ChemGenex will focus its efforts with the drug as a single agent in refractory patients. The current Phase II/III trial will support a new drug application, and talks are under way with the FDA.

Later, though, the compound's use might be broader, "offer not some synergistic affect - that's a hard thing to prove - but prevent oncoming resistance," Brown told BioWorld Today.

ChemGenex also has Quinamed (amonafide), which in June showed positive results in a Phase I/IIa trial in heavily pretreated patients with solid tumors, demonstrating that the dose level could be optimized according to patient genotype for anticancer activity. The synthetic organic compound has been discovered to affect a number of targets in the EGFR pathway.

At the preclinical stage is CXS-299 for cancers with the wild-type p53 gene, such as ovarian, breast, testicular and non-small-cell lung tumors. About 45 percent to 90 percent of patients who fail chemotherapy have wild-type p53 in their tumor cells. Typically, they resist other therapies as well.

Earlier this month, ChemGenex appointed Adam Craig as chief medical officer. Craig served in that post at Innovive Pharmaceuticals Inc., of New York, also focused on cancer and hematology.

The shift toward oncology had been ongoing for a while, Brown said, and the Adipogen deal offered an important opportunity, especially after ChemGenex's recent financing.

In April, the firm raised A$10.5 million (then US$8.53 million) through a rights issue, a deal that followed a separate A$10.5 million private placement in February. The rights issue included 16.9 million shares and associated options.

Participation raised Alta Partners' shareholding in ChemGenex to 19.9 percent and raised GBS's shareholding to 8.9 percent of the 185.8 million outstanding shares.