SYDNEY, Australia - Medica Holdings Ltd. said it will invest A$2 million (US$1.3 million) in a small biotech company, Xenome Ltd., which is developing an anti-pain drug based on a toxin taken from snails.

Medica, of Brisbane, will initially take one-third of Xenome, also of Brisbane, and potentially up to 48 percent of the company depending on its reaching various research milestones. Xenome was spun out of research work at the University of Queensland Centre for Drug Design and Development.

Medica managing director Kevin Healey said Xenome was developing a compound identified in toxin taken from various species of cone snails found in the Great Barrier Reef off the coast of Queensland.

"One group of these conotoxins has shown exciting results in the treatment of intractable pain such as that experienced by many terminally ill cancer patients," Healy said. "They demonstrated an ability to alleviate severe pain in situations where morphine is ineffective."

Other compounds were being developed to combat neuropathy (pain in cancer patients), and the potential market for a successful drug in this area was also very large. It had been estimated by analysts to be in the order of US$1 billion, Healey said.

Medica is a biotech investment company with another $A2.5 million invested in two other companies. Most of that money has been put into Alchemia Pty Ltd., which specializes in producing complex carbohydrates for use in other biotech projects and manufacturing, and the rest in another small, wholly owned company, Cytopia Pty Ltd., which is developing an anti-inflammatory drug.

Medica has about A$5.5 million more to invest, including money raised from its initial public offering earlier this year, and is considering several investments. To date Australian investors have registered only lukewarm interest in Medica and its portfolio of biotech investments.