SYDNEY, Australia ¿ The difficulty of raising money in the present tough environment for biotechnology stocks has prompted Amrad Corp., of Melbourne, to perform a corporate restructuring and make major changes in its research strategy.
Last week, Amrad said it will concentrate its development efforts on the seven research projects it has in or near clinical trials. Development of the remaining 23 development projects in its portfolio, all much further away from clinical trials, will be put on hold.
In addition, and besides cutting the research and development budget (set at around A$25 million [US$16.2 million]) by 20 percent for the more-focused development program, Amrad said it intends to sell or float off its active mass bioscreening division and its reagent manufacturing operations.
Amrad chief financial officer Michael Rowland said biotechnology stocks around the world are ¿getting thumped¿ and the company does not believe it can go to the market for additional capital for some time.
¿You can¿t raise money anywhere,¿ he said.
The company is still losing money overall, but has plenty of cash on hand: nearly A$50 million.
Rowland said once the announced strategy is in place, the company will be able to survive for a ¿long time¿ without having to go to the market for additional capital.
Screening Operation Losing Money
The announcement of the changes pushed Amrad¿s share price up by just A$0.05 cents, to A$1.30, which is a price well short of its peak of A$2.80 reached in August 1997. At the end of last week, the share price was A$1.21.
Amrad Discovery Technologies, the mass screening operation, is losing money. Although the operations at some point will start generating value, that point will not be reached until the ¿longer-term.¿ So, Amrad will appoint advisors to look at ways to ¿externally fund an expansion of the business to generate shareholder value.¿
Rowland said the operation will either be floated off or larger companies brought in as shareholders. Although the operation is still expected to lose money in the short term, there is considerable investor interest in them, so the company does not anticipate any difficulties in finding buyers.
The second business flagged for sale, Amrad Biotech, manufactures and sell reagents and diagnostic tools and is profitable, but is considered a ¿non-core¿ business by Amrad.
Rowland said he cannot discuss the price the company hopes to get for Amrad Biotech, but noted the operations made a profit of A$2 million last year.
Amrad also has cut overhead and administration expenses, a move that includes some layoffs.
Of the seven lead compounds selected for development, the most advanced is AM 94, a naturally attenuated human rotavirus strain being developed as an oral vaccine to treat severe diarrhea in infants. AM 94 has completed Phase IIa trials, and London-based SmithKline Beecham plc is considering the results. A decision on whether to proceed with trials is expected soon.
Another advanced compound is AM424, a treatment for peripheral neuropathies caused in cancer patients during chemotherapy. Planning for Phase II trials in AM424 is under way. n