SYDNEY - A biotechnology group in Melbourne plans to raise about A$10 million by floating off in a separate one-project company an anti-fat treatment that has shown considerable promise in trials with mice.

The money raised in the float of the new company, to be called Metabolic Pharmaceuticals Ltd., will be used for human trials in the U.S. of the treatment - a reengineered fragment of the human growth hormone that can be taken orally.

To remain under the control of its parent, Melbourne-based Circadian Technologies Ltd., Metabolic will be listed on the Australian boards but initially will not be on Nasdaq.

Instead, the company will take the route adopted by a few Australian stocks of tapping the much larger U.S. market by issuing American Depositary Receipts (ADRs) through a U.S. bank. ADRs are issued in place of shares to get around restrictions on selling foreign stocks.

Chris Belyea, Circadian's licensing and projects manager and the managing director of Metabolic, said the ADRs will be issued through an as-yet-unselected bank, which will coordinate buying and selling between the various U.S. parties.

Belyea cannot reveal any of the financial details of the proposed float until the prospectus for the listing is issued, which is expected to occur in late August. However, other sources indicated the group expects to raise A$10 million from the float and Circadian will retain enough of the company stock to ensure it still has control.

Belyea also commented Circadian does not anticipate any trouble in raising the money, as anything involving fat reduction appears to cause considerable interest among fund managers and stock brokers.

The money raised in the float will be spent mainly on the required Phase I and Phase II trials, to be run by a contract research organization (CRO) in the U.S. The CRO has not yet been selected.

If those tests are successful, Metabolic will consider its options, which may include an alliance with a major pharmaceutical company or raising the money to take the resulting fat-reduction pill all the way to FDA approval.

Belyea said if the initial clinical trials are successful, there will be little difficulty in raising the A$50 million or more required to obtain regulatory approval, especially as the drug itself is a fragment of the growth hormone and so is already almost a “natural“ product.

As previously reported, the hormone fragment, initially labeled AOD 9401, was discovered by scientists led by Frank Ng, a professor at the School of Biochemistry at Monash University, in Melbourne. (See BioWorld International, July 10, 1996, p. 1.)

Now known as AOD 9604 due to its reengineered structure, the drug works by accelerating the enzymes burning up fatty cells. Its approach is completely different from most U.S. work on obesity, which mainly involves trying to suppress the appetite.

At the time, Ng said initial trials with rats and mice, using a slow-release form of the drug contained in an ampoule implanted in the animal's neck, reduced animal fat by 20 percent over 18 days. He also later discovered the drug can be taken orally.

Circadian has a range of projects under development, plus investments, including a 24 percent holding in Axon Instruments Inc., of Foster City, Calif., which develops and sells electro-physiological equipment for scientific research. *