Once Destined for Bankruptcy, Adventrx Pharmaceuticals Sets New Course With Reformulated Drugs
Like something out of an old Clint Eastwood movie (where the cowboy left for dead is somehow resurrected), San Diego’s Adventrx Pharmaceuticals (AMEX: ANX) announced last week that it raised $19 million and filed a new drug application.
Shares of the biotech, which had no pulse a year ago, sprang to life. Adventrx stock that had been trading around 26 cents a share zoomed to 39 cents on the news, before falling back to 28 cents in extraordinarily heavy trading of nearly 85 million shares. Trading in Adventrx continues to be heavy, and I’ve been contacted by several shareholders who want more details about Adventrx, or who are urging me to write more. Yesterday, Adventrx closed at 47 cents a share, yet one recent e-mail enthusiastically predicts, “This one goes to $2.” A gamblers’ mentality surrounds Adventrx these days, and should serve as a warning to investors.
Nevertheless, the comeback at Adventrx has been remarkable. Brian Culley, who describes himself as the biotech’s “principal executive officer,” recounted the story for me recently, saying that a year ago Adventrx was destined for bankruptcy. He’ll no doubt revisit the story again in a presentation he’s set to give this afternoon at the OneMedForum Finance Conference in San Francisco.
Adventrx specializes in developing improved formulations of existing cancer treatments that address side-effects and other limitations associated with their safety and use. But Culley told me during a telephone interview, “The company ran into two pretty troubling matters.” One stemmed from a decision in mid-2008 to discontinue the late-stage clinical trial of a “co-factor” drug that was intended to enhance the activity and reduce the toxicity of a widely used chemotherapy for metastatic colorectal cancer. “They got equivocal data, and it basically failed,” Culley says. “That set the company on a pretty poor trajectory.” The other matter, Culley says, was that Adventrx was “hemorrhaging cash while running headlong into pretty hard economic times.”
By last March, Adventrx had laid off all but a handful of employees and announced plans to “substantially end” its drug development and business operations. A few weeks later, the company was down to just two employees—Culley, a vice president who had previously headed business development, and lawyer Patrick Kernan, who assumed the duties of chief financial officer as well as Adventrx general counsel.
Culley says the two Adventrx survivors turned to Rodman & Renshaw, a New York investment bank, which helped them raise additional funding through private investments in a public entity (PIPE) deals. After raising about $2 million, the biotech announced in June that it would restart its development of ANX-530, a formulation of the chemotherapy drug vinorelbine (Navelbine) that Adventrx obtained with its 2006 acquisition of SD Pharmaceuticals. The strategy was appealing because vinorelbine already was approved by the FDA, and Adventrx had conducted studies showing its proprietary emulsion formulation could potentially reduce the incidence and severity of vein irritation and blistering associated with the drug’s intravenous delivery. Culley says the FDA also had been satisfied with so-called “bio-equivalence studies” that showed its formulation of the drug worked in the same way as the approved drug.
What remained to be done, Culley says, were “process validation” (PV) tests, which are intended to show the FDA that Adventrx could maintain tight manufacturing controls in producing its version of vinorelbine. Culley says the biotech ultimately raised about $3.4 million through its PIPE financings, and most of that was invested in the PV studies. “We took the capital we had, and it became a ‘bet the company’ kind of venture,” Culley says.
After completing the work, Culley says Adventrx had the final bit of data needed to complete a new drug application. But the company needed to raise about $11.3 million in additional funding, which was arranged last October through the sale of convertible preferred shares of Adventrx stock.
Even with the funding, though, Culley says Adventrx still had to prepare the new drug application (NDA) for the U.S. Food and Drug Administration. “We converted everyone who had worked with the company into a consultant,” Culley says. “We were really ruthless about it.”
Yet Culley says he dislikes characterizing Adventrx as a virtual biotech. “I don’t actually like the term ‘virtual’ because it makes it seem not real,” he says. With its consultants, Adventrx probably has between 15 and 20 full-time equivalents to employees. As Culley says, “We’re just kind of bringing folks in, having them do work and having them move on when the project is over.”
After submitting its application to the FDA last week, it will likely take the FDA about 10 months to review the paperwork. “The FDA can slow that down or speed that up at their sole discretion,” Culley says. In the meantime, Adventrx is turning its attention to development of another anti-cancer drug, ANX-514, a reformulation of docetaxel (Taxotere), and has been negotiating with the New York Stock Exchange to preserve the listing of Adventrx shares on its AMEX exchange.
As for the Internet rumors and investor hype that has accompanied the biotech’s resurrection, Culley says Adventrx has not funded any financial research and doesn’t “solicit those kinds of reports.” He adds that many Adventrx shareholders are individual investors who might not be as sophisticated as institutional investors. Still, Culley says, “The various reports and exceedingly high volume, I feel confident, are being driven by a compelling and attractive story.”
As for institutional investors, Culley acknowledges that Carl Icahn made a sizable investment in Adventrx in 2005 and still holds a roughly 3 percent stake in the company. Culley says Icahn is “one of our largest shareholders, and the only investment entity with a board seat.” That seat was filled for three years by Alex Denner, who also represents Icahn’s investment entities on the boards of Cambridge, MA-based Biogen Idec and San Diego’s Amylin Pharmaceuticals. But Culley says Denner resigned late last year “without disputes,” and “before the company started kind of waking up and running again.”
Culley noted that Icahn started investing in Adventrx when its common stock was trading at $1.85 a share. Since then, Adventrx has fallen as low as 3 cents a share. But Culley says, “I’d like to get him [Icahn] back in the black again.”