Over the years, a number of people have asked me what I think about StarPharma (ASX : SPL), and the answer has changed a lot over time. Overall it’s a company I haven’t really bothered spending much time looking at because after its failed Phase III for VivaGel, I sort of figured it was burnt toast. The general consensus is that Jackie Fairley is a good CEO and great to see another capable female exec leading the charge of an Aussie tech company, particularly one with a consumer health focus. By the way, despite a number of snotty and misogynistic emails I got about some prior (positive) comments I made about Megan Baldwin, I don’t have a specific agenda to promote female CEOs irrespective of merit. Rather, I see diversity in the ASX healthcare sector as one of the best ways of breaking the entrenched, stale, incestuous, golfing-buddy mentality that underpins so much of the chaff in our industry.
… but I digress.
In general, I like the team – David Owen is a good scientist and he has a few people working in his team with some decently chubby brains. Whenever I take a look at a company, my first starting point is the people and I am always keen to get informal feedback from my network about what it is like to do business with a company. It’s telling.
Nanotechnology has been slowly but surely creeping into our consumer product landscape in all kinds of ways, but mostly in a humdrum matter. You probably haven’t even noticed. Of course, a whole lot of surface chemistry, formulation, lipidisation, etc. gets branded as nanotechnology – which it is – but only because that’s how nature intended it to be. Your typical sunscreen product is “nanotechnology” (a zinc oxide nanoparticle dispersion), as is the average water-based paint, most coloured optical glass, anti-bacterial coatings and industrial catalysts. But are you really willing to put nanotechnology on your squishy bits?
That’s the real question – and it is a question that Starpharma has elected to take head-on (pardon the pun).
The core of what Starpharma does, is not especially controversial. The heart of the “VivaGel” (SPL7013) technology is essentially a poly(L-lysine) dendrimer – a technology concept that has been around since the late 70s or early 80s. A dendrimer is nothing terribly special, it’s basically a polymer but instead of forming chains or “tangles” (for any polymer chemists reading, forgive my pseudo-scientific explanation), the most common incarnations of a polymer, a layering technique is used to build a branch-like structure instead. The result is a macromolecular structure that has some very exciting dispersion, surface charge and molecule “carrier” potential, and so people started to get enthusiastic about the potential to use dendrimers as a novel way of delivering genes into cells and as drug delivery platform. The easiest way to think of a dendrimer is as a little furry polymer sponge that can mop up a drug (or bit of DNA) and, depending on how it is “functionalised”, can deliver its contents in a very specific fashion. Despite all the hype about nanotechnology, simple dendrimers are actually relatively trivial to synthesise – you can pretty much make them in your kitchen if you want to. The real challenges to making useful dendrimers are consistency of product (i.e. all those little suckers need to look the same and have consistent characteristics), stability – especially when “loaded” with a drug, functionalising them so that they are useful in a specific application (more on that in a minute) and developing efficient and high-yield process chemistry so that the manufacturing costs are not ridiculous. There is an enormous body of academic literature around dendrimer synthesis and use for drug delivery applications. Dendrimers also have biological properties that are inherently anti-microbial, and this is a core part of Starpharma’s story.
What sets Starpharma apart is that it has taken a serious stab at building a commercial platform for dendrimer technology. This means it isn’t just experimenting with “nifty” academic peculiarities, it is robustly developing the structural and functional aspects of dendrimers to address a lot of the product-directed challenges enumerated above. Although the IP landscape for dendrimer technology is extremely dense and complicated (and there are a few competing “platforms” the seem to have roughly similar levels of potential) it looks as though StarPharma has carved out a niche for itself that is yielding some useful outcomes. To an extent, when it comes to sophisticated chemistry like this, patents are sort of also generally less important because the process chemistry used to synthesise a product can have a lot of proprietary know-how associated with it that is never going to make it into a patent filing. Notwithstanding a few (not very important) announcements over the years about patents being granted, an investor in Starpharma can probably assume that between platform patents, specific compositions of matter associated with products and trade secrets around synthesis optimisation, that the company is in pretty good shape in the IP department.
Where Starpharma is in “less” good shape, is some of its programs. I’ll talk about the bacterial vaginosis first because I think it is the most controversial. As most of you know by now, I don’t like it when healthcare companies are not transparent about the outcome of their clinical studies, and I have seen a lot of garbage in my time. However the award for the most embellished public communication for a failed Phase II study, without hesitation, goes to Starpharma. In the April 2013 announcement of the results of the Phase II study for recurrent bacterial vaginosis (R-BV), I had to really read this document multiple times to actually understand that the trial did not – on any level – meet its end points. Frankly, I have never seen a press release where a key end-point has been described as “close to statistically significant.” This is important to understand because the company is obviously spending money on it’s Phase III study for this indication as we speak. I am not trying to be unkind here, and it will not be the first time that a drug didn’t have the right Phase II structure, but then in looking at the study protocol description it was an incredibly simple and uncontroversial study.
Either the “stuff” has consistent and effective antimicrobial properties or it doesn’t. Especially for a “mass market” application like this.
My opinion is that after the failed Phase III study for BV treatment, which was probably an enormous stressor on the company (and fairly unexpected by all accounts), the Phase II R-BV study was basically the life-line and Starpharma has hung on to it with dogged determination. I’ve listened to all the analyst calls and read all the presentations (at least that I could find), and it concerns me that between a failed Phase III study in a primary treatment indication, and a non-statistically-significant outcome from a simple efficacy study in Phase II for recurrent disease (the same disease), that there is still momentum to complete the current Phase III study. I think the SPA approach was a smart move for the current R-BV Phase III study, to try and at least manage some of the uncertainty given one Phase III disaster (and usually the Agency is fairly supportive when a product has had a late stage development glitch but still shows some degree of clinical efficacy). But again, I have to note, all that has been demonstrated so far is purported clinical benefit in a patient population where objective clinical assessment can be challenging (er… patient-reported symptoms, a “sniff test”?) and quantitative measures haven’t cut it so far. The Phase III protocol includes the standard quantitative end-points (Amsel/Nugents – both of which are roughly equivalently diagnostic) but the primary outcome measure is clinical assessment – and not quantitative. In fact, presumably the purpose of the quantitative secondary end-points are to eliminate cases where the patient has clinical symptoms attributable to some other condition, like candidiasis or trichomoniasis.
This is all pretty interesting stuff when you combine it with the fact that the substantial difference between the (first) failed Phase III study and the current Phase III, is the use of oral metronidazole (an antibiotic commonly used to treat BV/R-BV) in both the treatment and the placebo arms. What this means is that the placebo is not really a placebo, and Starpharma is not taking any changes with the “clinical assessment” part of the primary end-point. Frankly, I am amazed that the FDA agreed to this, it must have been on the basis that for recurrent disease, oral antibiotics are the “standard of care” and the expectation is that a higher percentage of “placebo” patients will have present/recurrent clinical symptoms develop in the 15 weeks after the course of antibiotics is out of the way. In fact, what this study will effectively show, if it is successful, is that the antibiotic does the initial job of clearing out the bacteria, but that the VivaGel prolongs the efficacy.
Let’s also just hope, for the sake of the patients participating in the study, that the regular administration of the placebo gel (inserted into the vagina every other day for 16 weeks) doesn’t actually exacerbate or even cause bacterial vaginosis that ends up making the “untreated” arm look worse than it really is.
I don’t hate the R-BV Phase III strategy, but I don’t really like it much either. My opinion – for what it is worth – is that the risk profile of this application of VivaGel is pretty much off-scale. That’s a shame, because for good drugs/therapies, by the time you are in Phase III, you shouldn’t have this kind of technology risk relative to the cost of clinical development. If I am being cynical, there is an element of continuing to “ride the train” in the absence of strong evidence that it is a good idea. But then this could also turn out to be one of those gambles that really pays off in a spectacular fashion. If every woman who is prescribed metronidazole (and I guess clindamycin and tinidazole would be fair game since it would be hard to imagine a drug interaction / prescription contraindication with VivaGel) is recommended to take VivaGel to prolong the antibiotic effect, that could be very big business indeed. If that scenario unfolded, one could imagine Sandoz or Perrigo getting rather interested, rather quickly.
Phew! When I started writing that, I thought it would just be a couple of paragraphs but as you can see, it’s a bit more complex than this… Quickly the rest.
Let me get the docetaxel stuff out of the way first because it’s pretty simple. There are plenty of well-understood toxicity issues with administering a dendrimer as a drug-delivery vehicle. As a general rule, biological membranes (i.e. cells) don’t like dendrimers, although there are ways of engineering the surface chemistry/functionalisation so that they are more user-friendly. PEGylation, is one way of doing this and this appears to be Starpharma’s strategy. The result is not a little baby macromolecule like SPL7013 (16kDa) but much bigger beasts that have the potential to circulate around much longer, possibly even park excess toxicity into the liver rather than the kidneys, and can reduce nasty side-effects (like neutropenia, thrombocytopenia, cardiac toxicity) at therapeutic doses. This appears to be working in early clinical evaluation. However, contrary to Starpharma’s commercial articulation of this program, I don’t personally think that a “better” taxane is all that interesting. Ever since the first PEG/liposomal reformulations of “dox” appeared, the world has been littered by efforts to make better versions of chemo drugs – all the way up to the Abraxis success story. Starpharma is yet another example – and a very early stage one, at that. What I do like about this effort is that it is a validation of the use of StarPharma’s platform technology in an in vivo setting (as opposed to “topical” applications like VivaGel) and it is probably crucial decision-making data for the company going forward if it really aspires to be a comprehensive drug-delivery company. Therefore the valuation impact is not as a potential drug, but as a proof-of-concept of the company’s technology in vivo, alongside some of its other pharma collaborations (AstraZeneca, GSK).
That’s pretty exciting.
Speaking of platform technologies, I do like the fact that the company has as broad range of possibilities for its technology. I think, through the various partnerships that it has, it has validated the strength of its technology position and demonstrated its ability to conduct effective business development. I do think that a bunch of low-value focus areas can be dropped from the company’s story (diagnostics, who cares … research/transfection reagents … blech … water treatment, cosmetics, etc … blech). If StarPharma really is going to potentially make waves as a commercial-stage company, then it needs to have a tighter focus on what it is going to be when it grows up. I do, however, like the agricultural application potential because it is a huge market, it is a natural fit with the core technology, and also the human toxicology experience with the dendrimer platform may have some natural synergies in terms of understanding biological risk. Contrary to popular belief, spraying dendrimer-loaded herbicides onto fields isn’t a whole lot easier than injecting dendrimers into patients from a regulatory perspective. But with China using 2 million tonnes of pesticide a year – including plenty of glyphosate and triazines – this is not only a significant commercial opportunity but also important for the health of our planet. Improving the stability and “stickiness” of herbicides with something like a dendrimer could dramatically reduce the use of toxic material and consequentially lower the cumulative environmental impact.
Ok – finally, the “rubbers”. Yes, I like the rubbers and my hat goes off to the management team for an intelligent “plan B” for the VivaGel application.
I think the published data around HIV and Herpes is reasonably compelling, although it would have been nice to see more dose-efficacy data at the bottom of the range given the 0.5% w/w formulation that ended up going into the VivaGel “Dual Protect” product marketed by Ansell. Obviously the early dose ranging studies that were undertaken in women, including with some (ethical) forays into geographies where an anti-viral/microbial condom would possibly have an impact, also yielded data to support this fairly sensible product development decision. I really dislike the concept of developing VivaGel as a vaginal microbicide in the HIV/HSV context, because the efficacy studies are too complex to execute, fraught with ethical risk, and the data is not “out of the park” clear that it is even a good idea. Vaginal microbicides have a somewhat tarnished reputation with public health opinion leaders as well, so getting widespread support for the product is going to be a mountainous task, a task that has to (unfortunately) be viewed through a skeptical lens given that the same product has a failed Phase III study in a fairly simple anti-bacterial application (i.e. can the company really demonstrate that it understands how the technology works, before putting women at risk of infection). But using that same data to support the development of a condom product was super-clever, especially since there is a real lack of topical antiviral agents that are suitable for the task. At least in the worst-case scenario, unlike a vaginal microbicide, it probably isn’t going to do harm (presumably Ansell got comfortable that VivalGel/formulation doesn’t mess around with latex either).
There is no doubt that having an initial commercial product incarnation of VivaGel is a huge bonus for Starpharma at this stage in its development. There is also no doubt that the hook-ups with Ansell and Okamoto are smart moves that could potentially push a fair amount of product out there. I guess it remains to be seen how big a percentage of the multi-billion condom industry Ansell/Okamoto manages to capture with a VivaGel-loaded product. They are both dominant players in their domestic markets but this is globally a hugely competitive space. Of course, this is precisely the reason why a company like Ansell is interested in advanced technology as a differentiation strategy. I suppose the main issue is that the technology differentiation doesn’t seem to be reflected in the asking price of the product, with the “Dual Protect” product sitting somewhat at the bottom of the price range, and situated within a slightly confusing portfolio branding strategy (i.e. the “Nano-thin” condom contains no “nano”). The current labeling for the product is not especially strong, particularly the efficacy claim, but presumably Ansell got comfortable enough with the technology to take the risk notwithstanding that not all of the press so far has been positive and there is plenty of skepticism. In my opinion, the biggest risk for Starpharma is that the widespread consumer experience with the condom – and any potentially negative experiences associated with it – could impact the market success of the vaginosis application downstream. Similarly, if the vaginosis Phase III doesn’t succeed, it could have impact on condom sales because VivaGel would be perceived by the general public as being ineffective in a fundamental anti-microbial capacity. To this end, I think it would have been smarter if the VivaGel branding had been a little more carefully considered in terms of creating a distinction between different product application areas, and I suspect this is going to bite Starpharma at some stage in the future.
VivaGel should have been kept for vaginal applications … and maybe something beginning with a “P” or a “D” for the condom (PrivaGel? PenaGel? PeenyGel? … ah, sorry, marketing is obviously not my forte). Although given that a bunch of kids in the UK managed to ideate a condom that changes colour when exposed to an STD, there might yet be some unexpected sideways cannibalisation of the condom application too!
Well, before my toilet humour gets activated (I note that I have maintained an appropriately sombre tone throughout this piece) it is probably best if I wrap it up. Notwithstanding a few speed-bumps, I do think this is one of the better ASX-listed healthcare innovation companies in terms of utilisation of capital and execution. It has demonstrated a significant measure of durability in sticking it out this long (pardon the pun). The team seems to have an out-of-the-box attitude to getting its technology to market and a lot of the clinical development is quite grown up. The company does proper things (even if it has historically had a little BS clinical communication), doesn’t offer up too much spin, and may actually be on a solid trajectory at long last. I thought the recent hoo-hah around Mark Carnegie and James Dack was a bit nauseating – I mean it’s always easy to throw money at a company that has a product out the door, an FDA de-risked Phase III plan and has just had Fidelity sneak in and build a significant position while everyone else was schnoozing (BTW guys, when are you going to actually start investing in early-stage companies like you promised?).
Still, it’s nice to see some momentum for the company after a few tough years.
Feature Image: My little 1mm-sized buddy holding a Starpharma “nano-condom” is a Tardigrade. I think he is sort of cuddly looking and is probably a bit of a hit with the ladies. Image adapted from Eye of Science.