I truly and desperately wanted to believe…
Take a guy like Graeme Kaufman. Now, I only met him once briefly half a dozen years ago, but this is a man who has been around the traps a few times, is revered by a lot of a people and to quote one leading financial services professional “is as smart as they come.” Sure, I don’t have much time for Cellmid and Bionomics, two other companies he is associated with, but then there are a dozen other things this guy has done that more than amply make up for it. I figured Paradigm Biopharma (ASX : PAR, proposed) had to be something at least worth a look at.
So look at it I did. If you’ve got some time to kill, you can look at the prospectus as well. Make sure you have a decent bottle of red going and good lighting conditions because the bright orange highlighting/brochure accents will give you the heebie jeebies by the time you get to page 80, I promise.
Like many people, I’ve got a bit of a soft-spot for a good 505b(2) story. For those of you not up on the “jargon”, I mean an alternative New Drug Application (NDA) based on the re-purposed use of an existing approved drug. Paradigm plans to re-purpose pentosan polysulphate sodium (PPS), which already has approval for other indications. As Paradigm reminds us ad nauseam in their prospectus, this is a potentially much faster and lower risk way of getting a new drug approval (i.e. s2.3 of the prospectus). The problem is that just because a drug already has an existing approval and a good safety profile, doesn’t mean that a re-purposed NDA is a slam-dunk. To be fair, the company goes to extensive lengths to outline the risks, but at the end of the day investors need to understand that this will not be an easy journey, especially for the COPD indication (I am not going to go there because I have previously talked about how challenging it is to develop COPD drugs and anyhow it is not where the company is going to invest its funds in the short term).
For the primary “asset” (indication) of bone marrow edema (BME) – basically bone bruising – I am far from being sold. I tried to dig out all the proof-of-concept work that was done to support the investment thesis and I think it is fair to say that it is somewhere between a bit thin-on, and non-existent. I did a reasonable PubMed search and found precisely nothing on this application for PPS and when you take a look a the key patent filing, the science behind the “invention” is anecdotal at best*. From what I can gather from the company’s planned clinical development strategy, pain reduction is going to be the primary end-point but for an (acute) injury situation where baselines are still in flux and patients are likely to self-medicate to achieve pain relief, there is plenty of reason to be skeptical. Surely with all the great MRI images they flash about in the prospectus, they have plans for a more quantitative endpoint? Subjective pain-related end-points are challenging enough for chronic applications, let alone an acute application like this.
So we have a mediocre scientific premise and a mediocre clinical game-plan, but the worst part of this story is the mediocre commercial underpinnings of the company. You can ignore all the exosome stuff and the various bits of IP rat-packing the company has done. It’s all early stage and not that interesting. In fact, in my view, it is a total distraction and completely defeats the purpose of raising a pathetically small amount of money to re-purpose a generic drug when in the same breath you are talking about developing and manufacturing exosome technology. It’s just stupid. Maybe they did it so they could call themselves “Paradigm BioPharmacueticals” instead of “Paradigm Pharmaceuticals”.
The “Bio” bit does sound sexier (and Paradigm Pharmaceuticals is already an existing unrelated company).
Folks, the only section you need to read in the prospectus document is s11.7 on page 81. It goes like this:
- In Australia/NZ/ASEAN territories, the company has a field-limited (presumably with respect to the company’s patent claims for BME, COPD, etc.) exclusive material supply agreement for PPS with bene PharmaChem. Now you can argue whatever you like about the emerging middle-class health needs of our Asia-Pacific back-yard, but shucking out cash for a novel treatment for sports injuries is probably not high on the expenditure priority list, especially in Myanmar. But ok.
- OUTSIDE of Australia/NZ/ASEAN, you know – places like Europe and the US – where a little magic shot for a sports injury is probably a decent revenue generator, Paradigm basically has no supply rights from bene PharmaChem. Or, to be specific, any rights it may have at some point in the future, are at the sole discretion of bene PharmaChem (exclusive, non-exclusive, or otherwise).
Reading between the lines, Paradigm does seem to have Drug Master File (DMF) access while it is running its clinical trials. That’s going to be critical because when it submits its IND(s)/NDA(s) to the FDA, it is going to have to be able to reference bene PharmaChem’s Chemistry Manufacturing and Control (CMC) package. But actually, what Paradigm seems to be proposing to prospective shareholders, is to invest shareholder capital in running a drug re-purposing strategy with the US FDA for a drug [Master File] that it actually doesn’t have the guaranteed commercial rights to source and sell in the US market. Now, sure it would be utterly ridiculous for Paradigm to do all that work (and spend all that money) and then for bene PharmChem to get obstructive. I also generally like and trust Germans, and I tend to think that if the Paradigm guys have agreed something with bene PharmaChem then it’s probably going to happen (especially since PPS is bene PharmaChem’s principal revenue generator). But supposing bene PharmaChem has a change of control, or something else happens to their business? Paradigm will then have to source the API from somewhere else, re-qualify it, do the comparability studies, etc. and that’s just kind of a frickin’ hassle. Meanwhile, in countries where Paradigm doesn’t have IP protection, people are just going to be cracking on with selling the drug for the new indication.
Assuming the indication works.
I keep telling myself that there must be a good reason why management did it, but no matter how hard I scratch my head, I can’t think of one. Not a single reason. To put yourself in the position where you are at the complete mercy of your supplier (in fact, more than just a supplier because the relationship is also about referencing the DMF for the NDA) seems stupid and to do a public offering on the basis that the company doesn’t even have a non-exclusive supply arrangement for PPS (and guaranteed DMF access) for the strategically key market (i.e. the strategic foundation of the company) just seems a little bit amateur-hour to me.
So, to conclude, this whole company was a bit of a surprise to me. I may have misread something but I don’t think I did. When you do a drug re-purposing play, these are exactly the kinds of basic commercial things you need to get right. Sometimes retail investors get too caught up in the regulatory and clinical development issues and just fail to take a step back and consider business fundamentals. This, Dear Readers, is why I have given Mr. Kaufman a set of beer googles in my feature image. But because I also respect him, I gave him some sun on his back and a deluxe tropical backdrop too.
Paradigm BioPharmaceuticals – good from afar, far from good.
*I note from both the patent application and the prospectus that 5 patients have been dosed with PPS for BME. I am reliably informed that one of those “patients” is Managing Director, Paul Rennie. Frankly, forget s11.7, that should tell you everything you need to know about the integrity of this offer. Whenever you see CEOs trying out drugs on themselves, run for the hills. If this information is true (and possibly one other involved party may have also taken both PPS for this indication as well as the “exosome” technology) then it is not disclosed in the prospectus. In my opinion, this is unethical.