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Avexa Plunges 75% After Scrapping Most Advanced Drug

Avexa Ltd. plunged 75 percent in Australian trading after scrapping an HIV treatment it spent more than five years developing.

Avexa is considering buying assets, selling the company or “any way possible to restore shareholder value” after the last of potential licensing partners for the drug walked away on May 6, Chairman Nathan Drona said in a telephone interview. Today’s decline slashed Avexa’s market value to one-tenth its peak of more than A$250 million ($226 million) in mid-2007.

The decision ends work on apricitabine, which Avexa spent more than A$100 million ($90 million) developing and was in the final of three stages of patient studies usually needed for U.S. regulatory approval. The pill was designed to be taken twice a day, putting it at a disadvantage to Gilead Sciences Inc.’s once-daily Truvada, the world’s top-selling AIDS drug.

“It’s not enough to have a beautiful drug, you’ve got to have a market,” said David Blake, the Melbourne-based editor of Bioshares, a weekly newsletter on Australia’s life sciences industry. “That wasn’t going to transpire.”

Avexa fell 9 cents to close at 3 Australian cents. It was the biggest loser by percentage points on the nation’s All Ordinaries Index of 500 companies.

Julian Chick, chief executive officer since Avexa went public in September 2004, resigned from the board and will leave his position at the end of the month, the Melbourne-based company said in a statement today. The company said it is trimming jobs as it seeks to reduce costs and preserve capital.

Job Cuts

The company, which had 24 employees, will probably only retain one to two executives as well as a minimum of administrative staff by the end of this month, Drona said.

“We suggest clients exit the stock,” Tanya Solomon, an analyst at Royal Bank of Scotland Group Plc. in Brisbane, Australia, said in a note to investors today.

Wilson HTM Investment Group, a Brisbane-based stock broking advisory firm, stopped covering Avexa in July, saying the drug had “limited prospects for advancement.”

Apricitabine belongs to a class of drugs known as nucleoside reverse transcriptase inhibitors. Others in the class include Truvada and GlaxoSmithKline Plc’s Retrovir, or AZT, approved in 1987 as the first drug to treat HIV. While apricitabine helped suppress the AIDS-causing virus in patients who had resistance to other NRTIs, it required a heavier dose, making it difficult to combine with other drugs, Avexa said.

Doctors are increasingly prescribing newer classes of drugs such as Merck & Co.’s Isentress, a so-called integrase inhibitor, as a first-line treatment or when patients develop resistance to NRTIs.

M&A Opportunities

Avexa had A$26.6 million in cash at the end of March. The company has reported cumulative losses of A$117 million since its initial public offering, its 2009 annual report shows. Most of that was spent developing apricitabine, Drona said.

Johnson & Johnson’s Tibotec unit decided not to pursue an option to jointly develop another Avexa HIV drug, the Australian company said in March. Avexa bought the rights to apricitabine from Shire Pharmaceuticals Group Plc in 2005. The drug has been in development since 1998, according to data compiled by Bloomberg.

Besides experimental treatments for HIV, Avexa is searching for new therapies for hepatitis C and antibiotic-resistant bacteria, according to its website.

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