RE: Sunday Times today24 Feb 2019 22:25
, 24th Feb 2019 16:36
(Sharecast News) - In her 'Inside the City' column for the Sunday Times this week, Sabah Meddings opened by saying the story of Motif Bio was a familiar one - a drug development
firm promising a blockbuster treatment for an underserved disease "crashes at the final hurdle".
The AIM-traded firm has been working on a new type of antibiotic designed for serious skin infections, with its management team - lead by Graham Lumsden - previously telling shareholders that the drug, 'iclaprim', was looking seriously promising in treating specific infections and minimising the risk of drug-resistant bacterial growth.
A note from Peel Hunt in January even praised Motif Bio's "de-risked product" and "undervalued pipeline story", Meddings pointed out.
But the excitement might have all been a bit too early, with the company revealing on Valentine's Day that it had received a "complete response letter" from the US Food and Drug Administration (FDA).
The American regulator said it needed more information over the risk of liver damage from iclaprim, which has already passed two phase 3 trials, with the risk now that the FDA could require further testing.
Shares in Motif Bio plunged 88% in the aftermath, with institutional investors including HSBC and Invesco - which ended up selling 10% of its holdings - suffering heavy losses.
The company's stock close at 7p on Friday, valuing the firm at just £20.8m.
Its board remained optimistic, however, telling shareholders it would look for a positive way forward with the FDA.
But Meddings said investors should exercise caution, noting that this was not the first time iclaprim has stumbled at the behest of the FDA, with Roche spin-off Arpida having to sack most of its staff after the regulator refused to approve the drug 10 years ago.
And despite the market's enthusiasm for the drug in the hands of Motif Bio, with the firm raising $10m in anticipation of FDA approval last May, Meddings added that concerns around liver damage do ring alarm bells, with products previously being pulled from shelves for far less.
The company was now in a "precarious cash position", with only $3m left in the bank after it was forced to repay $7m to its specialist lender Hercules Capital last week.
Lumsden has warned shareholders that the company will need to raise more money to remain viable, although some observers have suggested it was now the time to throw in the towel, with Andy Smith at Edison Securities suggesting management should sell the company and move on.
"While it may sound drastic, Smith has a point," Meddings said.
"Investors might do better putting Motif Bio up for sale - allowing a private company to reverse into it and take advantage of its tax losses.
"It's either that, or be asked to plough millions into a drug that may never make it to market."
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