Microbix at “inflection point” bringing pipeline forward

It was a pretty seamless transition for Mark Cochran last year.

His latest gig, running a neurosciences institute in West Virginia for the Rockefellers, had come to an end.  He’d been a director of Microbix Biosystems (TSX: MBX) of Toronto since 1990 and a long-time friend of CEO Bill Gastle.  So, when Mr. Gastle asked him to slide into the new role of chief business officer of Microbix, Mr. Cochran hardly blinked.

“The idea behind the CBO is to advance the programs we’ve been investing in,” Mr. Cochran says in an exclusive interview with biotuesdays.com.

Those programs include technology that allows dairy, swine and beef producers to select the sex of their herd, technology that can double the yield of an existing flu vaccine plant, and Mr. Cochran’s first deal: purchasing the urokinase assets, including a clot-busting drug, from ImaRx Therapeutics of Arizona.

Each ingredient of the pipeline, in addition to meeting the company’s requirements for market potential and relative attraction to partnership deals, also gives Microbix another important advantage: technology barriers to entry by competitors.

Not to be forgotten, Microbix also has a bread-and-butter core business, including a new plant, that makes and supplies infectious disease antigens for medical diagnostic testing by global clients.

Mr. Cochran predicts that core business revenue this year should reach $6-million, which would make Microbix cash flow neutral based on its annual operating costs of $6-million.  Revenue in 2013 is forecast at $14-million.

But the company readily admits that the core business alone, which now sells about 35 products, doesn’t have enough firing power to drive long-term revenue and profit objectives.

“We’re at an inflection point in our development,” Mr. Cochran says, explaining that Microbix is “about to reap some of benefits of the investments it has put into its pipeline.”

The stock price has had a nice run since the end of August, gaining around 40% to a recent close of 55 cents.  “The way we see it is the stock price reflects the value of the core business,” he contends.”  All the upside potential is from these three new businesses.”

Mr. Cochran says sperm sexing technology (SST) represents the largest potential revenue driver for Microbix.  Determining the sex of offspring has huge implications for the livestock industry and the existing $2.5-billion (U.S.) artificial insemination dairy market could almost double with SST, he predicts.

Microbix already has term sheets signed with 25% of collection centers, which sell sperm for artificial insemination, to license SST for dairy livestock when it’s ready, generating 15% royalties to Microbix.  “Collection centers have told us that sperm for either male of female offspring would be sold at a premium,” he adds.

Negotiations are underway to have a SST development partner in place by the first quarter of 2010, he says, predicting that the business could generate revenue of more than $140-million within three years of launch for Microbix and its partner, and more than $500-million at full penetration.

In its Virusmax division, Microbix is gearing up plans to develop a flu vaccine manufacturing plant in Hunan Province in China.

“The market for flu vaccine production in China is huge,” he points out, citing the central government’s strategy to dramatically increase the vaccination rate in the country as a way of erasing its reputation as the source of many global flu strains.

The company expects to unveil details of its joint venture with Hunan Province before the end of the year to build the first phase of the project to make 20 million doses of flu vaccine a year, using Microbix’s Virusmax technology.

Hunan Province will finance the initial construction, scheduled for completion by the end of 2010.  “Then we’ll raise money, potentially from banks in China, to expand production in stages until we get to 100 million doses,” Mr. Cochran explains.

Microbix expects to begin generating revenue before 2012 from management fees built into the Chinese agreement, he adds, with vaccine sales ready for the 2012 flu season.  The company will participate with an equity interest and receive fees and future royalties of more than $25-million a year when the plant is at full capacity, he predicts.

Mr. Cochran also says the company is in “deep discussions” with a process engineering company to license Virusmax as part of a plan to integrate the technology into their equipment and modify flu vaccine manufacturing plants around the world in order to increase vaccine yields.

The third piece of the puzzle was picking up the urokinase assets for $2.5-million last year, making Microbix a full-scale, biopharmaceutical company for the first time.

“It was a very good deal,” Mr. Cochran claims, noting that the drug is approved for sale in the U.S and Canada.  It was the previous standard of care for peripheral clots and catheter clearance.  The acquired assets included $40-million retail value of drug in inventory, all FDA filings and licenses, and raw materials for manufacturing urokinase.

In 1998, before Abbott Labs of Illinois sold its urokinase business to ImaRx, the drug, then known as Abbokinase, had annual sales of $300-million (U.S.).  Microbix has rebranded the drug as Kinlytic.

“Our goal is to ultimately manufacture product to reclaim the market Abbott enjoyed in the U.S. and elsewhere, and to expand into additional indications,” Mr. Cochran says.

Before the end of the year, Microbix expects to reactivate the drug’s DIN number with Health Canada, which will permit domestic and off-shore sales early next year.  Mr. Cochran also notes that the company is in discussions to grant exclusive regional licenses to certain offshore manufacturers so they can move from now making a urine-derived urokinase product to Microbix’s cell-based product.

“We know we will get a lot of value out of this program,” he adds.