Bhronchitol FDA Approval Transformative for Pharmaxis

Pharmaceutical research company Pharmaxis Ltd (ASX: PXS) today announced the United States Food and Drug Administration (FDA) has approved Bronchitol® (mannitol) as add‐on maintenance therapy to improve pulmonary function in cystic fibrosis (CF) patients 18 years of age and older. The product, developed by Pharmaxis in Australia, has been steered through final stages of FDA approval by US licensee Chiesi Farmaceutici SpA (Chiesi).

Pharmaxis will manufacture the product in Australia and export it to Chiesi in the USA. Access to the US market and the cash milestones triggered by FDA approval represent transformative steps for Pharmaxis.

A US$7 million milestone is now payable to Pharmaxis by Chiesi, with a further US$3 million payable on shipment by Pharmaxis of commercial launch stock, scheduled for the first quarter of 2021.

Pharmaxis expects Bronchitol sales in the US market to contribute strongly to the product’s global sales and profit growth from its launch in Q2 2021, making the mannitol business (Bronchitol® and Aridol®) cashflow-positive from FY 2021.

Bronchitol is a precision spray‐dried powder that is delivered to the lungs by a portable inhaler and works to rehydrate the airway and lung surface of CF patients.

Pharmaxis Chairman Malcom McComas said, “We are very pleased that Bronchitol, an Australian drug discovery, will now be available for cystic fibrosis patients in the USA. This is a very significant event for everyone who has worked hard to achieve this outcome. Approval in the world’s largest market is a testament to the capability of the Pharmaxis clinical team who designed and conducted the three large-scale phase 3 clinical trials establishing Bronchitol’s safety and efficacy, and our particular thanks goes to all the patients and healthcare professionals who made those trials possible.”

Pharmaxis Chief Executive Officer Gary Phillips said, “The US market makes up more than 60% of the global CF market by value, so today’s announcement of FDA approval has important and positive ramifications for Pharmaxis. It justifies the vision we shared with our partner Chiesi to commit to the final phase 3 study requested by the FDA. The additional volume of Bronchitol that Pharmaxis will produce at our Sydney production facility to supply the US, on top of Australia and 17 other international markets, greatly increases capacity utilisation and consequently radically improves the cost of goods.”

Following the receipt of the Chiesi approval and launch milestone payments totalling US$10 million, Pharmaxis expects US sales to commence in H1 2021. Pharmaxis will then earn high-teens royalties, which, allied to a long-term supply contract, is forecast to deliver approximately 20% of Chiesi’s US Bronchitol net sales directly to the Pharmaxis mannitol business segment EBITDA. Three sales milestones totalling US$15 million are also payable on achieving annual sales thresholds.

Mr Phillips continued, “The FDA approval of Bronchitol is transformational for Pharmaxis because the milestone payments from Chiesi together with positive cash flows from the mannitol business segment allow us to move confidently ahead with the development of our lead clinical development asset, PXS‐5505 for the treatment of myelofibrosis.

“Clearing this last significant regulatory hurdle for the mannitol business also enables us to progress a number of restructuring initiatives to further extend the company’s cash runway. These will continue to be pursued over the coming months.”

Together with Pharmaxis cash of A$34 million pro forma1 at June 2020, the contribution from the mannitol business provides a cash runway that covers development of PXS‐5505 to conclusion of its phase 2 trial for the treatment of myelofibrosis. Pharmaxis today announced detailed plans for the development of PXS‐5505 in a separate announcement “Pharmaxis Prioritises Breakthrough Clinical Program on Myelofibrosis.”

The company hosted an investor conference call at 11.00 this morning (Sydney time) in relation to today’s announcements. A separate announcement will provide access details. A recording of the call will be available later today on the Pharmaxis website.

1. Proforma cash at June 2020 is calculated as follows: A$15 million cash at 30 June 2020 plus A$5 million R&D tax credit received 14 October 2020 plus A$14 million Chiesi milestone payments.