New blow for Amrad as collaborators pull out

Two early-stage research projects will revert back to the Amrad Corporation (ASX: AML) fold after collaborators decided they no longer wished to pursue them.

The Melbourne drug developer conceded it was surprised by the separate decisions of UK company DevCo and pharmaceutical group GlaxoSmithKline not to proceed with the research partnerships.

The projects involved are AM36 for stroke and components of the SOCS drug discovery platform.

In a statement to the Australian Stock Exchange, Amrad chairman Professor John Mills said, "it is to be expected that with such an extensive portfolio some of these agreements will be discontinued in the normal course of business".

He said the company would now evaluate alternatives for further development of the projects.

The news comes in the midst of tumultuous times for Amrad, first with the announcement of negative results from its Emfilermin trial, followed by a lambasting from the market over the timing of a $15 million capital raising just weeks earlier.

On top of this came last week's call by major shareholder Circadian that three of Amrad's board members be replaced. The two companies are currently in negotiation in a bid to quell the boardroom stoush.

In the latest announcement, strategic reviews and reprioritisation by DevCo and GSK have been named as the reasons behind the ending of the collaborations.

DevCo, a specialist development company in the area of neurological disease, entered an agreement with Amrad last year to take its AM36 compound for stroke through to the pre-clinical stage.

Under the arrangement, DevCo did not charge Amrad for the development costs, with Amrad set to share in any resulting successes.

Amrad's chief scientist, Dr Jonathan Coates, said while the news of DevCo's withdrawal came as a surprise, the UK group had developed AM36 to the pre-clinical phase, taking it through assays and tests to ready the compound for use in human volunteers.

Coates said DevCo had not told the company there was anything wrong with the drug, but said its reason to drop the compound was a strategic one based on the fact it was a private company with limited resources.

"Clearly we have only just found out that DevCo does not wish to pursue it, so now we need to sit down and think of what would be the most valid and sensible way to progress," Coates said,

He said options including Amrad developing AM36 itself, finding a new co-developer or seeking to license or partner out the research.

Similarly, Coates said the GSK decision not to continue work on the SOCS1 and SOCS3 drug development platforms was part of a global pharmaceutical company shift away from early-stage research into the less risky later-stage projects.

"They have looked at their portfolio of targets and chosen to put their resources, huge though that is, probably against other targets," Coates said.

He said Amrad would receive research and development payments from GSK, as well as the invaluable benefit of having had the technology validated by a major pharma.

At the time of writing, Amrad's stock price had slipped 20 per cent to 68 cents on trade of more than one million shares.