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The following is the text of a letter to be
sent today to shareholders in the Company.
“Dear Shareholder
I am writing to shareholders
to provide an update on the Company’s current status with respect to our
ongoing projects and the strategic review, and our objectives moving forward.
As a significant
shareholder I, like you, am disappointed by the current low share price. Your Directors
strongly believe that this price does not represent the true value of the Company. I have outlined the reasons below.
Even though Henderson
Morley is a ‘micro cap’ biotech company on AIM, we have a very significant pipeline
of both clinical and pre-clinical products. We believe this pipeline is larger and
potentially more valuable than those being developed by many companies that
have significantly higher market capitalisations.
The markets that
our pipeline addresses are large and important and have, in many cases, little
or no competition either widely available or under development.
I describe the
status of development of our current projects below and outline our strategy
for exploiting the market potential for them.
Koi Herpes Virus (“KHV”)
As you will have
seen from recent announcements, we are developing a vaccine against this virus
that decimates Koi carp kept by breeders and enthusiasts around the world. We
have signed a collaborative research and option agreement, that is cash bearing,
with Schering Plough (SP), one of the largest pharmaceutical companies in the
world. Under this agreement SP is paying an undisclosed amount each quarter for
the development of the vaccine for up to a 15 month period. The vaccine is in
field studies in the UK
and elsewhere, and results to date have been very encouraging. We have
demonstrated that all fish that received the high dose vaccine developed
neutralising antibodies, which is likely to be effective when examined in the field.
The Company has also developed some very sophisticated blood tests (ELISA) that
are able to discriminate between infected and non infected fish.
A successful
completion of the current and other field studies is likely to trigger an
exclusive worldwide licence with SP. A
granted license would be for a minimum term of 10 years on a revenue sharing
basis. The scientific team are also researching fish vaccine adjuvants. These
are important additions to vaccines that help boost immune responses, and thus aid
in the protection of fish. This research is also now in field studies.
Feline Herpes Virus (“FHV”)
Feline herpes
infection causes a significant disease burden to kittens and breeding cats.
There is no anti-viral treatment licensed for the disease, so Ionic Contra
Viral Therapy (“ICVT”) stands to be the first, and therefore the market leader
if successfully licensed. Clinical studies are being undertaken by a
prestigious contract research organisation, Triveritas, which is
in the process
of recruiting cats with the disease. This is a multi-centre study in Germany, and
although a little slow in recruitment, results are expected within the next few
months.
If successful,
Feline ICVT stands to be the first licensed treatment for FHV with the
potential to take a market leading position. In anticipation of a successful
trial, we are currently seeking a sales and distribution partner, in the same
way as we did for KHV.
Australian Centre for
Vaccine Development
Cytomegalovirus (“CMV”)
CMV is one of
the most significant infections globally. It is responsible for the death of
many renal transplant recipients, and causes tens of thousands of babies to be
born with brain damage every year.
The Australian Institute of Vaccine Development has possibly the
most advanced and sophisticated CMV vaccine antigen candidate (the part of the
virus that is recognised by the immune system) anywhere in the world. The Institute
had been seeking a ‘delivery vector’– a way of delivering the antigen to a
patient’s immune system. They consider that the PREPS and L-particles platform,
the Company’s proprietary vaccine technology, may be a suitable delivery
vector, hence a collaboration agreement was signed.
We are now in
the process of incorporating their vaccine antigen into the PREPS and
L-particles. This should be completed within the next few months, following
which large scale production of these particles will be undertaken in-house,
and subsequently sent to Australia.
The Centre will then undertake extensive studies to validate the delivery
mechanism and which we believe will demonstrate the same efficacy as other
comparable antigens. Success in this project alone could yield very significant
up-front, milestone and royalty payments, once a commercial partner is found.
Australian Centre for
Vaccine Development
Epstein Barr Virus (“EBV”)
EBV is a major
contributor to the cause of cancer globally (nasopharyngeal carcinoma - a
cancer affecting the tissues behind the nose).
No vaccine currently exists to prevent the infection, and consequently a
successful vaccine in this field could generate sales of several million units
annually. Once we have the necessary data, we will collaborate with the Australian
team to attract commercial partners to this project. This could occur within
the next 12 months or so.
Cancer immunotherapy
One of the main
reasons that cancer is such a significant problem is because individual cancer
cells have developed ways of evading detection by the body’s immune system. If
they are not recognised they cannot be destroyed. If they are recognised, an
immune response may be able to eradicate the individual diseased cells. Different cancer cells have different surface
proteins, and these proteins, if presented in an appropriate way to the immune
system, may stimulate an immune response. Cells known as dendritic cells (white
cells found in the skin and mucous membranes), are very important for
recognising cancer cells.
We are working
with SBL, a state of the art dendritic cell company, which is undertaking, (at
no cost to Henderson Morley) detailed studies on the interaction between
dendritic cells (important cells of the immune system) and PREPS and L
particles.
Several cancer
antigens are being included within PREPS and L-particles, and the specific anti-cancer
immune responses will be examined once we have produced large scale virus
stocks.
We are also in
collaboration with the largest animal cancer research and treatment centre in North America. Dogs
are prone to develop the malignant skin cancer malignant melanoma. There is a
considerable similarity between dog cancer and human cancer. We are therefore
planning to examine PREPS and L-particles that carry melanoma antigens as a
cancer immunotherapy.
If this is
successful, using this initial antigen, there are many other cancer antigens
that could be included to target other forms of cancer. This is a very exciting
prospect, and the opportunity for commercial success is immense.
LICENCE UPDATE
Licences have
been signed with Croma Pharma (for eye indications), Amistad (for herpes and
dysplasias) and Cutanea Life Sciences (for warts). Several other licences remain
possible covering different territories and different disease areas. It would be fair to say that the performance
of certain licensing partners to date has been disappointing; however, we are
pleased with the progress which has been made by others. The current status is as follows: Cutanea -Unfortunately
we have not yet had the results from Cutanea that we expected, and we are
working with them to realise the full potential of this part of the ICVT
platform.
Amistad Pharma has
been very active. It is currently involved in negotiations with other partner
companies in the EU, US and Japan,
with a view to using ICVT with novel delivery mechanisms. It is anticipated
that announcements will be made regarding this in the near future.
Croma Pharma having
successfully completed a Phase l study, started a large scale, international,
multi-centre Phase ll study that was of regulatory standard. Due to a combination of slow recruitment under
the trial protocol, and other factors beyond our control, it is likely that the
trial will be restarted in a different country with a different recruitment
methodology. We will continue however to
supervise Croma’s efforts diligently to ensure that trial objectives are met
and in the interim, step up our efforts to create further licenses in North
America and the Far East.
PRODUCT PORTFOLIO
ICVT
As shareholders
will be aware we discovered this new way of killing viruses using tried and
tested, off patent drugs, in a different and novel combination. We re-patented
and proved the concept of the first, broad acting, non toxic, anti-DNA virus
platform. This technology is effective against a broad range of viruses, including
HPV (responsible for skin and genital warts) (adenovirus cause of viral
red-eye), herpes simplex (cold sores and genital herpes) as well as some orphan
disease indications.
Our products have
great potential in their respective markets. The injectable formulation of ICVT
will target the most common viral sexually transmitted disease globally -
genital warts (caused by HPV). The statistics regarding this disease are
astounding - approximately 20 million Americans are currently infected with
HPV, and another 6.2 million people become newly infected each year. At least
50% of sexually active men and women acquire genital HPV infection at some
point in their lives. (CDC figures). Although treatments are available, none
target the ability of the virus to replicate. The vast majority of treatments
simply destroy the infected tissues. The figures for skin warts are similar -
over 60 million treatments occur each year globally, and once again, ICVT
offers distinct advantages over the competition.
For the treatment
of adenovirus infection of the eyes, we are working in a field with no marketed
competition and no other broad acting anti-viral treatments in the clinic.
Successful studies would result in the first broad acting anti-viral eye drop
available globally.
PREPS and L-particles
Our vaccines are
also targeting diseases of real significance to human health. In 1999, the
Institute of Medicine (IOM) of the National Academy of Sciences (USA) assigned
the highest priority for a vaccine to prevent congenital human cytomegalovirus
(HCMV) infection, on the basis of the life-time cost to the health care system
and the impact of the virus on human suffering. Working with a global leader,
the Australian Centre for Vaccine Development, which has significant resource and expertise, we believe
our vaccine candidate will help address this need.
Our pipeline
also has a number of other opportunities relating to PREPS and L-particles. The
versatility of the technology to enable delivery of a very wide range of
proteins to cells means that the potential applications are vast. We are
initially focussing on diseases of most importance - cancer and infectious
disease, but are also examining its use as a treatment for autoimmune disease,
prevention of organ transplant rejection and its use as a targeted delivery to
the nervous system.
Animal Health
Our animal
health programme has similar potential. The time lines for licensing animal
health products are much shorter than human equivalents, and the regulatory
pathway is much more straightforward. No marketed competition exists (in all of
the major markets) for a vaccine against KHV. The virus has spread rapidly - it
was discovered in 1996, and is now present in over 20 countries. With the support
of SP, our vaccine has the potential to be the first licensed product against
this disease.
Patent Suite We have been continuing to expand our Intellectual Property
portfolio. New patents have recently been filed or are in
preparation for new uses of PREPS and L-particles, our KHV vaccine, our
cancer vaccine candidates and other significant uses of PREPS and L-particles.
STRATEGIC REVIEW
As announced on
3 July 2007, the Company has been undertaking a strategic review of its
operations, which, as then stated, may have included a sale of some or all of
part of the Company.
It has become
clear to your Board that, with the prevailing market conditions and a dismally
low share price, to market or sell the whole Company at this time would be
unlikely to result in an offer which fully reflects the Company’s potential and
its portfolio of technologies and patents. We have therefore engaged industry
specific consultants to identify and approach appropriate purchasers for some
of the technologies that we hold in-house. We have not been in talks with any
party in relation to an offer for the Company as a whole, but continue to talk
to interested parties for the sale of some of our technologies outright. On
this basis we have specifically ruled out seeking a buyer for the whole of
Henderson Morley Plc and as such we are no longer considered to be in an ‘offer
period’ under the City Code on Takeovers and Mergers.
I am pleased to
report that interest levels from these ongoing conversations with potential
acquirers remain high. It will have been clear, from widespread publicity, that
many fully integrated pharma companies are ‘cash rich and pipeline poor’. If a
sale of some of our technologies were to be completed it would in all
likelihood bring a significant cash injection to the Company. We remain
optimistic, and with sufficient capital for our immediate needs, no debts, and
a rich and diverse pipeline, the prospects for the Company are very good.
I wish to thank you for your ongoing support
for Henderson Morley and look forward to bringing you news on the current
projects, licences and product portfolio with respect to the strategic review
at the appropriate time. I believe that the current share price has
considerable upside potential as Henderson Morley has a broad pipeline of
clinical and pre-clinical products in large addressable markets with little or
no competitive products in the market or under development. We are delighted
that so far the Koi Herpes Virus trial looks to be very encouraging and we are
expecting results from the Feline Herpes Virus trial within months. Our vaccine
for Cytomegalovirus is close to in-house production and we are making good
progress with cancer immunotherapy.”
Yours faithfully,
Andrew Knight
Executive Chairman
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