Junior biotech Pharmaxis Ltd. (ASX: PXS) today announced that it has completed recruitment for its Phase III clinical trial evaluating its drug candidate Bronchitol in adults with cystic fibrosis. The results are due in the second quarter of 2017.

Should the trial prove successful then Pharmaxis will submit a response to the Food and Drug Administration (FDA) to gain approval to sell Bronchitol in the US. There appears to be a good chance of a positive outcome given Bronchitol is already approved in Australia, Europe and Israel.

The trial is expected to cost US$26 million, of which global pharmaceutical company Chiesi Farmaceutici SpA (Chiesi) will fund up to US$22 million. If approved, Bronchitol will be sold as part of Chiesi’s cystic fibrosis portfolio.

Pharmaxis stands to receive milestone payments of up to US$25 million including US$10 million on the product’s launch. The company will also manufacture Bronchitol on behalf of Chiesi, for which it will receive a high teens percentage share of sales revenue as its margin.

Sales for Bronchitol totalled $4.2 million in 2015, up from $3.3 million the previous year. US approval would almost double the addressable market for the drug given there are an estimated 30,000 cystic fibrosis sufferers in the US versus 37,000 in Europe.

Many irons in the fire

The Chiesi partnership is one of two major deals that Pharmaxis has struck with “Big Pharma” in recent times. The other is with German outfit Boehringer Ingelheim under an agreement that is potentially worth over $750 million to the company.

Boehringer purchased drug candidate PXS4728A from Pharmaxis last year primarily for its potential to treat non-alcoholic steatohepatitis (NASH), a disease of the liver that affects between two and five percent of Americans.

Following successful Phase I trial results, PXS4728A looks likely to progress to Phase II triggering a further milestone payment to Pharmaxis. Boehringer could pay a total of $80 million for commencement of Phase II and III trials combined, although the breakdown of this has not been disclosed.

In a further collaboration with respiratory drug development company Synairgen, Pharmaxis is investigating the use of its enzyme inhibitor technology to treat the fatal lung disease idiopathic pulmonary fibrosis (IPF). The disease affects 100,000 people in the US and if the collaboration leads to early stage trials then Pharmaxis is likely to seek a sale or partnership in keeping with previous deals.

Worth a flutter?

By partnering with large pharmaceutical companies, Pharmaxis gets the best of both worlds. It does not have to fork out for costly clinical trials but still shares in the spoils if the drugs are successful.

The company had $42 million in cash at the end of March 2016 and has a current monthly cash burn of $1.4 million. With a market capitalisation of just $87 million, Pharmaxis might make a suitable addition as a small part of a portfolio for the risk tolerant investor.

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Motley Fool contributor Matt Brazier has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.