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ASX stock of the day: Pharmaxis share price surges 8% as milestone payment brought forward

The Pharmaxis Ltd (ASX: PXS) share price has surged 8.24% today at the time of writing, after the pharmaceutical research company announced a US$7 million payment milestone had been brought forward.

The payment will now be made on the date the United States FDA approves Pharmaxis’ drug Bronchitol. The drug is used in the treatment of cystic fibrosis and is already approved and marketed in Australia, Europe, Russia, and several other countries. 

What does Pharmaxis do? 

Pharmaxis is a pharmaceutical research company focused on drug development for inflammation and fibrotic diseases. The company has an expertise in amine oxide inhibitors, which has attracted interest from leading pharmaceutical companies looking to partner in this area of medical need. Pharmaxis has a number of approved products which it manufactures and exports from its facility in Sydney. 

How does the milestone payment work? 

Pharmaxis entered an agreement with Chiesi Farmaceutici SpA (Chiesi) for the commercialisation of Bronchitol in the United States. Chiesi funded US$22 million of the cost of the phase 3 trial of Bronchitol, which was required to seek FDA approval. Chiesi has now agreed to pay Pharmxis US$7 million of a US$10 million milestone payment when Bronchitol is approved by the FDA. This is expected to occur on 1 November 2020. Another US$3 million is payable to Pharmaxis on shipment of commercial launch stock in the first quarter of 2021. 

Pharmaxis CEO Gary Phillips said, “the development and commercialisation of Bronchitol reaches a pivotal point on November 1st. Approval by the FDA for Bronchitol would see the business segment generate immediate cash and move into profitability.”

The approval will also provide the opportunity to investigate different ways of structuring the business and funding drug development activities.  

What’s next for Pharmaxis? 

Chiesi is the exclusive distributor of Bronchitol in the US, as well as 11 countries in the European Union. Pharmaxis and Chiesi are preparing for the US launch of Bronchitol, subject to FDA approval. This will see the business segment generate immediate cash and move to profitability. According to Pharmaxis, this provides the opportunity to structure the business and activities that drive shareholder value in a much more significant way. Pharmaxis advises it is in discussions with its business partners about how to shape the future, post-FDA approval.

At the time of writing, the Pharmaxis share price is up by 8.24% to 9.2 cents per share, with a market capitalisation of $36.36 million.

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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Pharmaxis Ltd. 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 Scott Phillips.

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Kate O'Brien