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Thursday, March 17, 2005

Starpharma: A “Nano” Star on the Rise

On Monday, Starpharma—an Australian-based biopharmaceutical company focused on the development and application of dendrimer-based nanotechnologies—announced it was launching a new company, Dimerix Bioscience, to develop technology for the new field of receptor coupling. The overall size of the deal is pretty small—about AUD$200,000—and Starpharma will only have a 30% equity stake in the company, but it is yet another indication of Starpharma’s growing sophistication in leveraging its impressive intellectual property position in the area of dendrimer-based nanotechnologies. (Full disclosure: I own Starpharma stock).

To understand the long-term potential of dendrimers—which are tiny (approximately 50 nanometers) synthetic, nanoscale structures that can be tailored for a variety of applications—one need look no further than yesterday’s press release coming out of Central Michigan University (a world leader in the development of dendrimers). The release succinctly addresses how dendrimers may someday be used to treat breast cancer and osteoporosis.

More exciting than these developments, however, was the news last month that Starpharma, in exchange for giving Dow Chemical a 31 percent equity stake in another company it owns—Dendritic Nanotechnologies—received 196 dendrimer patents from the chemical giant. This gives Dendritic Nanotechnologies (of which Starpharma is still the biggest equity holder at 33%) the largest portfolio of intellectual property in the field. It also alleviates the future threat of costly and time consuming litigation.

Beyond these developments, I am bullish on Starpharma for the following reasons:

 The company is developing VivaGel—a dendrimers-based topical microbicide gel that has been developed for women as a preventative against the sexual transmission of HIV. The gel has been proven 100 percent effective in animal trials and, in 2004, received clearance from the FDA for human clinical trials. In early trials, VivaGel appears to be safe (it is still too early to know about its efficacy) but if it is approved it will, arguably, be the first truly nanoscale platform technology approved by the FDA. Longer-term, it is quite possible that the technology will also be tested for effectiveness against other sexually transmitted diseases like Herpes and Chlamydia (an estimated 15 million women in the U.S. contract sexually transmitted diseases every year).

 As stated earlier, Starpharma owns 33 percent, Dendritic Nanotechnologies, which is one of the few companies to be accepted as a partner in MIT’s prestigious Institute of Soldiering Nanotechnologies. (It is likely that the Army is exploring the company’s dendrimers as a possible platform for detecting treating various chemical and biological agents).

 In late 2004, a consortium lead by Starpharma was awarded a $5 million from the National Institute of Health to develop a second generation microbicide for the prevention of HIV and other STD’s.

 And, earlier this year, Starpharma began trading as an ADR on NASDAQ under the symbol: SPHRY. One ADR is equal to 10 shares of the company’s stock on the Australian market.

As always, there is another side to the story and Starpharma is not without some risk. At the present time, the company is not profitable and has few revenues. It also faces some competition from a private start-up out of the University of Michigan, NanoBio Corporation. And, of course, in almost every area it is working—from HIV to osteoporosis—it faces stiff competition from not just the major pharmaceutical companies but hundreds of other promising start-ups as well.

In all, however, I believe Starpharma is an excellent investment for those investors with a strong penchant for risk. VivaGel’s effectiveness in animal studies, coupled with the company’s impressive IP platform and its large stake in Dendritic Nanotechnologies, provide great potential upside—especially in the area of treating various cancers.

Moving forward, investors should look for a major pharmaceutical company to license Starpharma’s technology. If such a development occurs, investors should consider it a very positive development. Of course, the most significant milestone will be if the FDA approves VivaGel. Such an act would serve as a major validation of Starpharma’s technology.

Jack Uldrich

For more information:

Starpharma Pooled Development Ltd.
SPHRY (NASDAQ) and SPL.AX
Address: Level 6, Baker Heart Research Building
Commercial Road
Melbourne, Victoria
Australia
Phone: 61.3.9510.5955
CEO: Dr. John Raff
Web: www.starpharma.com