You are going to hear a great deal about network pharmacology in the next few years.
Why do I make this very confident prediction? Well, already it is the next big thing in the US.
And if it lives up to its billing it will revolutionise the way medicines are developed.
This cutting edge science has the potential to evaluate new compounds for efficacy and safety, which ought to ensure fewer drugs fail in clinical trials.
But even more impressive is the ability to find completely new medical uses for products already out on the market, and to derive medicines for diseases that are currently poorly treated or not treatable at all.
At the vanguard of network pharmacology is a tiny north east firm spun out of Newcastle University.
E-Therapeutics (LON:ETX) is headed by Professor Malcolm Young, who is a world leader in the field.
He makes the science sound simple, which it is not, and in one email managed to distil a whole career’s work down into a series of short bullet points.
“Network pharmacology acknowledges that a drug molecule in or near a cell will affect many proteins, not just the designed target protein,” he tells me.
“Because many proteins are affected by a molecule, the net impact of all these protein interventions is not straightforward to infer.
“It uses network analysis to determine what the net effect of a specific set of protein interventions will be in specific cells' networks.
“If the cell is a diseased cell, this gives information about whether the molecule will have efficacy in the disease.
“If the cell is a normal cell, this gives information about whether the molecule will be safe in patients, and about possible side effects.”
As I said earlier, this means the technology can be used to discover new drugs and to test for efficacy and safety.
The technique offers some obvious and tangible benefits to big pharmaceuticals companies which endure their fair share of clinical failures as drugs either have unexpected side effects or simply don’t do what they were designed to do.
Young and his company will be pushing an open door if it can be proved that network pharmacology works in the way outlined.
And that is what the e-Therapeutics team is trying to do – validate its claims for network pharmacology.
The approach to validation however is unusual. It is taking drugs that are already out there in the market and “repositioning” them for ailments for which they weren’t originally designed.
Using its screening technique e-Therapeutics has identified and repurposed drugs for asthma, cancer, depression, atherosclerosis and C.difficile.
It is taking a twin track approach. The asthma and depression compounds are going into phase III trials in India, with the help of pharmaceutical partner Khandelwal Laboratories. At the same time the five I mentioned will enter the clinic here in the West.
It is hoped the data from India will provide some good evidence that the drugs work, but the main thrust of the research will be the multiple phase II trials.
Infinitus Clinical Research will run the trials, recruiting 150 patients initially though there is the capacity to extend this to 500.
According to the company’s finance director Johnny Cordiner, the first pieces of clinical data “will show us whether we are on the right track”.
If positive, it also allows the senior management to sit down the industry’s big players and talk about potentially money-spinning drug collaborations agreements.
“The industry is looking for bona fide phase II data,” Cordiner explains.
“There’s quite a lot of traffic out there, and unless you’ve already bought into network pharmacology, it is hard to make the leap without good data.
“The tide is turning, but most (big companies) are sort of saying ‘show me the money’.
“So I think that’s what we’re doing: we are showing them the money.
“We are producing the level of data and all-round package that is realistic for there to be a bit of a queue at the door for the drug candidates.”
Cordiner points out that each of these hand-picked, repositioned drugs has the potential to be a blockbuster if it makes it onto the market.
That means a successful phase II trials for any one of those drug candidates ought to be a transformational event for the company. Whether this is the case or not is another matter.
But a simple “back-of-the-fag-packet” NPV calculation comes up with truly mind boggling valuation for the company of between 47p and £22 a share (yes I said £22 a share) depending on the results of the multiple phase II studies.
Of course at 32p, the share price isn’t even close to that baseline figure, which underlines the market’s scepticism about network pharmacology.
It also highlights the lack of understanding of the company and just how out of favour the small-cap biotechnology stocks are at present. The company’s broker, Panmure Gordon, reckons the shares are worth 80p each.
The price target is based on the present value of just two of five repositioned drugs: Clostriban for the treatment of C.diff and cancer candidate Dexanabinol.
Analyst Savvas Neophytou said: “E-Therapeutics possesses a technology platform that could revolutionise how the pharmaceutical industry conducts drug development.
“The platform is increasingly accepted as credible and the company has intellectual property that puts it in a position of strength which may necessitate others paying it a licensing fee or, in an alternative scenario, result in the company being acquired.”
What we have between now and when the trials start producing that all important data is potentially a 15-18 month lull where news-flow might be slow.
The first clinical data should begin to emerge “at the back end of 2011”, Cordiner says. “And it will arrive like London buses in 2012,” he jokes.
At the current burn rate the company will need a fresh injection of capital by the end of next year.
Panmure concedes this point, saying “our forecasts indicate a likely cash call in the next 12 months”.
The broker forecasts the group will start earning its keep in the year ended January 2013, which by my calculation means e-Therapeutics will need £4-£5 million to see it through to profitability.
This represents a big and dilutive cash call for a firm valued at £21 million.
Deals to licence out the technology so larger pharmaceuticals companies can use it to develop their own drugs could also bring in some much needed funds.
Certainly, Cordiner believes this may provide an early source of income as work in the clinic progresses.
With such a tiny market capitalisation it is easy to see e-Therapeutics as an also-ran in a forgotten sector.
However, you take a look at the shareholder register and you realise there is a lot of latent support there.
Philip Richards is a 25 per cent shareholder through RAB Capital. “He thinks we are the Pharmaceutical Google,” Cordiner says.
And he is in good company. Gartmore and Octopus Investments are also there. And of course Newcastle University is sitting with a 10 per cent chunk of stock.
Now the hard the hard task is raising the company’s profile, which in turn will bring in new investors.
“I think we have to move from being a private company that’s listed on the market –which served us well in stormy times,” Cordiner said.
“Now we’re actually doing something that the market will recognise - pushing through clinical data and interacting meaningfully with big pharma - we need to be more liquid.
“And we need to tell our story. So that’s what we’re looking to do.”