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Physiomics ready to build on Merck Serono landmark

Physiomics' share price surged on a €500,000 contract for its virtual tumour software with Merck KgaA.
Virtual Tumour can be adapted for all forms of cancer

A 90-degree spike on a share price graph is rare and almost always indicates very good news.

For Physiomics Plc (LON:PGR) its share price surge was sparked by a €500,000 contract for its virtual tumour software with Merck KgaA.

WATCH: Physiomics PLC: Personalised medicines will build on momentum from recent pharma deals

To clarify, this is not the US pharma supermajor Merck but an unrelated German firm also known as Merck Serono.

This Merck though still has 50,000 staff, a net worth in the billions and is also a cancer drug developer so it’s not hard to spot why investors were so enthusiastic.

Merck Serono a big name

Not only does the deal generate a significant amount of revenue, but interestingly Merck Serono also allowed its name to be linked with the contract.

In the secretive world of pharma/biotech drug development that is unusual says Jim Millen, Physiomics’ chief executive, who sees it as a clear validation of the progress made by the company since he took charge two years ago.

The German company had been working with Physiomics for some time but the contract was a significant step-up in scale and might herald further even deals not only with Merck Serono but other pharmas.

Cancer simulation technology

As the name implies, Virtual Tumour is a simulation programme. The software predicts the effect of different combinations of drugs on whatever type of cancer a pharma might be researching.

Millen says Virtual Tumour helps the pharma decide the optimum combinations of drugs for a specific cancer along with other important elements such as dose sizes and how it should be administered.

It gives a head start when designing development programmes and helps to avoid costly failures especially in clinical trials.

As new cancer drugs can cost up to US$1bn, involve 10 years of work and still fail right at the end of the process, anything a pharma can do to increase the probability of success is worth something, he says.

VT very adaptable

So far, Virtual Tumour has been used to model 40-50 types of the disease but its adaptability means it has the potential to be used across all areas of oncology, says Millen. 

Since the Merck KgaA deal, Physiomics has also picked up contracts from two more major pharma groups and a smaller UK biotech, though none of these have been named.

A second grant has also been made to the company from the government-backed tech innovation body Innovate UK.

The first grant was for £131,000 while a further £68,000 was recently awarded as part of a programme researching prostate cancer chemotherapy dosing.

Millen says Physiomics’ sweet spot is in pre-clinical in vivo work (animals primarily) and phase I and II early stage clinical trials.

Depending on their size, early-stage clinical trials can cost £1mln for a phase 1 and up to £15mln for a phase II.

Phase III trials can cost hundreds of millions, so it important the pharma companies gets it right in the early stages says Millen.

Personalised Medicine

Innovate UK’s grants were for studies in personalised medicine, which involves treating individuals or groups in a specific way rather than a one-size fits all approach.

“Doctors typically prescribe medicine irrespective of who you are, your genetic make up, your age and what other conditions you might have had.

“Personalised treatments take these into account and give a treatment optimised to give the best outcome for an individual.

“Virtual Tumour can help predict the effect of cancer drugs on subsets of patients, which makes it very well positioned to help develop personalised treatments.”

Millen admits the work with Innovate has more of a ‘blue sky’ element than its standard core service but he believes there is a lot of future potential.

Revenues on the rise

In the meantime, the contracts already won this year should this year produce a significant jump in revenues.

Turnover in the year to June 2017 was £270,000 with a net loss of £400,000 but some of the €500,000 from Merck will fall into this calendar year in addition to the £153,000 from the three new contracts plus the £68,00 Innovate grant.

At a price of 6.15p, the company is valued at a lowly £3.6mln, but Millen points out that is five times more than a year ago.

“Momentum is building and we are establishing a history of delivering what we say.”

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