Anglo-Sino drug developer Phynova has just raised £1.1m to move its unique lead candidate into a Phase IIb trial, after its safety and tolerability was proved in preceding studies.

The drug in question, named PYN17 and designed to relieve the debilitating symptoms of chronic hepatitis-C, got the green light from US authorities early last year and moved into Phase I/II trials. Its positive results were published in November. Chief executive Robert Miller aims to take this candidate through to the end of these current tests, expected in 2009, before looking for a pharmaceutical partner to help fund its later stages.

He says PYN17 will need further funding down the line. How much all depends on the successful conclusion of talks with potential partners about Phynova's other drug candidates, including the PYN6 treatment for MRSA, which has discharged promising pre-clinical results, and PYN22, an anti-obesity product that is ‘moving forward successfully’.

For the year to September Phynova, whose drugs all began their pre-clinical life as traditional Chinese medicines, lost £2.9m before tax and had £1.4m of cash left at year-end. Miller eulogises about the PRC, where Phynova recently took a 45% stake in a Beijing-based drug development company, and says ‘this year we’re going to do more in China’.

Highlighted by Growth Company Investor last May at 54p, Phynova's shares have failed to receive much interest in London. But liquidity should be much improved by a secondary listing on OTCQX, a new exchange in New York allowing companies like Phynova to access US investors without the costly Sarbanes-Oxley compliance. This will both heighten visibility – with such blue chips as Adidas, Roche and Air France also listed – and increase interest, as US investors are generally less cautious about backing the biotech sector.

Even allowing for the long lead times involved in the sector, with one drug in advanced clinical trials and two more poised to begin soon – with big pharma partners possibly involved – Phynova, valued at below £10m, should merit a re-rating. A high-risk, high-reward punt.

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Phynova	AIM	£2.71m	12.00p	0.00p
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