Merrion Pharma is back on the active list. The Elan spin-off which effectively went into hibernation during the recession has re-emerged this year under new leadership and with renewed impetus behind a prospective therapy for breast cancer.

But the company, which is scheduled to report interim figures over the coming week, is still struggling to persuade stock market investors of what it sees as significant potential for growth.

Merrion is one of a cluster of Elan spin-offs that have been driving innovation in the indigenous life sciences sector over the past decade. Founded when life science venture capital group Growcorp acquired drug development technologies from Elan in 2003, the company’s focus is developing oral forms of drugs that until now have generally been available only in injectable form.

At the heart of Merrion is a technology platform called gastrointestinal permeations enhancement technology (Gipet) and, thus far, Merrion has been most closely associated with using it in the field of diabetes and cancer therapies. Two licence deals with Danish diabetes specialists Novo Nordisk in 2008 and 2009 were a critical affirmation of the value of its technology, but failed to lead to other similar arrangements.

Retrenched

A cash crunch in 2011 saw the departure of then chief executive

John Lynch

, and the company retrenched. However, it continued to work not only on the Novo Nordisk deal but on its own proprietary treatments using its technology and existing drugs to target breast cancer. That treatment is now on the cusp of Phase III trials and Merrion expects to finalise terms of the trial protocol with the US regulator, the Food and Drug Administration, within the next couple of months – a critical factor in the board’s decision to hire new chief executive

John Fox

last January and become more active generally.

Finding a trial partner is more difficult. Because of the very specific subset of breast cancer patients being targeted – post-menopausal women within a 15-16 per cent subset of those with early stage breast cancer – conducting those trials will cost “north of $40 million”, according to Fox. Merrion is currently seeking partners to push the drug to market in what it estimates is a $300 million peak sales opportunity.

Separately, Merrion has signed a landmark deal with contract manufacturer Hovione which will see the Portuguese company offering the Gipet technology to its clients in their efforts to develop new drugs which will then be manufactured by Hovione. For Merrion, the strategic partnership opens the door to further licence deals while keeping tight control of operational costs.

And its Novo Nordisk licence last month delivered a welcome milestone payment as the Danish company successfully concluded a Phase I trial for a diabetes therapy using the Gipet technology.

Shares languishing

But, despite the increased newsflow, Merrion’s shares continue to languish. The stock, which was floated at the end of 2007 at €4.05, is now worth but a fraction of that despite the increased recent activity in the business. At the end of last week, they hit a 12-month low of 38 cent, close to 40 per cent down on their highest level in 2014 and almost 27 per cent off the level they were trading at a year ago.

Fox is concerned that people may have wiped Merrion off their radar after it “went into hibernation” in 2012.

“Not only are we still in business, but actually we are trying to position the company now to where we are going to have a reasonable growth in value going forward, because there are good things happening.

“On top of that, we have strong industry validation with Novo Nordisk and we have a great partner [Hovione] out trying to market the technology for us.”