BioWorld International Correspondent

LONDON - SR Pharma plc said it is poised to make an acquisition that will change investors' perceptions of the company, as it announced the axing of the lead product SR 299 after it failed a Phase II trial in childhood atopic dermatitis.

The recently appointed chairman, Iain Ross, told BioWorld International, "The company is a busted flush: The aim is to make [a company] acquisition that will allow me to attract new funding to grow the business."

Atopic dermatitis is the third indication in which SR Pharma's approach to immunotherapy has failed. Related products, based on inactivated forms of the soil bacteria Mycobacteria vaccae, did not reach the endpoints in Phase III trials in lung cancer and tuberculosis (TB).

The Phase II randomized, placebo-controlled study of SRP 299 in 166 children investigated the efficacy of a single administration of either one high or one low dose of the product, taken with existing medication. All three arms of the trial showed an improvement in dermatitis scores, but there was no statistically significant difference between the two active arms and placebo.

"The trial is black and white," Ross said. "It didn't reach significance, so we can't invest further."

Despite three failed attempts, Ross does believe in the M. vaccae technology. "It is easy to say with hindsight, but the trials were not well conducted," he said. "I do feel it works in TB and cancer." Ross has made a commitment to John Rook and Graham Stanford, the scientists that founded SR Pharma in 1992, that there will be an M. vaccae product.

"I feel Stanford and Rook deserve to see something on the market, and I have brought them back into the frame," Ross said. The founders still own 11.4 percent of the company.

In the past year, SR Pharma has downsized to conserve cash as it awaited results of clinical trials. In May, the founding Chairman Eric Boyle left the company; he was followed in June by CEO of 12 months David Hill. In September, SR Pharma moved its listing from the main market of the London Stock Exchange to the AIM junior market.

Trials are continuing in asthma and psoriasis and the U.S. National Institutes of Health is sponsoring a $2.4 million study of M. vaccae in treating multi-drug resistant TB in HIV/AIDS patients. The 2,000-patient study, in Tanzania, is due to report in 2005.

The company has about £3 million (US$5.8 million) in cash. Ross declined to say how he will pay for any acquisition.

"To take the company forward I have got to change perceptions of it; that's why my acquisition is very clever," he said.