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The following piece comes to us from a OneMedPlace contributor. DelMar will be presenting at OneMedForumNY 2013, June 26-27 at the Metropolitan Club in New York City. View the original story on Seeking Alpha.

DelMar Pharmaceuticals (DMPI.OB) started 2013 with a revealing corporate update on January 8th. In the update, president and CEO Jeffrey Bacha outlined his goals with an exciting year ahead for the company and its employees. Mr. Bacha focused primarily on the company’s lead product candidate, VAL-083, a small molecule (chemotherapy) agent that DelMar is developing in a dose escalation trial for recurrent glioblastoma multiforme (GBM). Readers casually perusing through the press release, formatted as a two page letter, may not even make it to page two, for despite all the promise and excitement in the letter with regard to DelMar’s progress in 2012 and upcoming catalysts in 2013, the company was privately held and not traded on the public markets. However, the second page of the letter noted the company’s plan of a reverse merger with a public company, a cheaper and effective means of becoming a publicly-traded entity than a typical initial public offering (IPO). In a subsequent January 25th announcement, DelMar announced the first closing of an associated private placement. This closing plus subsequent closings netted gross proceeds of about $10.5 million and notified the public that it would begin trading on the OTCBB. Trading commenced shortly thereafter for the company as (OTCQB: DMPI).

VAL-083’s History

DelMar’s adventure with VAL-083 started with its October 2010 purchase of the chemotherapy agent from Valent Technologies, LLC, as noted in an October 2010 corporate update. DelMar went to work developing VAL-083 with an IND (investigation new drug) filing to the FDA to garner permission to initiate clinicals. On September 6, 2011 the company received the IND approval, and quickly went to work, announcing patient enrollment initiation in a dose-escalation phase I/II trial on October 25th for refractory (recurring) GBM. While the drug has no approval in the U.S., it does have marketing approval in China for the treatment of chronic myelogenous leukemia (CML) and lung cancer. Since DelMar’s 2010 acquisition of VAL-083, it has also obtained exclusive marketing rights to the drug in China. While monetary terms have not been disclosed as the company was not public at the time of the acquisition, revenue generation as a result of the deal not only helps to offset costs associated with clinicals here in the U.S., but the approval itself in China helps to validate the drug’s potential in the U.S. for lung cancer and CML and helps confirm the safety profile of the drug for the currently-attempted GBM indication. DelMar’s collaborator in China, Guangxi Wuzhou Pharmaceuticals, will be helping the company further develop the drug in China for other indications by providing the drug itself for clinicals and commercialization, while DelMar will be responsible for its development and marketing.

Of particular note in the collaboration announcement was the statement “DelMar is conducting research aimed at demonstrating the utility of DAG (Chinese marketed name for VAL-083) for injection in cancers refractory to current therapies”. In the purchasing agreement of the U.S. rights to VAL-083, DelMar obtained access to the company’s unique and proprietary ChemState™ bioinformatics tools which is used to screen and identify potential candidates and additional targeted indication. This technology will be used to further develop VAL-083 in China and the U.S., and is likely the source of the initial targeted indication here in the U.S. for GBM. Much cheaper than “trial and error” preclinicals to validate proof of concept, the tools will help the company rapidly identify and advance potential drug candidates and indications without significant investment in “wet lab” infrastructure and with fewer wasted preclinicals.

Developed by one of the company’s founders, current science officer Dr. Dennis M. Brown, ChemState™ was behind the development and subsequent FDA-approval of ChemGenex Pharmaceuticals’ Synribo for the treatment of CML. Dr. Brown was the founder of ChemGenex Therapeutics in 1999 which underwent a reverse merger with an Australian publicly traded company in 2004 to become ChemGenex Pharmaceuticals only to be later bought out by Frazer, Pennsylvania-based Cephalon for $231 million. In 2011, Jerusalem-based Teva Pharmaceuticals (TEVA), paid $6.8 billion for Cephalon. It seems that ChemState™ helped to develop Synribo as well as sealed the company’s fate with the profitable drug garnering not one but two subsequent buyouts. Has the cycle started once again with DelMar with the same technology utilized to develop drugs there and with the same innovative science officer? While I never invest based on “buyout potential”, the possibility certainly deserves some attention and gives the investment some additional speculative thoughts for consideration.

Catalysts Ahead

While promising therapies can certainly drive share price as the companies develop them through clinicals, a lack of updates and other catalysts can often make the investment appear lackluster and keep the share price depressed until later stages of development when share price can quickly drive the company’s market capitalization up as a result of strong late-stage data and regulatory filings. DelMar looks to have an exciting year ahead with multiple catalysts to keep investor interest strong, once it actually does garner investor interest. The company has been faithfully providing quarterly investor updates via the same type of “letter to shareholders” format over the last two years.

According to the January update, the company should complete dose escalation trials in 2013 for VAL-083 and prepare the drug to advance to registration directed clinical trials this year (although it did not state that the trials would initiate this year). As pertaining to the Chinese license, DelMar will continue to develop VAL-083 there, and plans to establish marketing relationships that will position it to generate revenue through product sales or royalties for the approved indications. Updates on the royalties and partnerships should be forthcoming and could be solid share price drivers moving forward. Interested investors should review the company’s first quarterly financials once released in order to ascertain the current revenue levels DelMar has been generating with regard to the partnership, a very telling number moving forward.

DelMar’s VAL-083 acquisition should position the company well with the drug being approved for some indications in China, while research on other indications to target in the near future in China due to the highly utilitarian ChemState™ bioinformatics tools is still progressing. Here in the U.S., DelMar benefits from the collaboration additionally as Guangxi Wuzhou will be providing the drug here for all clinicals as well. This eliminates the need for the company to produce the drug on its own or to validate other suppliers – saving valuable time and money. On April 10th, DelMar released an update on its GBM trial here in the U.S. The company presented data at the American Association for Cancer Research (AACR) annual meeting in Washington, D.C. during a clinical poster session entitled, “A Phase I/II Study of VAL-083 in Patients with Recurrent Malignant Glioma or Progressive Secondary Brain Tumor”. Data were promising with all three dose cohorts not reaching dose-limiting toxicity (DLT), with no adverse events detected. The fact that the DLT was not reached is highly significant. With most drugs, and chemotherapy drugs in particular, there is an ever present tradeoff of efficacy versus safety with regard to dosage levels. Higher dosages typically yield better efficacy values with less tolerable safety profiles, while lower dosages often better safety profiles but with less efficacy.

Although the Phase I/II data should be considered as preliminary in nature, Mr. Bacha noted that the response rate was 33%, meaning that 33% of patients had tumors that either stabilized or regressed (shrank). Remember, this response is in a very difficult to treat patient set that the company is tackling with VAL-083: GBM patients who have failed standard care treatment temozolomide (Temodar®), marketed by Merck (MRK) and its subsidiary Schering-Plough Corporation as a front-line treatment. The patient set also includes a more dire set, those who have failed other treatments and then subsequently failed bevacizumab (Avastin®) marketed by Roche Holdings’ Genentech (RHHBY.OB) for recurrent GBM. Of particular note with regard to efficacy was that the proposed doses to be utilized in future registration trials as a result of this dose-escalation trial thus far yielded response rates as high as 40% in historical GBM trials sponsored by the U.S. National Cancer Institute (NCI). Without the DLT yet reached, the drug is already showing signs of efficacy. As dose escalation continues, DLT levels also rise as likely does the efficacy, garnering more attention from healthcare oncology, larger pharmaceuticals and investors. With the highly-acclaimed ASCO in Chicago approaching from May 31st-June 4th, an announcement by DelMar that the company is attending could be forthcoming and gives yet another high-profile venue for the next corporate update.

Targeted Patient Group

VAL-083’s efficacy mechanism is a bit different than other chemotherapy drugs used to treat GBM. The mechanism is independent of O6-methylguanine-DNA methyltransferase (MGMT) repair, the repair enzyme responsible for resistance to Temodar® and other alkylating agents approved for GBM such as the nitrosoureas (BCNU, CCNU). According to data released at ASCO 2011, high expression of MGMT is associated with a 10% survival two years after diagnosis, while the lack of the enzyme correlates to a 50% survival at two years. With VAL-083’s activity not likely to be affected by the presence of MGMT, it could fill a significant need for the recurrent GBM indication after Temodar® or Avastin® treatments, and could be developed for newly-diagnosed GBM in the future, particularly in patients having a high expression of the MGMT enzyme.

With about 15,000 patients dying from GBM annually in the U.S., the disease is certainly not epidemic in incidence relative to other cancers. However, the number is a bit misleading as its median survival rate is about 15 months with only about 4% of patients still living at 5 years – a horrifying statistic striking fear into patients and loved ones. VAL-083 has earned Orphan Drug designations for both the U.S. and European markets. The designation is intended to provide incentives for developing therapies for diseases with fewer than 200,000 patients affected in order to make such approvals profitable and worthy of the required research and capital expenditure. It provides for reduced filing fees and other regulatory expenses and provides for a period of exclusivity in which the respective regulatory agencies would not approve similar drugs for the same indications for 7 years in the U.S. and up to 10 years in the European markets after regulatory approvals. Not only do these designations provide for maximized gains for the research put into such drugs, but they also make the company a bit more appealing to larger pharmaceuticals in search of drugs to replace the ones they have that may be coming off patent protection in the near future.

Financials: Show Me the Money

All SEC filings reported before the January reverse merger for DMPI were of the reverse merger public company with the ticker symbol BRRY.OB, so I do not yet have an indication as to DelMar’s financials up to that point, but its first quarterly filing should be imminent. However, since the company’s introduction to the investor public, the company has raised funds which should fund its operations for at least 2013. The private placement announced in conjunction with the January 25th reverse merger netted DelMar $10.5 million in gross proceeds through a series of closings in a private placement, which was oversubscribed (apparently lots of interest by the buyers). These funds were from investors that likely have first-hand interaction with the company, its financials and VAL-083 data, with each providing funds for the company to advance its pipeline at least through the year.

Looking Ahead

Interested investors should carefully glean through each of DelMar’s “updates” via its website to get a better feel for the company’s clinical progression, quality of management and plans for the future. DelMar’s first SEC filings with regard to financials should be forthcoming and will likely be very revealing with regard to the revenue from its Chinese marketing of VAL-083 for lung cancer and CML. Investors should consider that revenue, the company’s cash burn rate and the $10.5 million it has obtained via private placements since its public debut in January in order to get a better feel of its cash position. With a revenue generating product in China for two indications, the downside for the investment should be less than that of many development-phase pharmaceuticals. Although the company is a bit risky currently having only one product in development for one indication in the U.S., the already marketed indications in China along with the ongoing work for developing other indications beginning with ChemState™ recommendations could bring other indications into development in the near future.

Nonetheless, I do feel certain that this competent management team is likely using ChemState™ to find additional products to develop with more partnerships also possibly on the way, giving current and potential investors an exciting future ahead, with this company keeping a long-term position in their portfolios or their pharmaceutical company watch lists.