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Company Hits Milestones as It Advances Cancer Drug to Market

MARSHALL EDWARDS INC.

CEO: Daniel Gold.

Revenue: $84,000 in 2010; $228,000 in 2009.

Net loss: $7.9 million in 2010; $11.2 million in 2009.

No. of local employees: Nine.

Headquarters: San Diego.

Year founded: 2000.

Stock symbol and exchange: MSHL on Nasdaq.

Company description: A development stage company that seeks to create and commercialize drugs that treat cancer.

Key factors for success: In pre-clinical trials, the company’s drug candidate has been successful in killing cancer cells using a compound similar to what’s found in soy.

Marshall Edwards Inc., a development-stage company that moved to San Diego from Australia last year, has accomplished a series of key milestones as it seeks to take its lead cancer drug candidate to market.

The U.S. Food and Drug Administration in August accepted the publicly held company’s investigational new drug application for ME-143, a molecule that has demonstrated “potent activity” in fighting various types of cancer tumors in pre-clinical tests. The drug also has shown the ability to increase the effectiveness of chemotherapy.

With the FDA’s go-ahead, Marshall Edwards kicked off a clinical trial this month in collaboration with the Sarah Cannon Research Institute in Nashville, Tenn. The trial, which is expected to enroll 24 patients, will give the company valuable information on dosing, safety and efficacy — data that will help shape Phase 2 studies that are set to begin in 2012.

Marshall Edwards’ transition from “pre-clinical” to “clinical” will likely weigh favorably with potential investors, said Joseph Pantginis, an oncology stock research analyst at New York-based Roth Capital Partners.

“It’s difficult trying to attract investor interest as a pre-clinical-stage company,” Pantginis said. “You’re going to have a harder time getting on the radar screen.”

Indeed, investors took notice on Aug. 16 when Marshall Edwards announced that the FDA would let the company begin clinical trials. Trading volume that day rose to more than 5 million — a 2,074 percent increase over its 65-day average volume — and shares rose 38.4 percent to $1.91.

Pursuing Lucrative Market

It’s a recognition that as ME-143 moves forward, so does Marshall Edwards’ chance for tapping into the ultra-lucrative market for drugs that treat cancer.

“The markets that we’re going to be addressing are huge multibillion markets,” said Marshall Edwards President and CEO Daniel Gold.

Depending on what type of cancer the drug will be geared to — in pre-clinical studies it has been effective on a range of tumor cell lines, including breast, colorectal and ovarian — the drug has potential for blockbuster status.

A Blockbuster, Perhaps?

Pantginis offered examples of Genentech’s Avastin, which is approved to treat a range of cancer types, and Roche’s breast cancer drug Herceptin, both of which have annual sales of more than $1 billion. With respect to Marshall Edwards’ ME-143, “one positive aspect is that it can potentially address multiple tumor types,” Pantginis said. “In oncology, the potential for financial reward is pretty great.”

If the name Marshall Edwards doesn’t ring a bell, it may be because the company is relatively fresh to the San Diego biotech scene. It was launched in Sydney, Australia, in 2000 as a cancer-focused spinout of Novogen Ltd., a publicly held pharmaceutical company that deals mainly with degenerative conditions such as osteoporosis and Crohn’s disease.

Marshall Edwards went public on the Nasdaq Stock Market in 2003, where it trades under the symbol MSHL. The company’s drugs are based on the central design of compounds called isoflavones that are naturally found in soy and are believed to inhibit tumor cells’ metabolism and thus kill cancer cells.

“Women in Japan had lower incidences of breast cancer, and the diet in Japan is heavy in soy,” said Gold, explaining Novogen’s initial reasoning for looking closer at compounds in soy.

Relocation and Reorganization

But in spring of 2010, after a late-stage clinical trial gone wrong, Marshall Edwards’ board of directors made the decision to move the company to San Diego and rework the management team, placing Gold at the helm. The ill-fated trial had been for an oral drug to treat recurrent ovarian cancer. But the drug was only effective when used intravenously.

Gold, as one of his first major actions, acquired all of Novogen’s isoflavone-related intellectual property, including compounds that Marshall Edwards had previously been licensing. The $4 million stock deal, closed in December, included a portfolio of more than 400 compounds that the company can choose to further develop.

“We have our hands full for now,” Gold said, referring to the company’s efforts to advance its two lead drug candidates. “But we will definitely go back and revisit that portfolio to see where we can gain value.”

Pantginis said that Gold has “cleaned house” in terms of forging a more transparent relationship with Novogen, which is still a major shareholder, and identifying a clear path for the company’s lead product. “This really is a new company,” Pantginis said.

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