Pharmaxis shares have plunged to record low levels amid a stoush with one of the drug developer's financiers.
Pharmaxis says NovaQuest Capital Management is threatening to withhold $US20 million after claiming it has breached their funding agreement.
Pharmaxis denies the claims and says the decision to withhold the money could cause problems for an advanced clinical trial of its key cystic fibrosis drug, Bronchitol, in the United States.
Its shares plunged 16.9 per cent, or 1.3 cents, to 6.4 cents on Tuesday - just off the stock's all-time low of 6.1 cents.
Pharmaxis says NovaQuest plans to default on a planned payment of $US20 million because it is not happy with the way the drug developer has handled reimbursement payments for Bronchitol from European customers.
It said NovaQuest had not provided any detail to support its allegations of a breach of their financing agreement.
Pharmaxis signed a $US40 million funding deal with NovaQuest in January 2013 to support the development, manufacture and commercialisation of Bronchitol in Europe and the US.
It received an initial $US20 million in February 2013.
However a month later the powerful US Federal Drug Administration knocked back approval of Bronchitol and ordered more clinical trials of the drug.
Last October, Pharmaxis asked for the remainder of the $US40 million.
The final $US20 million payment was to be subject to Pharmaxis meeting certain commercial and regulatory performance criteria, including the first patient taking part in the next important clinical trial of Bronchitol by October.
The $US20 million was to be paid in four equal instalments of $US5 million.
But NovaQuest is refusing to pay the first instalment as planned in September, despite the clinical trial being due to start in August.
Pharmaxis chief executive Gary Phillips said NovaQuest's threat to withhold the payment would have serious consequences for the clinical trial.
"It also has consequences for a US partnering agreement for Bronchitol which I had expected to sign later this month," he said.
"This partnering deal, with a global pharmaceutical company, has significant potential value to Pharmaxis including partial funding of the trial, the payment of significant approval and sales milestones and a share of sales revenues."
If the clinical trial is a success, it could significantly bolster Pharmaxis' chances of winning FDA approval for Bronchitol.
