The Cross-Border Biotech Blog

Biotechnology, Health and Business in Canada, the United States and Worldwide

Monthly Archives: March 2010

Monday Biotech Deal Review: March 29, 2010

This week’s Canadian biotech deals include an acquisition by Biovail, Hæmacure’s BIA filing comes to a predictable end, MethylGene finds $8.9 million in its couch cushions from some Ontario numbered corps, Leap Medical leaps ahead with $1 million from MSBiV and other Quebec favourites, and BioSyntech borrows against its SR&EDs.  Those, plus more securities, debt and commercial deals after the jump…

This Week in the Twitterverse

Here are some good tidbits to catch up on over the weekend in case you missed them the first time around on @crossborderbio:

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Friday Science Review: March 26, 2010

Why Did the Duck Kill the Chicken? Well… a scientific explanation is RIG-I.  Ducks are resistant to influenza viruses but may by asymptomatic carriers.  One of the reasons for ducks’ resistance is because ducks express the RIG-I protein that senses the presence of the viruses.  Chickens, however, do not appear to express RIG-I or a similar protein and have no method to detect the presence of viruses to illicit an immune response.  This could have implications to the poultry industry who do not want to see their entire farm wiped out by a viral outbreak and may want to start breeding transgenic chickens expressing RIG-I.  The discovery was led by Dr. Katharine Magor and her team at the University of Alberta and is published in the early edition of the Proceedings of the National Academy of Sciences.

Promoting Cancer Cell Growth: The YB-1 (Y-box binding protein-1) transcription factor is a known oncogene that is expressed in a significant percentage of breast cancers.  In this study, scientists demonstrated that YB-1 induces the expression of CD44 and CD49f, which are associated with cancer stem cells and used as stem cell markers.  Although they do not make a direct link to breast cancer stem cells, they suggest that it is this link that explains why YB-1 expressing cancers are resistant to drugs such as paclitaxel and are associated with disease recurrence and poor outcome.  The principal investigator of the study was Dr. Sandra Dunn at the University of British Columbia. Details of the study were reported in Cancer Research.

Knock, knock… Let Me In: A transporter protein that is selectively expressed in blood cells can be manipulated to facilitate the entry of cancer drugs into the cell.  This is extremely important for new treatment regimes against blood cancers such as AML and other leukemias.  Researchers found that the Human Carnitine Transporter encoded by the SLC22A16 gene acts as a gateway and can mediate the uptake of the polyamine class of drugs such as the anti-cancer agent Bleomycin.  Dr. Dindial Ramotar, Université de Montréal, first demonstrated this in yeast cells and now in human cells as reported in the Journal of Biological Chemistry.

Please, No More Radiation: A genetic mutation in the p53 gene in children with a rare type of brain cancer – choroid plexus carcinoma (CPC) – is a new marker indicating a poor response to radiation therapy.  It is unfortunate that this signals a more aggressive disease, however, this finding would relieve the patient of having to suffer through the difficulties of radiation.  The inherited p53 mutation is associated with a condition called Li-Fraumeni syndrome and is found in about 50% of CPC cases.  Without the mutation, CPC patients treated by radiation have a good chance of recovery.  The study, led by Dr. David Malkin at the Hospital for Sick Children, Toronto, is published in the advance online issue of the Journal of Clinical Oncology.

Mooooooooo: Scientists have finished sequencing the genome of two different types of cows – one beef and one dairy – using Life Technologies’ next generation SOLiD™ 3 System.  It cost $130K and took only seven months to complete.  In comparison, it cost $50M and four years, finishing in 2009, to sequence the first cow.  The genomic information is important to the industry for making breeding decisions and to identify genetic markers of specific desirable traits.  So that T-bone steak waiting for you to grill up this summer will be even juicier and tastier.  The Bovine Genomics Program at the University of Alberta led by Dr. Stephen Moore performed the sequencing study.

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Ontario Budget 2010: Reserving Final Judgment

In the post below, I noted the increased budget for the Ministry of Research and Innovation. More than one little birdie says this increase portends significant pending program changes. So put away your poison pens for now and we’ll keep our ears to the ground for good news from the deployment of that additional funding.

Update: I have received confirmations/assurances this morning from several additional sources that MRI announcements will be made in the next few weeks. Stay tuned.

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2010 Ontario Budget Stands Still on Innovation

Ontario’s 2010 budget was released today.  It contains no new innovation-related initiatives, leaving the province to fall further behind competitive jurisdictions. Read on for more detail, but also see this post noting that signs point to further announcements.

Despite recent strategic initiatives in Québec and across the U.S., and despite opportunities to improve funding for biotech companies without any new expenditure, the 2010 budget chooses to rest on last year’s now questionable laurels. 

The section on “Innovation” in the 2010 budget’s Sector Highlights reads, in its entirety, as follows:

“From the discovery of insulin to the BlackBerry ®, the impact of Ontario inventions has reached around the world.

Today, Ontario’s economic and social prosperity has come to depend on its ability to innovate and compete in the global marketplace. Recognizing this, the McGuinty government is investing in an aggressive innovation agenda to ensure the province is one of the winning economies in the 21st century.”

The remainder rehashes prior years’ initiatives. 

There are two hints  of possible improvements directed at innovation:

  1. A bullet in the “Small and Medium-Sized Businesses” section says the government is “[p]roposing to extend the refundable Ontario Innovation Tax Credit to more small and medium-sized businesses.”  There is no further detail that I can locate on this proposal anywhere in the budget documents.
  2. The Ministry of Research and Innovation gets an increased budget, from $295 million in 2008-2009 to $343.8 million in 2009-2010 and $411.5 million in 2010-2011.  There is no information that I can locate on how these additional funds would be deployed. 

No detail is provided on either item, so the underlying goals or likely effects are impossible to determine.  Although there are increases for post-secondary education and general improvements to the corporate tax environment (the net effect of which against the HST is uncertain), the overall impression is undeniably disappointing.

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Capstone Therapeutics’ Proposed Put Rights Put the Company’s Future in Investors’ Hands. Here’s How they Work, and Why.

Capstone Therapeutics (NASDAQ: CAPS)  got a lot of press today (DealBook, FierceBiotech, etc.) for the “put rights” it’s proposing to give its shareholders. 

If shareholders agree at Capstone’s May 21 AGM, they will each get “the right to require the Company … to purchase for cash all or a portion of [their] shares [for cash] on or about July 31, 2011.”  By then, Capstone will have the results of its Phase II POC trial for its lead compound, expects it will have some cash left in the bank, and wants to give investors the choice of whether to continue with the company or not.

Three aspects of the Capstone Puts are interesting:

  1. How do they work?
  2. Why would a company offer them?
  3. How did investors react?

1. How do Capstone Puts Work?

To get more information about how the Capstone Puts work, I checked out the company’s proxy statement.  Here are some of the highlights that make them workable for the company:

  • The Capstone Puts terminate on certain events: a change of control, or entry into an agreement for a partnering, development or any other transaction, whether commercial, investment or otherwise,  that the Board in its sole and absolute discretion determines is material.
  • The Capstone Puts are priced after paying off all liabilities: the redemption amount would be 90% of “available cash” as of June 30, 2011, with available cash defined as “Net Liquid Assets” less “Commitments and Contingencies.”  Commitments and Contingencies are ”all obligations and liabilities of the Company, including contingent obligations and liabilities.”
  • The Capstone Put process turns into dissolution or liquidation: if 100% of the puts are exercised, the Board would propose a plan of dissolution or liquidation to stockholders for approval in accordance with the Delaware General Corporation Law, instead of paying the formula price.

As you can see, some of these terms, like the conditions under which the put rights terminate, are similar to mandatory conversion provisions of convertible debentures.

Which brings us to…

2. Why Would a Company Offer Capstone Puts?

As the Reuters opinion piece by Robert Cyran says:

“the Capstone puts are valuable protection for investors. Biotech executives prefer not to throw themselves out of a job. Often, a new drug of questionable merit is suddenly found in the labs, [or the company merges] with a private biotech company, trading cash for a pipeline. … Shareholder activists have pushed similar companies … into liquidation, but the campaigns can be expensive and the payoff uncertain.”

Again, an idea similar to convertible debentures.  If convertible debentures come due without a mandatory conversion event, the holders will be able to demand the principal amount and may well be able to drive a restructuring or insolvency process.  The popularity of convertible debentures, particularly among biotech VCs in the last few years, attests to their value.  Unlike debentures, though, the Capstone Puts will be issued to all shareholders.

Another interesting aspect is that the Capstone Puts should ensure a floor for Capstone stock — based on the “available cash” — in the event the Phase II trial fails.

3. How did Investors React?

Capstone’s plan seems to be designed to provide added value for shareholders, so you might expect the shares to trade up on the news. 

Did it work?  Not exactly.  At the end of trading today, Capstone’s shares were at $1.03 — exactly where they closed yesterday. 

Maybe the added value is negated because the plan could also be perceived as a signal that the company lacks confidence in its program?  Maybe it’s just that no-one knows how they’ll turn out next year.  So…

My bottom line: Stay tuned for July, 2011.

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Biotech Trends Update: ChemGenex and the Importance of Companion Diagnostic Development

Australian cancer drug developer ChemGenex was scolded by the FDA’s oncology panel for “fairly sloppy drug development.” The company’s mistake? It presented its leukemia drug, designed for patients with a particular genetic mutation, without a validated diagnostic test for the mutation.

ChemGenex says it’s a matter of months, not years, before it gets a test validated for Omapro; but the company’s stock took a beating on news of the FDA’s decision, losing 37% of its value on record volume.

Many companies, unwilling to risk such delays, have already shifted to a joint Dx/Rx co-development model.  Until it was bought by Qiagen, DxS was making an entire business out of developing companion diagnostics in partnership with pharmaceutical companies.  Similarly, Dako Denmark is developing companion diagnostics for AstraZeneca’s oncology pipeline.

The FDA’s message here is pretty clear: the quality of companion diagnostics matters.  One day, when everyone’s genome is fully sequenced, many personalized products won’t even need diagnostics.  Until that day, when you’re developing a personalized product, don’t give the diagnostic short shrift.

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Health Canada Calibrates Caffeine Consumption — Energy Drinks May Get New Labels

Two recent bulletins from Health Canada‘s caffeine directorate provide updates for the sleep-impaired. 

The first update reminds us of recommended limits: 400mg/day for healthy adults.  Health Canada describes this as “about three 8oz cups of coffee.” Pay attention though, because a “medium” at Tim’s is 10oz (14oz in the U.S.) and only the rarely ordered “short” at Starbucks fits the 8oz bill (Starbucks’ “tall” is 14oz). 

They also suggest limits for pregnant women (300mg) and for children (45-85mg based on age from 4(!)-12).  Yes, there is a recommended maximum caffeine intake for 4-year-olds, and it isn’t “zero”.  Actually, noting that symptoms of too much caffeine include “insomnia, headaches, irritability, dehydration and nervousness,” it’s possible more 4-year-olds than you might expect are drinking coffee, since most of them I meet have at least three of those symptoms.

Health Canada is also “developing a new labelling standard for all energy drinks sold in Canada,” presumably so as not to accidentally over-caffeinate so many 4-year-olds.

On the other hand, if you are a sleep-deprived and responsible adult, Health Canada would like to offer you some new options.  As they put it:  “Health Canada has authorized broader use of caffeine as a food additive from cola-type beverages to all carbonated soft drinks,” which is already the case in the U.S. and the EU. However, to help you keep your intake moderate, they are also “urging manufacturers to voluntarily identify on product labels the total caffeine contained in a product.” … because with that information in hand, everyone will gravitate to the drinks that disclose low amounts of caffeine. Right? Don’t blow your 400mg all at once, people.

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Image from Wikimedia Commons from user Can’t sleep, clown will eat me, under the Creative Commons Attribution ShareAlike 3.0 License.

Monday Biotech Deal Review: March 22, 2010

Bought deals are all the rage this week, with BioExx and Osta Biotechnologies both heading in that direction.  Also, everywhere we look, warrants are being exercised and debentures are being converted. We even noted the green shoots of a new Canadian listed biotech company poking through the ground via a CPC transaction.  Is there a Spring thaw in Canada’s biotech capital markets?  Read more of this post

This Week in the Twitterverse

Here are some good tidbits to catch up on over the weekend in case you missed them the first time around on @crossborderbio:

Friday Science Review: March 19, 2010

Biotech Trends Update: A Personalized Critique of Comparative Effectiveness Misses the Mark

As the U.S. and Canada move to invest and rely more on comparative effectiveness research (CER), lack of personalization has been the loudest and most frequent objection.  That is why we have been following the interaction between comparative effectiveness and personalized medicine as a key industry trend.

Yesterday, an opinion piece in the WSJ by Leonard Zwelling, a professor of medicine and pharmacology at M.D. Anderson, came out strongly in opposition to CER.  Zwelling takes a number of swipes at CER, but most of the time he is focused on the inability of CER to personalize treatment — for a patient’s genes, age or preferences — in identifying a “best” treatment.  For example:

“If decisions based on CER inhibit the progress of personalized medicine—or in any way interfere with a meaningful interaction between doctor and patient to individually tailor the most appropriate therapy—no one is helped.”

Zwelling’s argument sets up more than a few straw men — that CER uses only retrospective data, that it will ignore qualify of life, and that treatment options change too quickly for CER to provide timely advice — but the main problem is that he assumes that CER and personalization are incompatible.

As this blog has noted on many occasions, CER is at its best when coupled with personalized medicine.  This post about KRAS genotyping is a great example.  This point is not lost on the Obama administration, which is aware of and sensitive to the need to account for personalized treatment in CER.  Zwelling himself opens with a quote from relevant legislation that says the current CER funding is supposed to find out

“what works best for which patient under what circumstances.”

The clause “for which patient” is a built-in acknowledgement of the importance of personalized approaches to CER. 

My bottom line: Both comparative effectiveness and personalized medicine are critical to medically effective and financially sustainable medical care and drug development.

Subsequent Entry Biologics (aka Biosimilars) get Final Health Canada Guidance, 6 Years of Data Exclusivity

Health Canada released the finalized version of its Guidance Document for “Subsequent Entry Biologics” (SEBs).  The final version is mostly the same as the draft guidance released last March, and actually comes after the approval of Canada’s first SEB last April.

SEBs are a class of drugs that the EU calls “biosimilars” and the U.S. calls “a class of biologics we may recognize one day if health reform passes”“follow-on biologics,” but the gist is that they are copycat versions of existing large-molecule drugs.  Because of their complexity, different versions of the same biologic cannot be characterized as identical.  Hence “similar”.

Regulators are seeking a balance with respect to how much biosimilars can rely on data from the original (“reference”) drug in applying for their own approval, and with respect to how long to protect the reference drug’s data.  Here are some highlights of Health Canada’s approach:

  • A full New Drug Submission required for SEBs, (not an abbreviated submission, as for small-moelcule generics).
  • The data exclusivity period — the time that must elapse before an SEB can use the data from the reference biologic’s application — is 6 years.
  • Studies comparing the reference biologic to the SEB must be conducted in a side-by-side format.

For more information, check out the Ogilvy Renault Pharma in Brief publication, or read the whole Guidance Document.

Deal Review is On Vacation

We’ll be back next week with a double dose of Canadian deal info, and regular posting should resume tomorrow.  Stay tuned.

This Week in the Twitterverse

Here are a few tidbits to catch up on over the weekend from  @crossborderbio.  Back to full capacity next week.

Friday Science Review: March 12, 2010

Good viruses, bad viruses, biomarkers and protein structures in this week’s research highlights…

Biomarker for Hodgkin’s Lymphoma Subset: Using a high-throughput genomic approach to associate gene expression profile with treatment outcomes for Hodgkin lymphoma, researchers identified an overexpression of genes typically expressed by macrophages in samples from patients who had experienced a relapse after treatment.  This was confirmed histologically by looking at stained tissue samples and tallying the number of macrophages – high numbers of macrophages are associated with treatment resistance in Hodgkin lymphoma.  About 25% of patients fall into this category where a biomarker test could shuttle them into a more aggressive or experimental treatment option and may prevent them from being exposed to the side effects of primary treatments that are likely to fail.  The study, led by B.C. Cancer Agency researcher Dr. Randy Gascoyne, is reported in The New England Journal of Medicine with an editorial that is touting this as the “breakthrough we have been looking for.”

Immune System Boost for HIV Patients:  A very important molecular discovery may give a boost to restoring immune function in HIV infected patients.  Renowned HIV scientist, Dr. Rafick-Pierre Sékaly, and his cross-border research teams at the Université de Montréal and Vaccine and Gene Therapy Institute of Florida identified that the protein PD-1 is up-regulated by the release of bacterial products from the gut.  Another factor, IL-10, is subsequently increased and together this is what shuts down the CD4+ T-cell immune system in HIV patients.  Therefore, the scientists suggest that new immunotherapies should aim to block PD-1 and IL-10 to help restore the debilitated immune system in HIV infected patients.  The research article appears in this week’s Nature Medicine.

Not All Viruses are Bad: The ubiquitous reovirus has oncolytic actions against different types of cancer when used as a therapeutic approach.  Now, prostate cancer may be added to the growing list of cancers, which includes ovarian, breast, pancreatic and gliomas, that may be treated with a reovirus based strategy.  In fact, the Calgary-based Oncolytics Biotech Inc. technology platform and pipeline are based on the reovirus and contributed to the prostate study.  In the prostate cancer clinical study, a viral concoction was injected into prostate cancer nodules and three weeks later, the prostates were resected.  There was evidence of cancer cell death and overall, the procedure was deemed safe with only mild side effects experienced by the patients.  The success of this pilot study should draw interest to expand the clinical trial novel treatment for prostate cancer.  Dr. Donald Morris led the research and medical team at the University of Calgary and reports the study in Cancer Research.

Having Fun with Names: This study provides more molecular and structural details than you probably need to know but I want to point out the cool protein domain name: Really Interesting New Gene or RING domain.  It is an important component of a group of proteins that regulate the potent oncogene called eIF4E (eukaryotic translation initiation factor).  The details of the Université de Montréal study are described in the Proceedings of the National Academy of Sciences.

Pump It Up: Another structural study that I want to point out because of its importance: the V-ATPase.  This is a membrane proton pump that controls the acidity of the cellular environment and can play critical roles for the cell in promoting a diseased state.  SickKids Research Instiute scientist, Dr. John Rubinstein explains “In some types of cancer, the pumps are “hijacked” to acidify the external environment of tumours, allowing the cancer to invade surrounding tissues and spread throughout the body.  The cells that take up bone minerals also use V-ATPases to dissolve bone, a process that must be limited in treating osteoporosis.”  More details on the study are found here in the Proceedings of the National Academy of Sciences.

Paradoxical Signalling Interaction: The phosphatidylinositol 3-kinase (PI3K) signaling pathway is a well studied signaling module and its aberrant activity is implicated in a number of diseases including cancer.  It is also the target of a handful of therapeutic drugs currently under study or in trials.  However, the new study led by Dr. Deborah Anderson at the Saskatchewan Cancer Agency throws a new twist into the pathway.  Their data identifies a paradoxical interaction between the p85 regulatory subunit of PI3K and the PTEN phosphatase enzyme since these two enzymes have opposing actions.  This is certainly food for thought for researchers in this field to rethink their signalling models.  A recent news article headlines this study as the “on switch” for cancer cell growth but it is really a much more complicated puzzle than that.  The data is presented in the early edition of the Proceedings of the National Academy of Sciences.

Monday Biotech Deal Review: March 8, 2010

A busy week in Canadian deals, with Paladin Labs in a global transaction with SpePharm; M&A activity from therapeutics and consulting companies; the last of the SIFT/SR&ED deals; over $20 million of new offerings from BioSign, Bradmer and YM; government funding for Medicago and Isotechnika; a new standby equity deal from Yorkville for Allon; and the closing of the first deal of the rest of BioMS’ new life. Read more of this post

This Week in the Twitterverse: Weekend Reading

This week was full of news and analysis from the federal budget, so check that out by clicking here.

When you’re done with that, here are some other good tidbits to catch up on over the weekend in case you missed them the first time around on @crossborderbio:

Reactions to Canada’s 2010 Federal Budget

Reaction in the biotech and innovation community to the 2010 budget was generally positive, since they (we) got something in a year when most groups got nothing.  As Rob Annan put it over at Researcher Forum:

“What a difference a year makes… Funding increases, though relatively small, are made more significant by the context of spending restraint evidenced elsewhere in the budget.”

There was also much celebration of the demise of Section 116, including from BIOTECanada (pdf), and the CVCA, both of which had recommended the change, and from Communitech, the organization that represents Waterloo Region tech companies.  Mark McQueen over at Wellington Capital blasphemously refuses to hail the event as Our Salvation, pointing out that (1) there has been a lot of investment by U.S. VCs even with 116 in place, (2) U.S. VCs aren’t having a great year either, and (3) those that are may not be as excited as we hope about early-stage Canadian deals.

Directly funded organizations wrote prompt thank-you notes:

  • TRIUMF, slated to receive $222 million over the next 5 years for its work on particle and nuclear physics, described the budget as a “firm commitment to science & technology.”
  • The Canadian Youth Business Foundation (CYBF), seeing its $10 million in funding, characterized the move as an “investment in young entrepreneurs.”

Others, perhaps encouraged by this year’s $75 million allocated to Genome Canada following last year’s kerfuffle, have been quick to point out other flaws they perceive in the budget as well:

Friday Science Review: March 5, 2010

Missing Enzyme Improves Metabolism: Mice lacking the TGH gene for the enzyme triacylglycerol hydrolase showed an unexpected dramatic improvement in their metabolic profile.  TGH is an enzyme that helps to release stored fat or triglycerides into the blood stream where it circulates to be used as an energy source or, if in excess, ends up being stored at tissue sites that do not normally store fat depots.  This contributes to cardiovascular diseases, diabetes, and liver dysfunction.  Researchers were correct in hypothesizing that deleting TGH would prevent this from happening but they were surprised to discover global metabolic benefits.  These mice not only have better lipid profiles but they also burn more fat and are also more physically active compared to mice that have the enzyme.  Additional research is required but this study demonstrates the potential of TGH as a therapeutic target for lowering blood lipid levels and likely other related benefits in humans.  The study was led Dr. Richard Lehner and his team at the University of Alberta and is published in this month’s issue of Cell Metabolism.

Gene Duplication Causes Bleeding Disorder: The genetic cause of the rare blood clotting disorder, Quebec Platelet Disorder (QPD) was recently discovered by researchers at McMaster University.  QPD is caused by a mutation involving an extra copy of the gene encoding the enzyme urokinase plasminogen activator (uPA), resulting in an overproduction of the enzyme that accelerates blood clot breakdown.  This transforms blood platelets from clot forming to clot busters.   A genetic test for the mutation, the first gene duplication mutation causing a bleeding disorder, is in development and will be an invaluable diagnostic tool.  Dr. Catherine Hayward led the discovery team and their study is published in the journal Blood.

Blocking Metabolic Genes: Prox1 is the newest player in the control of our body’s energy balance.  It binds to and inhibits two well known transcription factors for metabolic genes, estrogen-related receptor alpha (ERRalpha) and proliferator-activated receptor gamma coactivator-1alpha (PGC-1alpha).  These are significant findings along the long road to understanding the complex regulation and homeostasis of our metabolic system.  Dr. Vincent Giguère and his team at McGill University’s new Goodman Cancer Centre describe their work in the latest issue of Genes and Development.

Molecular Clues to Chemotherapy Resistance: Scientists at The Campbell Family Institute for Breast Cancer Research knocked out a specific isoform of the p73 protein family, DeltaNp73, to try to delineate the specific function of this protein.  They discovered a novel function whereby the DeltaNp73 protein targets the DNA damage site and partners with another protein, 53BP1, to block the subsequent DNA damage molecular response pathway involving p53.  This has significance in explaining chemotherapy resistance in human tumors with high levels of DeltaNp73 expression.  Dr. Tak Mak reports the study in Genes and Development.

More Highlights in Canada’s 2010 Federal Budget For Biotech, Venture Capital and Innovation Groups

My first take on the most important bits for Canadian biotech companies and investors:

1) Looks like Section 116 will stay dead this time!

2) Better for research funding, with Genome Canada, NSERC, CIHR, SSHRC coming out much better than last year.  Grease?  Meet squeaky wheel.

3) Is this the end of the SIFT/SR&ED dealsLooks that way: Yes. Right now!

“Ensure that income trust conversions into corporations are subject to the same loss utilization rules that currently apply to similar transactions involving only corporations.”

Right now = today…

“[T]hese amendments apply to transactions undertaken after 4:00 p.m. Eastern Standard Time on March 4, 2010, other than transactions that the parties are obligated to complete pursuant to the terms of an agreement in writing between the parties entered into before that time.”

4) The new SMB Innovation Commercialization Program — looks like a made-here-bought-here initiative:

“a two-year pilot initiative through which federal departments and agencies will adopt and demonstrate the use of innovative prototype products and technologies developed by small and medium-sized businesses. Budget 2010 provides $40 million over two years to support up to 20 demonstration projects. To help small and medium-sized businesses take advantage of this initiative, the Government will organize regional trade shows so that companies can showcase their innovative concepts to federal departments. Further details regarding this initiative will be announced later in the spring of 2010.”

5) Some administrative improvements to SR&ED credits:

“In addition, as announced in January 2010, the CRA will begin to report quarterly, through its website, on the time it takes to review an SR&ED claim from start to finish. A new manual for CRA reviewers will become effective on April 1, 2010. This manual will emphasize how the CRA will work closely with claimants so that they may better understand the SR&ED program requirements and process.”

Canada Federal Budget 2010: Goodbye Section 116

As predicted by Mark McQueen among others:

Section 116: Eliminating tax reporting under section 116 of the Income Tax Act for investments such as those by non-resident venture capital funds in a typical Canadian high-technology firm.

Specifically:

“narrowing the definition of taxable Canadian property, thereby eliminating the need for tax reporting under section 116 of the ITA for many investments.”

With a shout-out to the CVCA (kudos)!

“The Canadian Venture Capital Association has indicated, in making representations for changes of this nature, that “…a broader exemption…would make Canada a more attractive destination for equity investments by non-residents and, in particular, venture capital and private equity funds.”

Here’s the stake:

“[T]he definition of taxable Canadian property in the Income Tax Act [will] be amended to exclude shares of corporations, and certain other interests, that do not derive their value principally from real or immovable property situated in Canada… This measure will eliminate section 116 compliance obligations for these types of properties.”

Deloitte has a bulletin out that notes the changes and puts it in the context of what we will now call the “bad old days.”

Highlights of Canada’s 2010 Federal Budget For Biotech, Venture Capital and Innovation

 Here’s the highlight reel.  More details and analysis here.

  1. $45 million over five years to establish a post-doctoral fellowship program.
  2. $222 million in funding over five years for TRIUMF, Canada’s premier national laboratory for nuclear and particle physics research.
  3. Additional $32 million per year for Canada’s research granting councils, plus an additional $8 million per year to the Indirect Costs of Research Program.
  4. Providing Genome Canada with an additional $75 million for genomics research.
  5. Doubling the budget of the College and Community Innovation Program with an additional $15 million per year.
  6. $135 million over two years to the National Research Council Canada’s regional innovation clusters program.
  7. $48 million over two years for research, development and application of medical isotopes.
  8. $497 million over five years to develop the RADARSAT Constellation Mission.
  9. Launching a new Small and Medium-sized Enterprise Innovation Commercialization Program with $40 million over two years.
  10. Renewing and making ongoing $49 million in annual funding for the regional development agencies to support innovation across Canada.
  11. Improving Canada’s system of international taxation to facilitate investment, cut red tape, and streamline the compliance process associated with the taxation of cross-border activity.

Closer look at #9 coming up…  Is #11 the end of 116?  Checking…

The full budget homepage is here: http://www.budget.gc.ca/2010/home-accueil-eng.html

X-Prize Ventures Further Into Biology: Millions May Be Up for Grabs for New Organs from Stem Cells and New Doctors from Software

A story in FierceBiotech reports that the X Prize Foundation, most famous for incentivizing Burt Rutan’s SpaceShipOne, is considering a “stem cell” prize that would award $10 million to

“the first team to be able to create a lung, liver, or heart from the stem cell of a patient who is terminal, have that new organ transplanted into the patient and have them live for a year.”

This is not the Foundation’s first venture into biology.  The Archon X Prize for Genomics — still likely out of reach of current technology — will also award $10 million for

“the first Team that can build a device and use it to sequence 100 human genomes within 10 days or less… at a recurring cost of no more than $10,000 per genome.”

Nor will the stem cell prize be the last biology X Prize.  In the CNet interview noted by FierceBiotech, Foundation Chairman and CEO Peter Diamandis is enthusiastic about an “an artificial intelligence physician,” that can equal or best the diagnostic skills of a panel of 10 doctors.

Prizes are a valid alternative to patents as a method of incentivizing innovation, are widely used in IT, and have a long history of successes beginning with navigation in the 1700’s and food canning in the 1800’s. 

Although prizes seem to risk market distortion and intentionally duplicative efforts, the goals set out by the X Prize foundation — full-genome sequencing, new organs from our own cells, and accurate automated diagnoses — are as much the stuff of dreams as commercial space travel and cars that drive themselves.  These big dreams create beneficial externalities, like publicity for the ideas and fame for the winners, that encourage more students to take up similar challenges.

Biotech Trends Update — IP Constituencies: India’s Courts Nix Drug Patents while India Courts Innovation

world_map_2002This blog has been tracking increasing innovative activity in India and China as part of our Biotech Trends series, the idea being that as innovative activity increases, the host countries will take a kinder view of property rights.

The trend toward innovation in India is undeniable — as the WSJ’s Venture Capital Blog noted recently, India even has its own version of  Y Combinator, an incubator/early-stage fund.  India also has many notable successes in pharma and biotech innovation, including Jubilant and Glenmark.

Yet, as Ronald Cass notes in a WSJ editorial, the groundswell of Indian innovation hasn’t yet worked its way up through the legal system.  Citing a Delhi High Court decision that allowed generic copies of Merck’s cancer drug Nexavar, Cass infers that India does not “want drug innovation.”

I disagree.  India does want drug innovation.  Like everyone else, India wants lucrative knowledge economy jobs.  But even with a broad desire for policy change, turning a judicial ship is a slow process in a common law jurisdiction. 

My bottom line: It will likely take time, and may take facts more sympathetic than Merck’s, to break with precedent and habit and to develop a more innovation-friendly jurisprudence in India.  Make no mistake, though, that’s the direction India is heading.  Patience, but not complacence, is the order of the day.

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Monday Biotech Deal Review: March 1, 2010

This week saw a lot of offerings move forward, in the shadow of Anthera’s shrunken and postponed IPO, but the news wasn’t all good in Canada either. ConjuChem filed for restructuring, and other companies are still holding on by their teeth. See who’s who after the jump

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