The Cross-Border Biotech Blog

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

Monthly Archives: May 2011

Monday Biotech Deal Review: May 30, 2011

Welcome to your Monday Biotech Deal Review for Monday May 30, 2011.  This week features summaries of the previous two weeks’ events in the biotech space, following the May 24 holiday weekend.  There hasn’t been too much activity, however Valeant is on the move, acquiring AB Sanitas for EUR 314M in cash.  Read on to learn more.   Read more of this post

Biotech Trends Update — IP Constituencies: Innovator-Generic Mixing Continues in Canada

As traditional pharma companies continue to diversify their revenue sources in the face of their pending patent cliffs, we have followed their entry into and expansion of their generics business lines. We have also noted activity in the reverse – generics companies developing novel products to build their margins and take advantage of their production capacity and expertise.

This week saw a Canadian example of the latter trend in Pharmascience’s purchase of Aegera for undisclosed terms. Pharmascience is a Montreal-based generics company and Aegera is a cancer-focused clinical stage company that has been backed by a raft of mostly Canadian venture capital outfits.

Canada’s domestic “generics” companies are now almost uniformly mixed generic / innovator businesses. Apotex carries out R&D through its ApoPharma subsidiary and has at least one novel product on the market. Valeant (nee Biovail) has a number of novel products in its pipeline as well. This should be particularly noteworthy in the innovation and economic development communities given recent decreases in Canadian R&D activity by global innovator pharma companies.

Friday Science Review: May 27, 2011

Functioning Neurons from Canine Embryonic Stem Cells

University of Guelph ♦ University of Toronto ♦ Published in PLoS ONE, May 17, 2011

Scientists have successfully created functioning neural cells from canine embryonic stem cells (ESCs). The protocol used was similar to those used to create neural stem cells from human ESCs. In order to produce neural cells, ESCs were subjected to treatment with epidermal growth factor (EGF) or the signaling molecule Noggin. In both cases, treatment led to the formation of neural stem/progenitor cells expressing the neural lineage marker SOX-2. After priming these neural stem cells, continuing differentiation in the presence of specific growth factors at low dose led to the formation of a diversity of different canine neural cells including oligodendrocytes and astrocytes.

In order to test the functional maturity of the ESC-derived neural cells, researchers grew them along with primary canine fetal cells and astrocytes and then took patch-clamp recordings; a method that can measure action potentials as they fire down the length of the neuron. These recordings showed that the stem cell-derived neurons received inhibitory and excitatory synaptic inputs similar to those observed in functioning neural cells. This protocol provides a necessary proof-of-concept and suggests that the canine could potentially be used as a clinically relevant animal model to improve the quality of data gathered in preclinical studies of stem cell transplantation.

The Protein Localizome

University of British Columbia ♦ Published in PLoS ONE, May 17, 2011

In a particularly eloquent study, researchers have exploited a specific cell type in the nematode worm, C. elegans, in order to begin elucidating the cellular location of proteins. Studies of protein localization are of great value to the scientific community as localization and function are often associated. The large size of the body wall muscle cells in C. elegans and the degree of order exhibited by the sarcomeres within, provide an excellent stage for experimentation and discovery of protein position.

In the beginning of what could become a complete protein “localizome”, researchers unveiled the location of 227 proteins. They achieved this by tagging proteins with green flourescent protein, a molecule that can be observed using flourescence microscopy. The localizations of proteins investigated, orthologs and homologs of human proteins, were largely unknown as no data was available on their precise positioning in the cell. Researchers observed 14 sub-cellular localization patterns in addition to discrete localizations. It is expected that this data will be useful in understanding muscle sarcomere assembly and function, and be applicable in the development of therapeutics for skeletal muscle diseases in humans.

Ultra-Sensitive Detection of Infectious Agents in Human Tissue

Genome Sciences Centre ♦ University of British Columbia ♦ Published in PLoS ONE, May 13, 2011

With the advent of massively parallel sequencing technology it is possible to detect as little as a few RNA transcripts in a sample of human tissue. This technology can analyze an entire transcriptome and pick out the needles in the haystack, so to speak, by identifying low abundance transcripts. In this work researchers describe an approach to troll large sequence data sets for microbial sequences. The impressive part is the sensitivity of the platform. Researchers sequenced RNA libraries containing decreasing quantities of an RNA-virus and found that viral transcripts could be detected at frequencies of less than one in a million. When as much as 20% of cancers are caused by infectious agents, a technology of this nature could have great utility as a diagnostic platform and is certainly more efficient than the traditional culture-based method for identifying infection.

Friday Science Review: May 20, 2011

Genetic Architecture: How a Cell is Wired

University of Toronto ♦ National Institute of Health ♦ Albert Einstein College of Medicine

Published in Nature Biotechnology, May 15, 2011

A great deal of effort has been invested in elucidating the physical interactions of proteins in order to understand their functional relationships. The research community is also trying to reveal the functional connections between genes. Very few genes that display genetic interaction actually physically interact however, so mapping out the architecture of genetic interactions and how these fit into signaling pathways must be done without using physical association. Researchers in Toronto have used a method known as dosage suppression to plot hundreds of genetic interactions in yeast and plotted these together to create a global genetic interaction network map that can be leveraged to understand how the cell is wired on a high level.

Dosage suppression is a form of genetic interaction that occurs when over-production of one gene compensates for another gene that has been silenced due to mutation. In this study gene expression was bolstered through the ectopic expression of yeast genes. In certain cases, this up-regulation can lead to the rescue of a mutant gene, at which point a genetic interaction or ‘edge’ is established. Researchers collected dosage suppression genetic interactions for 424 essential genes that were annotated in the Saccharomyces Genome Database. These interactions gave rise to a network containing 768 genes with 1,293 genetic interactions. The network was visualized using a program known as Cytoscape in order to place genes with common dosage suppression in distinct clusters. A clustering analysis identified nine clusters, each composed of 30 or more genes corresponding to specific biological processes. Researchers further analyzed the network to illustrate how it can be used to provide mechanistic insight into pathways and complexes, and showed that PKA signaling is linked with kinetochore function.

Dosage suppression is relevant to the development of cancer as gene amplification and gain-of-function mutations are associated with up-regulated gene activity, disease initiation, and progression.

Combination Treatment Cures Breast Cancer in 40% of HER-2+ Transgenic Mice

Saskatchewan Cancer Agency ♦ University of Saskatchewan

Published in Cancer Gene Therapy (npg), May 13, 2011

Human epidermal growth factor receptor (HER-2) is over-expressed in roughly 20% of breast cancer incidents. In some cases of HER-2-positive breast cancer, the humanized anti-HER-2 antibody Trastuzumab (Herceptin) is used for therapy. Unfortunately, most patients that receive the antibody develop resistance to it in time. As a result, the research community has been looking for alternative strategies to target HER-2. Researchers in Saskatchewan have recently released some very impressive results from an animal study wherein mice were treated with an adenovirus-based vaccine.

Adenoviruses can be engineered to express any number of transgenic proteins that elicit potent transgene-product specific CD8+ T-cell responses following injection into the body. In this study researchers constructed a HER-2-expressing adenovirus that was capable of inducing a significant reduction in breast carcinogenesis in transgenic mice. It was noted, however, that the vaccination had to be given prior to tumour formation. Mice that had pre-existing tumours did not benefit from the vaccine. Trastuzumab, while being highly effective at stunting the growth of early-stage tumours, has little to no effect on larger, more mature, tumours. After combining Trastuzumab therapy with the recombinant adenovirus vaccine, researchers realized they had stumbled upon a rather effective treatment. Mice, with well-established tumours, receiving combination therapy did much better than those receiving either monotherapy; 4 out of 10 mice treated were entirely cured of the condition, while there was significant delay in death of the remaining 6 tumour-bearing mice.

These findings suggest that a combinatorial immunotherapy of a HER-2 expressing adenovirus and Trastuzumab could be a new therapeutic approach to the treatment of advanced HER-2 positive breast cancer.

Valuation and other Biotech Mysteries Part 2: Some Basic Mathematics

[Please note that this blog series has not been pre-written. The subject of the next post in the series will be determined by where the current post leaves off and any questions that readers send me or leave as comments on the posts.]

When you create a valuation spreadsheet, you are plugging in numbers representing revenues and expenses which are going to occur over several years. When you do the basic addition and subtraction in this spreadsheet, you hopefully end up with a positive number because, if the number is negative, you are valuing something that is not economically viable.

However, we all know that a dollar received now is worth more than a dollar received ten years from now. This is extremely relevant for a biotech company because most expenses occur before any of the revenues. You need to adjust all future revenues and expenses so they are calculated in current dollars and the sum is called the ‘net present value’ or NPV. The key factor in this calculation is the discount rate or ‘risk-free cost of capital’. At this time, I would use a discount rate of 8% in doing an NPV analysis. You can get more detailed information from statistics textbooks or entering NPV in your web browser or spreadsheet help function.

While we all generally accept that a current dollar is worth more than a future dollar, you actually have to do the calculation to see the impact of time on the value of your money. The table below shows the NPV of a guaranteed $100 payment received now or from one to ten years from now, using discount rates of 8% and 20%.


Discount Rate





































I used the term ‘risk-free’ above because it does not take into account the risks associated with biotech, which can be large and numerous. There is a continuous need to understand and balance the risks and potential rewards. In the next few parts of this series, we will continue looking at valuation of the potential rewards before we move onto looking at the risk side of the equation.

Monday Biotech Deal Review: May 16, 2011

Welcome to your Monday Biotech Deal Review for May 16, 2011. Angiotech has completed its second amended and restated plan of compromise or arrangement, cleaning up USD$250M in debt in respect of 7.75% senior subordinated notes, which are now cancelled, and has also resulted in the restructuring of $325M of existing floating rate notes through an exchange transaction.  There was also interesting licensing activity, notably involving Paladin Labs.  Lastly, Arch Biopartners announced their development achievement of a “bio-steel” material that is approximately 40% harder and 50% less corrosive than regular stainless steel.  Read on to learn more.   Read more of this post

Friday Science Review: May 13, 2011

Environmental Stimuli Enhance Visual System Function

McGill University ♦ Published in Neuron (Cell Press), May 12, 2011

The developing nervous system utilizes sensory inputs to lay down the correct neural circuits, strengthening and weakening specific connections where necessary. Sensory cues from the external environment can play a role in neural development as well.  A new study from McGill illustrates that acute environmental stimuli can have strong and long-lasting effects on both synaptic plasticity and functional refinement during development. Using the Xenopus tadpole as a model to investigate the matter, researchers analyzed the effects that 20 minutes of visual stimulation had on the development of the visual system. They found that visual stimulation increased transcription of brain-derived neurotrophic factor (BDNF), a protein that is involved in refining the nervous system by strengthening appropriate synaptic connections and eliminating those that are inappropriate. The effects of visual conditioning went beyond increasing expression of BDNF in the short-term, it also led to improved visual acuity following the completion of development. Animals that were conditioned with visual stimulation and then returned to their normal rearing environment had improved visual system function, as measured by their overall visual acuity.

Array-based Platforms for CNV Analysis: Establishing a Benchmark

Hospital for Sick Children ♦ University of Toronto ♦ Harvard Medical School ♦ Sanger Institute ♦ Uppsala University ♦ University College of Medicine

Published in Nature Biotechnology, May 8, 2011

The largest component of genomic variation within humans lies in copy number variants (CNVs), segments of DNA that duplicate causing expanded regions in the genome. Differences in this variable genetic content between individuals in part explains the differences that humans have in their susceptibility to disease. The detection of CNVs has been playing an ever-more important role in cancer research, clinical diagnostics, and genome-wide association studies. To date, the scientific community has discovered over 15,000 CNVs in the human genome which have been logged in the Database of Genomic Variants. Despite the known importance that CNVs play in disease pathology, there remain several factors related to CNV detection platforms that have hampered the use of this data in research and clinical settings.

The two primary platforms for CNV detection are comparative genomic hybridization arrays and single nucleotide polymorphism arrays, a number of which have been released over the last several years with a trend toward higher resolution. The absence of standardization in CNV reporting and reference samples makes comparing platforms exceedingly difficult, which is exacerbated by a range of platforms that have different genome coverage and resolution. Another complication are the algorithms used to “call”  or identify CNVs, which themselves can be quite different. There has obviously been a need for a robust comparability study between today’s current platforms, and this recent study is the first that establishes a benchmark for these platforms to live up to.  Researchers carried out a comprehensive evaluation of 11 CNV detection platforms, looking at data quality, CNV calling, reproducibility, concordance across array platforms and laboratory sites, amongst other things.

Each array was used to analyze six well-characterized control samples in triplicate. As would be expected newer arrays outperformed older arrays when it came to the number of CNV calls and the reproducibility of calls; likely due to their higher resolution and the performance of their probes. An important finding to drive home is that the choice of analysis tool can be just as important as the choice of microarray for accurate CNV detection. When using identical raw data, different algorithms gave rise to considerably different call numbers of varying quality. Researchers suggest that customized algorithms be made for individual platforms and specific data types to reduce this variation. Overall, this assessment of array-based platforms should stress the importance of experimental design in CNV discovery and association studies, to ensure that the reliability and consistency of CNV detection platforms is upheld for their future use in the clinic. The authors of this work have made all of their raw data available to the scientific community providing an extraordinarily robust reference set for future analysis.

BIO World Congress on Industrial Biotechnology & Bioprocessing — Day 1 Review

We attended several sessions yesterday and learned about biofuels and bioproducts investment; bioingredients for food and nutrition; and strategies for profitable commercialization of renewable chemicals, among others.

One of the highlights was the lunch plenary, where panelists Brian J.M. Ames (DOW Chemical),  Balu Sarma (Praj Matrix), Feike Sijbesma (DSM) and Peter Williams (INEOS Technologies) addressed a panel discussion entitled “A Global View from Corporate Leaders”.

In an exchange that points to the reasons over 1000 people now attend the conference, the moderator noted that few large chemical companies have invested in industrial biotech, and asked whether more will begin to do so, and whether early adopters will get a lasting advantage…

Peter Williams’ view was that other large chemical companies will move into industrial biotech and that early entrants won’t get a lasting advantage over well-funded followers. He expects a big focus on industrial biotech in China.

Brian Ames agrees that we are at the beginning of the adoption cycle and points to Dupont’s Danisco bid as a signal. He is confident that cost-driven decisions will continue to be key.

Balu Sarma agrees as well, and sees good news for young industrial biotechnology companies as he expects that large chemical companies will rely on partners to develop their own capabilities.

Fieke Sijbesma followed that comment noting that there has never been a major technological shift without the emergence of brand-new companies.

Everyone in the audience is trying to be, fund, or partner with the giants in waiting that are sure to emerge over the next 10 years in this industry. Stay tuned…

Valuation and Other Biotech Mysteries – Part 1

I have been doing valuations in various forms since 1981 when I started my MBA at York University. There are major differences between those initial valuations and the ones that I have been doing as a biotech stock analyst over much of the last 20 years. Those initial valuations were for assets or profitable companies, much easier than valuing biotech companies with products which may never get to market and for which potential peak sales are ten or more years away. There are some advantages to doing valuations now – the amount of easily available information and the ability to rapidly create and modify financial models.

When I taught the valuation section of a licensing course, I ranked the importance of three aspects of valuation as follows.

  • The least important aspect of the valuation is the spreadsheet. Almost everybody has access to a computer and can create a spreadsheet, plug in some numbers and get a valuation of that company using standard formulae.
  • The assumptions which are used to generate the input numbers for the spreadsheet are more important because poor or flawed assumptions on factors such as success rates, market potential and event timing will result in poor quality valuations.
  • The most important aspect of valuations is how you use them to make decisions. Decisions in which valuations are important include the structure of licensing deals and the prices paid to acquire products or companies. Valuations can sometimes be useful in making decisions about biotech stock purchases or sales.

This series of articles is going to focus on information and questions. Information shapes assumptions, and better assumptions lead to better financial models and hopefully better decisions. There are numerous information sources, including many free and easily accessible databases. Asking the right questions allows you to obtain useful information and also to see what information is missing.

This series is titled ‘Valuation and other biotech mysteries’ because many people view biotech as a mysterious black box into which you throw a lot of money, wait a decade and see whether any products or returns on your investment emerge from the black box. Asking the right questions and accessing useful information removes some of the mystery and allows you to understand and balance, but not eliminate, the risks of the development process for drugs, devices and diagnostics.

When you create a valuation spreadsheet, the column headings usually define the period over which the valuation is being calculated. The first important question is ‘what events will occur and when will they likely be happening during his period?’ The next several parts of this series will look at the events which occur during the product development and regulatory approval processes.

BIO World Congress on Industrial Biotechnology & Bioprocessing

This year’s World Congress on Industrial Biotechnology starts today in Toronto.

A report from The Milken Institute released into the lead-up before the conference includes some interesting data:

  • Industrial biotechnology received $1.48 billion in venture investment from 2004 to 2009, compared to $1.99 billion for biofuels and $17.48 billion for therapeutic biotech plays.
  • Up to 78% of industrial biotech ventures cite “operational income” as a funding source — an impressive number of revenue-generating companies.
  • Some notable joint ventures include Metabolix joining with Archer Daniels Midland to form Telles, a plastic biorefinery; Cargill and Dow partnering on Natureworks; and DuPont’s pending offer for Danisco.

My colleague Lucas Thacker and I will be providing coverage of the conference over the next few days, so stay tuned for posts and for tweets @crossborderbio or under #WCIBB and let us know if you’re at the conference…

Monday Biotech Deal Review: May 9, 2011

Welcome to your Monday Biotech Deal Review for May 9, 2011.  Biotech activity was a bit slow last week.  Of note however is the minority shareholder oppression litigation launched against WEX Pharmaceuticals in the wake of the recent takeover by Pharmagesic (Holdings) Inc.  Read on to learn more.   Read more of this post

Friday Science Review: May 6, 2011

Heterochromatin Structures Disperse as Somatic Cells Move to Pluripotency

University of Toronto ♦ Hospital for Sick Children ♦ Ontario Human iPS Cell Facility ♦ Sprott Centre for Stem Cell Research

Published in EMBO Journal, May 4, 2011

Cellular reprogramming of adult cells is achieved through the introduction of genetic factors that make widespread changes to the genome. A hallmark of this process is the remodeling of the epigenome which establishes repressive epigenetic marks at specific locations of genetic code. The presence of repressive marks prevents the transcription of DNA, silencing genes, while their absence leaves genes free for transcription and expression at the protein level. Reprogramming occurs in gradual steps, allowing for both partially and fully reprogrammed states. Partially reprogrammed cells are pseudo-stem cells, possessing some of the qualities of true stem cells, but not all. The exact nature of the structural changes that occur during reprogramming are largely unknown.

A recent study used spectroscopic imaging to identify the changes that occur in heterochromatin during remodeling of the epigenome. Researchers found that heterochromatin was densely packed in the centre of the chromosome in somatic cells and partially reprogrammed iPS cells. On the contrary, there were no clearly defined boundaries of heterochromatin in embryonic stem cells or fully reprogrammed cells. Instead, heterochromatin was structured irregularly into 10nm fibres dispersed across the chromosome. To determine whether chromatin reorganization was a characteristic of achieving the fully reprogrammed state researchers brought partially reprogrammed  iPS cells to the fully reprogrammed state using a a cocktail of cell signaling inhibitors. The results showed that reorganization does indeed occur in the latter portion of the reprogramming process.

Enzymatic Modification of Glycoproteins in the Lab

University of Guelph ♦ Published in PNAS, May 3, 2011

Proteins can be powerful therapeutics for the treatment of human disease, however, their use is often hampered by processes within the body that reduce their half-lives and circulation time. Instability, break down by enzymes, neutralization by antibodies, and clearance from the bloodstream are known factors that contribute to reduced half-life. One method that can significantly increase the circulation time of a therapeutic protein, and its resulting effect on the body, is the addition of modifiers that make proteins just a little more rugged. Two such modifiers are polyethylene glycol (PEG), and polysialic acid (PSA).

PSA is biodegradable, and unlike PEG, it is non-immunogenic; the development of antibodies against PEGylated therapeutic proteins has raised some concerns in the scientific community. As a result, PSA is an attractive modifier for future therapies. Although PSA has been successfully added to proteins in previous studies by chemical means, this recent study from the University of Guelph marks the first time PSA has been added to specific sites on therapeutic proteins in vitro, using enzymes.

To accomplish this task researchers utilized two transferase enzymes, a -sialtransferase derived from Campylobacter jejuni and a -polysialtransferase derived from Neisseria meningitidis. In order to prove that the enzymatic approach works, two different human therapeutic proteins were subject to treatment: alpha-1-antitrypsin (A1AT, used to prevent uncontrolled tissue breakdown) and factor IX (used to treat hemophilia B). The experiment was a success and both proteins were modified as expected. Researchers took a closer look at A1AT, and the effect that polysialylation had on its activity and stability; their findings were positive. Polysialylation did not affect A1AT’s in vitro inhibition of human neutrophil elastase. After injecting modified A1AT into mice, its pharmacokinetic profile was significantly improved.

Monday Biotech Deal Review: May 2, 2011

Welcome to your Monday Biotech Deal Review for May 2, 2011.  This review is a double feature from last week’s Easter break.  Plenty happened in the interim, with Angiotech developments, private placements, licensing and other interesting corporate transactions and announcements.  Read on to learn more.  Read more of this post


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