University of Ottawa ♦ Ottawa Hospital Research Institute ♦ Ontario Cancer Institute ♦ University of Toronto ♦ University of Otago

Published in Molecular Therapy (npg), January 24, 2012

Oncolytic viruses were originally engineered to impose direct damage to tumour cells through infection, replication, and subsequent destruction of cancer cells via cell rupture. Many of today’s oncolytic viruses aim to do this, however it has become apparent that ‘next generation’ oncolytic viruses, those with the greatest efficacy, will be the viruses that not only destroy cancer cells physically but stimulate a strong innate immune response against cancer cells to continue the onslaught following initial infection.

This concept of inducing immune response is not novel. By their nature, oncolytic viruses offer the opportunity to deliver therapeutic genes at the time of infection. Indeed, previous studies have shown that viruses can be engineered to deliver cytokine genes into tumour cells. These cancerous cells then act as factories creating a protein product that leads to their own immune destruction. Suicide.

But researchers have now discovered that it may not be necessary to engineer viruses to do this. Certain viruses are capable of generating such an immune response simply through the presence of the viral particle itself. One example of such a virus is Parapoxvirus ovis, or ORFV. Researchers at the University of Ottawa found that injecting the virus into mice led to a significant upregulation of T cell response, including both CD4+ and CD8+, and an accumulation of B cells, natural killer cells, and various cytokines with anti-tumoural activity.

But there’s more to the story. ORFV infection does not lead to disease in animals, making it an excellent candidate for an oncolytic therapeutic. The real beauty though — the differentiative aspect of this virus — is that ORFV, even in the presence of antibody against the virus, continues to reinfect cancer cells. Animals seem to have a very short-lived immunity against the virus, allowing for an attenuated therapeutic activity unlike any found so far in this field.

Investment

PharmaGap Inc. (TSXV: GAP) has completed a $231,000 private offering of 3,300,000 ($0.07) equity units, each comprised of one common share and one (3-year, $0.10) warrant. In connection with this closing, $18,480 in cash fees and 264,000 broker warrants will be paid to Northern Securities Inc.  Broker warrants are issued on the same terms and conditions as the warrants included in the Units.

Resverlogix Corp. (TSX:RVX) has entered into an equity distribution agreement with JonesTrading Canada Inc., as agent, to sell up to 15 million common shares at Resverlogix’s discretion at the market prices prevailing at the time of the sales, without discount. Pursuant to the agreement, Resverlogix also appointed JonesTrading Institutional Services LLC and MLV & Co LLC to sell up to an additional 10 million common shares of Resverlogix, solely at Resverlogix’s discretion, from time to time at a fixed price to subscribers in certain jurisdictions outside Canada during the period that the Agreement remains effective. The shares will be sold by way of transactions that are “at-the-market distributions”, including sales on the TSX. The number of ATM shares sold will not exceed 10% of the aggregate market value of Resverlogix’s common shares as at the last trading day of the month before the month in which the first trade of ATM Shares is made. The number of shares sold on any trading day will not exceed 25% of the total trading volume of the common shares on that trading day. Concurrent with entering into the equity distribution agreement, Resverlogix has cancelled the standby equity distribution agreement announced on March 29, 2010.

Amorfix Life Sciences Ltd. has closed the first tranche of a previously announced $677,820 non-brokered private placement of 3,012,532 ($0.225) units (covered here) each comprised of one common share and one (3-year, $0.50) warrant, with a 20-day, $1.00 trigger. In connection with the offering, Amorfix paid $15,920 in finder fees and issued 70,756 finder warrants with the same terms as the warrants issued pursuant to the placement. Amorfix intends to complete a secondary closing of up to 1,431,912 units.

M&Eh

Valeant Pharmaceuticals International, Inc. (NYSE: VRX; TSX: VRX) has increased its previously announced offer to acquire ISTA Pharmaceuticals Inc. (NASDAQ: ISTA) (covered here) from $6.50 to $7.50 per share in cash. Valeant also communicated to ISTA that Valeant believed that it could achieve a price of up to $8.50 per share, assuming that ISTA provides it selected confirmatory due diligence related to the company that is consistent with what Valeant expects to see. The offer remains open until January 31, 2012.

ISTA, meanwhile, has adopted a stockholder rights plan under which all stockholders of record as of January 27, 2012 will receive rights to purchase shares of preferred stock. The Rights Plan replaces the Company’s expiring rights plan, which had been in place since 2001 and expired on January 12, 2012. The Rights will be distributed as a dividend and will initially attach to, and trade with, common stock. The Rights will be exercisable if a group acquires 20% or more of ISTA’s common stock or if a tender offer for at least 20% of ISTA’s common stock is announced.

Shares for Debt

Miraculins Inc. (TSXV: MOM) has agreed to issue 952,533 common shares to Genesys Venture Inc., at a price of $0.0675 per common share as payment for services rendered in accordance with the terms of an agreement between the parties.

Other Commercial Developments

biOasis Technologies Inc. (TSXV: BTI) has entered into an investor relations agreement with Brisco Capital Partners Corp. for the purpose of increasing awareness of biOasis. The agreement is effective immediately and may be terminated by either party with thirty day written notice. Brisco will receive 250,000 (13-month, $1.05) share purchase options, vesting at a rate of 31,250 every three months, and a monthly fee of $6,000.

Medicago Inc. (MDG: TSX) and Cellectis plant sciences have signed a research agreement under which Medicago and Cellectis will collaborate to improve therapeutic proteins expressed from tobacco leaves.

Kane Biotech Inc. (TSXV: KNE) has renewed the service agreement with Pure Advertising and Marketing Inc. for investor relations services in 2012. The agreement is a 12 month renewable term where either party may terminate the agreement at anytime on 6 months prior written notice. Pure Advertising and Marketing will receive a monthly retainer fee of $5,000.00.

iCo Therapeutics Inc. (TSXV: ICO) has retained Crescendo Communications, LLC to help broaden investor awareness with its proprietary network of small-cap investors. The agreement is for a one-year term that may be terminated by either party in writing with 30 days’ notice. iCo will pay a consulting fee to Crescendo of $6,000 per month plus approved expenses.

Special thanks to Keldeagh Lindsay for help with this week’s Monday Biotech Deal Review!

University of Manitoba ♦ Published in Nature Genetics, January 15, 2012

The medical community has been aware of the Jr(a) antigen on red blood cells for quite some time. Roughly 40 years ago it was shown that a small group of individuals created antibodies against this protein motif. In the presence of normal red blood cells the antibodies produced by Jr(a)- individuals react quite vigorously. During transfusion it is important that donor blood does not contain Jr(a) antibodies because they can lead to negative transfusion reactions that are harmful to the recipient. In this recent study, investigators isolated the genetic component responsible for the Jr(a)- phenotype. Carrying out single nucleotide polymorphism analysis, researchers discovered a nearly 400 thousand base pair null region in Jr(a)- individuals that contained the gene ABCG2.

Cutting to the Core of Systemic Immune Response

Ontario Cancer Institute ♦ Published in Science, January 13, 2012

The human body has become adept at regulating pathogens. However, this evolutionary trait also has its down sides. Extreme innate immune response can cause systemic inflammatory reactions that can prove fatal. This recent study out of Tak Mak’s lab identifies a mechanism by which animals induce innate immune response following exposure to foreign pathogens. Tumour necrosis factor alpha (TNF-α) mediates septic shock through its release from cell membranes. This release process is regulated by an enzyme known as TNF-α convertase. Researchers discovered that this enzyme’s maturation and trafficking is controlled by iRhom2. Sure enough, mice deficient in iRhom2 displayed an ability to circumvent lethal doses of bacterial lipopolysaccharide.

Conditions characterized by systemic immune response are some of the hardest to go after in the clinic. As an indication, sepsis has been a graveyard, with only a few of some 40 clinical studies showing any efficacy in the last two decades. Identifying general systemic pathways, like that involving iRhom2, will be critical in creating therapeutics for these complex conditions in the future.

Financing

MedGenesis Therapeutix Inc., has raised $5.0 million to support the phase II clinical development of glial cell derived neurotrophic factor protein in Parkinson’s Disease.

PharmaGap Inc. (TSXV:GAP) has completed a $70,774 private offering of 1,010,777 ($0.07) equity units, each comprised of one common share and one (3-year, $0.10) warrant. Cash finder’s fees of $3,406 will be paid to individuals in connection with this private placement.

Licensing and Other Commercial Developments

Xenon announced a strategic alliance with Genentech, a member of the Roche Group (OTCQX: RHHBY), to discover and develop compounds and companion diagnostics for the potential treatment of pain.  Genentech has obtained an exclusive license to compounds and a non-exclusive license to diagnostics from Xenon for development and commercialization of products. Xenon will receive an undisclosed upfront payment, research funding and is eligible to receive research, development and commercialization milestone payments, of up to $646 million for multiple products and indications.  In addition, Xenon will receive royalties on sales of products resulting from the collaboration. 

Amorfix Life Sciences, has signed a non-binding letter of intent with JSW-Lifesciences GmbH, a contract research organization, to license the Amorfix Aggregated Abeta Assay (A4) pre-clinical Alzheimer’s disease diagnostic test.  The LOI sets out the business and financial terms which the parties have agreed will be part of any formal agreements, including exclusivity of the license to perform the A4 as a service in the area of pre-clinical Alzheimer’s disease studies, transfer of know-how and technology, and supply of key proprietary materials from Amorfix. In return, JSW will commit to minimum annual sales, a royalty on net sales, and defined marketing activities.

Pyng Medical Corp. (TSXV: PYT) announced that its FAST1® Intraosseous Infusion System has been chosen by the Spanish Army through Pyng’s exclusive dealer in Spain, International Emergency Services, as the standard of care for their army combat medics to carry in their medical bags.

Special thanks to Keldeagh Lindsay for help with this week’s Monday Biotech Deal Review!

University of Toronto ♦ Published in EMBO, January 10, 2012

Certain genes have a critical role in maintaining the stability of the genome by exerting a certain control over DNA metabolism. Researchers at the Donnelly Centre in Toronto have discovered that disruption of these so called ‘gatekeeper’ genes has consequences beyond disregulating the direct influence they have on genomic stability. As expected, perturbing gatekeeper genes led to spontaneous DNA damage, however, this damage became amplified downstream. Measurements of ribonucleotide reductase (RNR) in budding yeast showed that expression of this enzyme increased as DNA damage occurred, and that RNR activity was associated with an increase in dNTP pools. A second wave of mutation occurred as yeast cells were then capable of synthesizing DNA in the presence of hydroxyurea in the next S phase.

Movement and Breathing, Where’s the Link?

University of Montreal ♦ Published in PNAS, January 10, 2012

As we exercise the rate at which we respire increases, and can do so dramatically. However, there is much to be elucidated in terms of the neural connections that elicit the body’s breathing response to movement. To interrogate this matter, researchers used the lamprey as a model. They first identified the region of the brain that was associated with an increase in respiration. In lampreys, stimulation of the mesencephalic locomotor region (LMR) increased the rate of respiration. Researchers then used a technique called ‘patch-clamp’, that is capable of taking electrophysiological recordings from single neurons, and used it to show that neurons in the dorsal region of the MLR are directly connected to a respiratory generator. To cross-check their findings, an inhibitor of the innervated region of the respiratory generator was used to show that inhibition at this site did indeed reduce respiration.

Investment

Response Biomedical Corporation (TSX:RBM) has completed its previously announced $6.7 million rights offering (covered here) of 90.1 million units each comprised of one common share and one (5-year, $0.0746) warrant. Pursuant to the terms of a standby purchase agreement, OrbiMed Private Investments III, LP, OrbiMed Asia Partners, LP, and OrbiMed Associates III, LP subscribed for 67 million units for $5 million.

Protox Therapeutics Inc. (TSX: PRX) has closed the previously announced additional investment of $8.3 million by Warburg Pincus pursuant to the terms of an investment agreement dated September 28, 2010 whereby Warburg agreed to purchase an additional 20,833,333 ($0.40) units comprised of one common share and a 0.6 (5-year, $0.50) warrant. Under the agreement, Warburg Pincus Private Equity X, L.P. and Warburg Pincus X Partners, L.P. have the right to invest up to $35 million in Protox.

Medicago Inc. (TSX: MDG) has closed the second tranche of the $22.5 million private placement, consisting of the issuance of 17,200,000 ($0.65) common shares to Phillip Morris Investments B.V. for gross proceeds of $11,180,000. Phillip Morris now holds 40% of the outstanding common shares of Medicago after this tranche.

Pacific Therapeutics Ltd. (CNSX:PT) has closed the previously announced $50,000 non-brokered private placement of 357,142 ($0.14) common shares (covered here). Proceeds will be used for general working capital.

Gemoscan Canada, Inc. (CNSX:GES) has closed the third tranche of its previously disclosed $143,000 non-brokered private placement of 408,571 units (covered here), comprising one Class A share and one half of a (1-year, $0.55) Class A warrant. Proceeds will be used to enhance Gemoscan’s cash position and strengthen its working capital position. Finder’s fees of $10,010 and 28,600 units will be paid in connection with the closing.

Amorfix Life Sciences Ltd. (TSX: AMF) has announced a non-brokered private placement of between 2,222,222 – 4,444,444 units priced at $0.225 per unit, which would result in proceeds of between $500k – $1M.  Each unit will consist of one common share and one (3-year, $0.50) warrant with a 20-day, $1.00 trigger. Proceeds will be used for R&D and general corporate purposes. Finder’s fees of 8% of proceeds and broker’s warrants equal to 8% of the placement will be paid in connection with the placement.

M&Eh

Valeant Pharmaceuticals International, Inc. (NYSE: VRX; TSX: VRX) has completed its previously announced acquisition of Dermik, a dermatology unit of Sanofi (NYSE: SNY) and its previously announced acquisition of iNova (covered here). Valeant has also successfully syndicated $500 million of incremental term loans maturing in April 2016 under its existing senior secured credit facilities in connection with its acquisition of iNova. Valeant has also offered to acquire ISTA Pharmaceuticals Inc. (Nasdaq: ISTA) for $6.50 per share in cash, or a 68% premium, for a total of $314 million. ISTA has net debt of approximately $13 million, bringing the total enterprise value to approximately $327 million.

Warnex Inc. (TSX:WNX) has entered into a binding agreement with Gamma-Dynacare Medical Laboratories to sell its wholly-owned Analytical Services division, which provides pharmaceutical and biotechnology companies with a variety of quality control services, for $400,000 and a cash payment equal to the working capital of the division on the closing date, a 15% passive equity
interest in the purchaser and other valuable consideration. Proceeds will be used to further reduce long-term debt and for working capital purposes.

Merus Labs International Inc. and Envoy Capital Group Inc. (TSX: ECG, NASDAQ: ECGI) have completed their previously announced amalgamation (covered here). In connection with the closing of the arrangement, Envoy closed its $8,393,000 private placement of 4,196,500 ($2) units. Each unit comprises of one Merus common share and a one-half (3-year, $3) warrant, with a $4, 20-day trigger. Envoy also issued 197,700 (2-year, $2) options as a finder’s fee. The Merus shares will trade on the TSX under “MSL” and on NASDAQ under “MSLI”.

Bradmer Pharmaceuticals Inc. (TSXV: BMR.H) has entered into a non-binding letter of intent to complete a business combination with Epic Production Technologies International Inc. by way of a three-cornered amalgamation, share exchange or similar arm’s length transaction between Bradmer and Epic that will constitute a reverse take-over and change of business. Epic will also complete a brokered private placement of subscription receipts convertible or exchangeable into freely tradeable common shares of the resulting issuer.

Biotonix (2010) Inc. (TSXV: BTX) has entered into an arm’s length letter agreement  with The Atman Co., a Quebec non-reporting issuer, pursuant to which Biotonix will, subject to a number of conditions, acquire all of the issued and outstanding securities of Atman in a reverse take-over of Biotonix. Prior to the closing of the RTO, Atman will issue a $200,000 convertible debenture, which will be converted on closing into 1 million shares at $0.20 per share. Proceeds will be used to restructure existing Atman debt. Biotonix will make a private placement of its pre-consolidation common shares prior to closing the RTO at $0.10 each, for maximum proceeds of $150,000 to be used to finance the RTO and related transactions. Biotonix will also make a prospectus offering to raise proceeds of at least $500,000to be used for working capital purposes.

Cynapsus Therapeutics Inc. (TSXV:CTH) has completed the previously announced acquisition of Adagio Pharmaceuticals Ltd. by way of share exchange (covered here). This transaction terminates the License Option Agreement dated July 22, 2010 entered into between Cynapsus and Adagio with respect to the intellectual property owned by Adagio concerning theAPL-130277 patent rights and know-how. Adagio shareholders will be entitled to the following payments pursuant to the transaction: 26,000,000 ($0.05) common shares; a $1,500,000 payment conditional upon the successful completion of theAPL-130277 phase 1 bioequivalence studies; and a payment of $2,500,000 conditional upon the successful completion of theAPL-130277 final safety study, to be satisfied by the issuance of common shares at a deemed value equal to the 30 day volume weighted average trading price immediately prior to the first public announcement of the results of such studies;

Debt Financing

Ceapro Inc. (TSXV: CZO) announced that holders of $370,000 of the convertible debentures due December 31, 2011 have elected to convert their debentures into common shares at a conversion price of 10 cents per share. This will result in the issuance of 3,700,000 new common shares of Ceapro. The remaining $130,000 of convertible debentures as well as the interest due, was paid out in cash.

Cynapsus Therapeutics Inc. (TSXV:CTH) has arranged a second closing financing of $155,172 in secured Series E-3 Debentures. The debentures bear interest at 10% per year. Cynapsus will pay a 13% capital discount to the debenture holders resulting in net proceeds of $135,000 and issue 540,000 ($0.05) common shares to the debenture holders. Proceeds will be used to fund ongoing research and development activities of the APL 130277 product, repayment of the Series B debenture, working capital and general corporate purposes. Cynapsus has also arranged a financing of $229,885 in secured Series E-4 Debentures bearing interest of 10% per annum and secured by a security interest in company assets. The debentures are payable on or before December 30, 2012. Cynapsus will pay a 13% capital discount to the debenture holders resulting in net proceeds of $200,000 and issue 800,000 common shares to the debenture holders at a price of $0.05 per share. Proceeds will be used to fund ongoing research and development activities of theAPL 130277 product, repayment of the Series B debenture, working capital and general corporate purposes. A $16,000 cash comission is due to Summer Street Research Partners as the placement agent in connection with the secured debentures.

Licensing and Other Commercial Developments

Microbix Biosystems Inc. (TSX: MBX) and Zydus Cadila have signed a LOI to market the thrombolytic drug, Urokinase in North American markets. Zydus will provide funding to re-launch the drug in the US and Canada, including an initial commitment, plus milestone based payments.  Microbix will also receive a milestone payment upon reaching a certain sales target and will be guaranteed a margin plus earn a sales royalty. Zydus will receive an option on the rights to all future indications including in the areas of oncology and ophthalmology.

Aeterna Zentaris Inc. (NASDAQ: AEZS, TSX: AEZ) has entered into a collaboration agreement with Ventana Medical Systems, Inc. to develop a companion diagnostic for the immunohistochemical determination of luteinizing hormone-releasing hormone receptor expression, for the Aeterna’s cancer treatment compound, AEZS-108.

Bioniche Life Sciences Inc. (TSX: BNC) has entered into two distribution agreements. The first agreement is with MedTrade Products Limited and provides a number of equine and companion animal health products based on MedTrade’s CeloxTM technology for exclusive distribution by Bioniche in Canada. The second agreement is with Mueller Medical International LLC and provides an equine product – Equine Gastrafate® – for exclusive distribution in Canada and the U.S. by Bioniche.

Special thanks again to Keldeagh Lindsay for help with this week’s Monday Biotech Deal Review!

The biggest concern in the sector is financing, both in Canada and globally. Two groups of numbers are shown below for our universe of public Canadian healthcare companies (132 companies to start 2011) – total equity and convertible debt financings by the group, and financings by development stage companies only (shown in millions of dollars). The 2011 total for the development stage companies is about the same at it was for the prior two years but is less than half of the average raised in 2005-2007.

Another major concern for both companies and shareholders is share price performance. We monitor share prices of a group of companies which started 2011 with a share price of $0.10 or higher and also look at two sub-groups. There were 104 companies in this group to start 2011 but only 97 companies actively trading as healthcare companies at the end.

The Equicom 2011 Canadian Healthcare Annual Review will look more closely at these numbers and the events from 2011, and discuss the results of its recent investor survey.

McGill University ♦ Published in Molecular Therapy (npg), January 2012

Mesenchymal stem cells have great potential as a source of therapeutic cell types for transplantation because they are capable of differentiating into bone, fat, cartilage, and muscle. Some reports show they even have the ability to differentiate into neural cells. The research community is beginning to learn, however, that perhaps the most interesting application of MSCs will be as a suppressant for the immune system. MSCs exhibit the unique ability to moderate T cell response. As a result, they are being investigated in clinical studies for treatment of disorders characterized by inflammation and autoimmunity. Rheumatoid arthritis is a model indication for MSC therapy down the line.

Results from clinical trials thus far have been varied. In order to gain a mechanistic understanding of the variability clinicians are observing, researchers at McGill University cross-examined MSCs from normal adult volunteers. Using an in vitro model, 7 different MSC lines were tested for their ability to suppress T cell proliferation. Results of this study indicate that MSCs possessing the most potent anti-immune power upregulate expression of an enzyme known as indoleamine 2,3-dioxygenase (IDO) in response to interferon-α. IDO is the first enzyme in the kynurenine pathway that catalyzes the degradation of trytophan. Several of the metabolites of this pathway are known to activate the stress response kinase CGN2, which causes apoptosis of T cells. Researchers also found that IDO activity is implicated in the differentiation of monocytes into immunosuppressive macrophages that regulate T cell proliferation in an IL-10 dependent fashion.

Elucidating the molecular mechanisms that contribute to the ability of MSCs to temper the immune system will allow us to generate MSC lines that have the most potent anti-immune power for the treatment of inflammatory and autoimmune disease.

University of Montreal ♦ Published in Science, December 23, 2011

The blood-brain barrier (BBB) is a crucial boundary within the body that restricts the migration of blood-borne molecules and immune cells from circulation into the brain. Specialized endothelial cells tightly bound together with junctional proteins ensure that only certain small molecules are able to access the brain. Given that Hedgehog (Hh) signaling has been implicated in multiple sclerosis, a disease characterized by autoimmune destruction of myelin cells, researchers at the University of Montreal hypothesized that Hh signaling may have an influence on the formation of the BBB. They found that astrocytes in close proximity to endothelial cells in the BBB release Hh and that endothelial cells express Hh receptors, in keeping with the theory that Hh signaling is important for the integrity of the BBB. In order to demonstrate that Hh signaling also keeps leukocytes out of contact with the brain, researchers injected mice with cyclopamine, a small molecule inhibitor of the Hh pathway. Indeed, pharmacological inhibition of the Hh pathway led to acute disruption of the BBB and passage of leukocytes into the brain. Together these findings implicate the Hh pathway as being critical in the development and structural integrity of the BBB.

Ottawa Hospital Research Institute ♦ Published in Molecular Therapy (npg), December 20, 2011

More on oncolytic viruses this week but not with VSV this time, but rather the poxvirus JX-594. This particular virus, while having an excellent therapeutic index against multiple solid tumour types, is not that well understood. Researchers seeking to understand the mechanisms underlying its exquisite cancer cell selectivity identified multiple interactions. Three model systems were investigated, including primary normal and cancer cells, surgical explants, and mouse tumour models. It was found that selectivity of JX-594 was driven by multiple factors; the first time selectivity has been attributed to more than one specific mechanism. Among these factors were virus replication activation by the EGFR/Ras signaling pathway, cellular thymidine kinase levels (the virus is engineered to be responsive to TK so this was expected), and similar to VSV, hyporesponsiveness to type-I interferon. These finding will allow for the generation of more selective and potent oncolytic viruses.

Immunomodulators Enhance Polyfunctionality of T Cells Following Vaccination

McMaster Immunology Research Centre ♦ Published in Molecular Therapy (npg), December 20, 2011

Recombinant human adenovirus vaccines are capable of producing memory CD8+ T cell populations, however these populations lack polyfunctionality; in response to antigen stimulation they are not able to produce multiple different cytokines and chemokines. Researchers at McMaster have discovered that inhibiting mammalian target of rapamycin (mTOR) while stimulating OX40 alters not only the magnitude of T cell response, but also its phenotype and functionality. mTOR inhibition modulates differentiation of T cell pools while stimulation of OX40 enhances the process of costimulation. The addition of immunomodulators elicited greater immunity against multiple virus challenges in a mouse model, but was contingent upon sufficiently long transgene expression from the adenovirus under study.