Monday Biotech Deal Review: May 3, 2010

I guess the excitement of BIO was driving deals this week. To the delight of the economic development folks, government was in on the action — Ontario announced a BIP investment and announced a whole new strategy, and OICR funded three equity deals. The private sector was also out in force, with four new licensing deals (including some interesting structures) and more securities than the week might otherwise … warrant. Keep reading

Public Funds

Therapure Biopharma Inc. has been awarded $4.2M from the Ontario Ministry of Research and Innovation’s Biopharmaceutical Investment Program (BIP). Therapure will use the funding to support a $27.9M expansion of its bio-manufacturing facility in Mississauga, ON. I heard that other applicants who had submitted before the program cut-off received letters over the past couple of weeks notifying them of various (newly identified) deficiencies in their applications, so it may be time to bid BIP bye-bye.

The Ontario Institute for Cancer Research made three equity investments in promising Ontario technologies to accelerate commercialization. The investments go to: (1) Dr. Li Zhang from University Health Network’s Toronto General Research Institute, for her novel cellular immunotherapy for cancer; (2) Dr. Shana Kelley, Director of the Division of Biomolecular Sciences in the Faculty of Pharmacy at the University of Toronto and Dr. Ted Sargent, Professor in the Edward S. Rogers Sr. Department of Electrical and Computer Engineering at the University of Toronto, and Canada Research Chair in Nanotechnology, for the validation of a microchip-based diagnostic system for clinically accepted leukemia biomarkers; and (3) DVS Sciences Inc., a spin-off company from the University of Toronto, to support further engineering and product development of its revolutionary instrument for highly multiplexed biomarker analysis for scientific research, clinical trials and personalized medicine.

Licensing and Commercial Deals

Protox Therapeutics Inc. (TSX: PRX) entered into an exclusive US $75 million license agreement with Kissei Pharmaceutical Co., Ltd. (TYO: 4547) for the development and commercialization of Protox’s PSA-activated pro-drug, PRX302, in Japan for BPH, prostate cancer and other diseases of the prostate. Protox retains exclusive rights to PRX302 in all other territories. Protox gets an upfront payment of US $3 million rounded out by a “near term milestone” of US $5 million. Later payments of up to US $67 million come with achievement of development, regulatory and commercial milestones plus “a double-digit royalty” plus a “drug supply fee” based on product sales. Kissei will be responsible for all costs associated with further development, regulatory approvals, commercialization and marketing of PRX302 in Japan.

BELLUS Health Inc. (TSX: BLU) licensed rights to its Phase III candidate KIACTA™ (eprodisate) to a subsidiary of Celtic Therapeutics. BELLUS gets $10 million upfront (half now, half in six months), and Celtic will fund 100% of KIACTA’s development costs to complete the Phase III study and through regulatory approval. Here’s the interesting bit: Celtic Therapeutics will then conduct an auction process for the commercialization rights of KIACTA. The overall proceeds of the auction process are expected to be shared equally between the parties, with certain preference rights on exit proceeds related to Celtic’s investment costs.

Medical systems automation company SQI Diagnostics Inc. (TSXV: SQD) entered into a development agreement with Silliker, Inc., a company dedicated to improving nutrition, food safety and quality, for commercialization of a botulism toxin panel that will run on SQI’s SQiDman™ analytical system. The panel will be used to aid in the diagnosis of botulism infection in the food chain. Silliker will purchase SQiDman systems and assay consumables from SQI following successful development. SQI, in exchange, has granted exclusive global market and distribution rights to Silliker to resell the assay and SQiDman system to its customers, some of the world’s largest food companies. SQI will be responsible for complete commercialization of the panel and Silliker will validate the assay and complete and file all regulatory documents.

Labopharm Inc. (TSX: DDS) (NASDAQ: DDSS) and Gruppo Angelini entered into an agreement to establish a joint venture in the U.S. to commercialize OLEPTRO™, a novel once-daily formulation of the antidepressant trazodone approved by the U.S. FDA on February 3, 2010. The JV will be owned 50/50 by Labopharm and Angelini and will be initially managed by personnel from Labopharm’s U.S. Operations. Labopharm will grant the JV the exclusive right to market and sell OLEPTRO™ in the U.S., and in exchange, will receive up to US$92M, US$52M of which will be paid on completion of the transaction (US$26M in cash and US$26M as Labopharm’s 50% ownership interest in the JV). Labopharm is eligible to receive the remaining US$40M upon OLEPTRO™ achieving certain sales milestones. The JV will reimburse Labopharm for costs that Labopharm has paid year to date in 2010 related to the U.S. launch of OLEPTRO™. Each of Labopharm and Angelini will contribute US$14M to the JV for initial working capital. In certain circumstances, each of Angelini and Labopharm will be entitled to acquire the interest of the other party in the JV.

Finally, in an item to keep an eye on for future Deal Reviews, iCo Therapeutics Inc. (TSXV: ICO) announced that it’s interested in out-licensing iCo-007, which is in Phase I and is for the treatment of diabetic retinopathy (including diabetic macular edema). They hired Ms. Susan Koppy to spearhead the out-licensing business development activities as iCo moves into Phase II clinical trials for iCo-007.

Securities

Neovasc Inc. (TSXV: NVC) announced that 4,635,114 of 4,761,902 warrants issued as part of an April 2009 financing (covered here), were exercised. The warrants entitled holders to purchase one common share at a price of $0.30 for twelve months following closing. The exercise of warrants resulted in $1,390,534 in proceeds to Neovasc.

YM Biosciences Inc. (NYSE AMEX: YMI) (TSX: YM) has entered into a Sales Agreement with Cantor Fitzgerald & Co. under which YM may, at its discretion, sell up to a maximum of 7,750,000 common shares through a controlled equity offering through October 2011. Cantor will act as sales agent for sales under any offering. Shares will be sold at prevailing market prices at the time of sale. The Sales Agreement does not prohibit YM from conducting additional financings.

Ondine Biopharma Corporation (TSX: OBP) (AIM: OBP) completed the private placement announced April 6, 2010 (covered here) by issuing an additional 1,270,000 units for gross proceeds of $76,200 to qualified investors at a unit price of $0.06. Each unit consists of one common share and one share purchase warrant exercisable at $0.075 until April 23, 2011. The company has, subsequent to closing, 126,796,145 common shares issued and outstanding.

ALDA Pharmaceuticals Corp. (TSXV: APH) has increased the private placement announced April 15, 2010 (covered here) from 2,500,000 to 3,080,000 units, “due to investor interest.” Each unit is priced at $0.20 and consists of one common share and one non-transferable ($0.30 two-year) warrant, subject to acceleration with a 10-day $0.60 trigger.

Sernova Corp. (TSXV: SVA) is offering up to 8.0 million units at a price of $0.15 per unit in a non-brokered private placement, for proceeds of up to $1.2 million. Each unit consists of one common share and one half of a ($0.20 two-year) warrant. The first closing of the offering was completed April 28, 2010, with 2,701,666 units placed for proceeds of $405,250. Proceeds will fund ongoing development of Sernova’s proprietary Cell Pouch System(TM).

Patheon Inc. (TSX: PTI) closed its $280 million notes offering (covered here) for net proceeds of U.S. $268.5 million. Proceeds were used to repay all of the outstanding indebtedness under the company’s existing senior secured term loan and asset-based revolving credit facility, certain other indebtedness and related fees and expenses, with some left over for general corporate purposes. Concurrently with the completion of the Offering, Patheon has also entered into an amended and restated $75 million asset based loan revolver with the maturity date extended from 2012 to 2014.

Critical Outcome Technologies Inc. (TSXV: COT) has closed the first tranche of its private placement. This first tranche has raised gross proceeds of $1,063,349 (out of a planned total of $3.5 million) at $0.35 per unit. Each unit is comprised of one common share and one-half of a (18-month $0.55) warrant. The company paid finders’ fees in the aggregate amount of $36,933 in cash plus 105,607 compensation warrants (18-month $0.40).

The University of Alberta, a major shareholder of BioMS Medical Corp. (TSX: MS), sold 12,915,365 BioMS shares this week, 7,245,000 of which were purchased by employees, officers and directors of BioMS.

Prism Medical Ltd. (TSXV: PM) declared a(nother) dividend. $0.075 per common share, payable on May 21, 2010 to the shareholders of record on May 13, 2010. An equivalent dividend was declared and paid in March.

Listing Miscellany

Aeterna Zentaris (NASDAQ: AEZS) (TSX: AEZ) has regained compliance with NASDAQ’s  minimum bid price rule as of Friday, April 23, 2010.

Lorus Therapeutics Inc. (TSX: LOR) (OTCBB: LRUSF), which specializes in developing pharmaceutical products and technologies for managing cancer, received notification that its common stock can trade on the Over-the-Counter Bulletin Board under the symbol “LRUSF” effective Monday, April 26, 2010.

Thanks again to Jacob Cawker for help with this week’s Deal Review!