World now beating a path to B.C. biotech

Multimillion-dollar deals with Neuromed and other firms drawing international attention

Business in Vancouver March 28-April 3, 2006
By Krisendra Bisetty

Leading international pharmaceutical giants in search of lucrative science-based discoveries are being drawn to the laboratories of B.C. firms whose products are showing huge potential for multibillion-dollar markets.

A series of mega-biotech deals involving local companies has cast Canada’s fastest growing biotech sector in a strong light, say industry watchers.

As global pharmaceutical companies increasingly turn to small cost-efficient producers for discoveries that could lead to useful, money-making drugs, they’re providing a market niche for local companies like Neuromed Pharmaceuticals Ltd.

The US$475 million deal it struck last week with Merck & Co. Inc. has thrust the University of British Columbia spinoff into international biotech’s big leagues.

Neuromed joins a growing list of successful biotech companies launched in B.C. that includes Angiotech Pharmaceuticals Inc., QLT Inc. and vaccine maker ID Biomedical Corp., which was acquired for $1.7 billion by GlaxoSmithKline in late 2005.

This month Burnaby-based cancer treatment drug developer Inex Pharmaceuticals Corp. (TSX:IEX) completed a deal that will license three products from its targeted chemotherapy pipeline to U.S.-based Hana Biosciences, Inc. for US$11.5 million upfront and an additional US$30.5 million on achieved milestones.

It and other recent deals indicate that a cluster of late-stage companies in B.C. are ready to operate at the highest levels, say insiders.

Those headliners are likely to be followed by many of the 90-odd small research-oriented biotech companies in the province.

“It’s a great deal for B.C.,” said Karimah Es Sabar, executive director of the industry alliance BC Biotech of Neuromed’s licensing agreement with Merck.

“This is huge. It’s extremely exciting to have one of the world’s largest pharma companies interested in a B.C. company with technologies that originated from UBC.”

Neuromed’s deal, which is thus far Canada’s largest biotech partnering agreement, grants Merck an exclusive, worldwide licence to research, develop and commercialize its lead chronic pain-blocking drug, NMED-160, which is in the second of three phases of development.

“We believe that what we have is something huge. We think that we have the first, fundamentally new big platform to hit central nervous system diseases in a generation,” said Neuromed CEO Dr. Christopher Gallen. “This has the potential to give rise to a series of multibillion-dollar sellers.”

The global chronic pain market alone is about US$30 billion.

Neuromed, a private company launched in 1998 with strong financial backing from local venture capitalists, will receive an initial US$25 million cash payment from Merck, as well as research funding for two years.

The successful development and launch of the drug would trigger milestone payments totalling US$202 million. That sum would increase to around US$450 million if NMED-160 is developed and approved for further use and if another compound is developed and approved.

Neuromed will also receive royalties on worldwide sales.

“From this partnership we anticipate the development of a series of compounds that are transformative to the lives of probably hundreds of millions of people,” said Gallen. “It enables us to grow to become a major biotechnology company.”

It would have cost Neuromed a minimum of US$200 million to develop its pain therapeutic on its own all the way to the final phase.

But Gallen said that raising the funds through private equity or the public markets would have seriously diluted the value of the asset.

Since start-up, Neuromed has raised US$74 million in financing, including US$24 million earlier this month with a substantial investment from Winnipeg grain tycoon Hartley Richardson.

Coupled with the US$25 million licence fee from Merck and the anticipated future milestone payments, it puts Neuromed in very strong financial position to develop its “second act,” a set of T-type calcium blockers to treat epilepsy and hypertension, Gallen said. He added that both were also multibillion-dollar markets.

Gallen expects a 50 per cent growth in its 45-employee staff in Vancouver during the next year as operations are expanded.un kbisetty@biv.com

Asked if the Merck deal was a prelude to an acquisition, Gallen said: “You can never rule that out.”

kbisetty@biv.com