Regenerative Medicine Deal Review: July

Author: Mark Curtis, 08/11/14

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Welcome to your deal review for the month of July. There was financing activity this past month as StemCells and Fate Therapeutics each secured $20 million in funding. Bluebird bio was busy with the acquisition of a privately-held genome editing company; clearly a strategic move to strengthen its gene therapy pipeline. Sernova was in the news as well, providing details on the licensing of a stem cell technology out of Toronto. Read on to find out more.

StemCells Inc. (STEM) closed a US$20 million financing, which was divided between two institutional investors. The company received gross proceeds of $18.7 million through a unit offering that saw 0.85 warrants issued per share of common stock. The deal was priced at $1.77, a ~7 per cent discount to market. Warrants can be exercised at a price of $2.17 per share up until August 15th, 2015.

Exercise of the warrants would provide STEM an additional $20 million, which would cover the company’s 2015 operating expenses and help close out its Phase I/II clinical programs in spinal cord injury and age-related macular degeneration. The unit offering is dilutive to existing shareholders, though, with the issuance of so many warrants. But as they say, when money is on the table, take it.

Fate Therapeutics (FATE) secured US$20 million through a long-term debt financing provided by the Silicon Valley Bank, of which the company has already drawn down $10 million at a fixed-interest rate of 6.9 per cent. The funds will be used for clinical validation of its lead product candidate PROHEMA®, a pharmacologically-altered cord blood-derived hematopoietic stem cell (HSC) product for rare blood diseases. FATE is currently enrolling patients in its Phase 2 PUMA study to investigate the product in adult patients undergoing HSC transplant for blood cancers.

bluebird bio (BLUE) announced pricing of a fairly significant offering of common stock on July 8th. The deal was expected to close on July 14th; however, there has yet to be confirmation of this, suggesting there may be issues with demand. The offering is for three million shares at a price of US$34 per share. Similar to the STEM deal, pricing was at a ~7 per cent discount to market. Bank of America Merrill Lynch, Cowen & Company and Citigroup are managing the deal.

Proceeds – a little over US$95 million – would be used to finance the company’s programs in CCALD (childhood cerebral adrenoleukodystrophy), beta-thalassemia and sickle cell disease. Stay posted to see if they manage to push it through.

On a more positive note, BLUE recently announced its acquisition of the private gene-editing company Precision Genome Engineering, otherwise known as Pregenen. The company, headquartered in Seattle, has a platform gene editing technology that utilizes homing endonucleases as a means to silence, edit, or insert genetic content. The acquisition is in keeping with its mandate of leveraging novel technologies to build-out and enhance its existing gene therapy pipeline, which currently includes both HSC and chimeric antigen receptor-T (CAR-T) cells.

bluebird bio issued the stakeholders of Pregenen approximately $14 million in BLUE stock. Under the agreement, owners of Pregenen are entitled to ~$120 million in clinical and commercial milestone payments.

Finally, Sernova (SVA), a Canadian company developing the Cell PouchTM technology for transplanting live cells into humans for the treatment of type-1 diabetes, announced terms of its licensing agreement with the University Health Network (UHN) to gain exclusive rights to a stem cell technology to pair with the device. The IP, based on the research of Dr. Cristina Nostro and Dr. Gordon Keller in Toronto, surrounds the generation of progenitor cells that are capable of differentiating into mature insulin-producing islet cells in vitro.

SVA plans to transplant the progenitors into humans under the premise that, once in the body, they will terminally differentiate to the therapeutic phenotype. The technology is currently being investigated in a Phase 1 study in patients with type-1 diabetes at the University of Alberta, but the islets being used in this study are derived from donor pancreases. This is not a viable long-term solution for the Cell PouchTM as the cell source is highly limited.

This licensing deal will provide Sernova the protocol to produce a potentially unlimited quantity of pancreatic progenitors. But the process will need to be scaled and optimized such that clinically relevant quantities of cells can be produced. The generation of mature islet cells in vitro will also be desirable as progenitors take several weeks to mature following transplantation.

To wrap up I’ll make a few comments around gene editing, given that it is topical with the recent BLUE/Pregenen deal, and that it was also a point of discussion at the recent Business of Regenerative Medicine Course hosted here in Toronto. At the course, Dr. Chad Cowan of the Harvard Stem Cell Institute gave a talk on the merits of this approach for manipulating the genetics of a cell and the implications this will have on stem cell technologies.

It is now recognized that while the generation of iPSCs from patients with different diseases provides possibilities for disease modeling in vitro, there are some fundamental issues at hand that make this approach challenging. There is a great degree of variability between iPSC lines, so much in fact that the disease phenotype of interest can be masked by background “noise” when comparing a disease-specific cell line with a control generated from a healthy individual.

Dr. Cowan is of the opinion that the future of disease modeling will be utilizing gene editing to produce disease phenotypes, such that the disease state and healthy state can be observed in an identical genetic backdrop. By its nature, gene editing will allow for much more precise experimentation with a degree of granularity, in terms of disease phenotype, that simply isn’t achievable when comparing iPSC lines generated from different patients.

Check out Signals blogger Holly Wobma’s recent post on a novel gene editing technique to get a sense of the versatility of this molecular tool.

 

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Mark Curtis

Mark Curtis

Mark is a Business Development Analyst at the Centre for Commercialization of Regenerative Medicine (CCRM), where he collaborates with the team to help evaluate the commercial potential of regenerative medicine and cell therapy technologies. He began his career at Princess Margaret Hospital studying cellular reprogramming of human skin cells. Following this project, he left the laboratory and took on a role with Bloom Burton & Co., a healthcare-focused investment dealer. While there he supported the advisory team in carrying out scientific diligence on early-stage biotechnology companies. Prior to joining CCRM he was a consultant to Stem Cell Therapeutics, a Toronto-based biotechnology company focused on developing therapeutics targeting cancer stem cells. Mark received a Master’s degree from the University of New South Wales in Sydney, where he studied the directed differentiation of embryonic stem cells, and a Bachelor’s degree in Biology, from Queen’s University. Follow Mark on Twitter @markallencurtis
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