Participating in public private partnerships to take advantage of biotechnology innovation is a business model that is rapidly gaining traction among pharmaceutical companies. These partnerships come in all sizes and flavors ranging from a focus on new technologies and pre-competitive research to speeding products through clinical trials.

The latest rendition brings together AstraZeneca Canada and Pfizer Canada which have joined forces with the Government of Quebec to establish a new institute whose goals are aimed at strengthening the life sciences sector in the province.

With a total of C$100 million behind it the newly created public-private biopharmaceutical research consortium Neomed Institute, of Montreal, will focus on becoming a bridge between promising academic research in Quebec and commercial development, Max Fehlmann, the new president and CEO of the institute, told BioWorld Insight.

In some ways the idea for the consortium arose out of adversity when the prospects for biopharmaceutical research in Quebec appeared to be ebbing.

In February Astra Zeneca plc, of London, announced that as part of its global research and development structuring it was axing its Montreal neuroscience research center with the elimination of 132 positions. (See BioWorld Today, Feb. 3, 2012.)

At the time it was the latest body blow for Montreal's biopharmaceutical research cluster, which had already experienced other pharma companies such as Sanofi SA and Merck & Co. Inc. following a similar path by cutting jobs and closing research facilities in the city.

Change is in the Air

The tide may, however, be turning. Fehlmann was able to bring the Institute's players together. As a result, AstraZeneca Canada donated C$35 million to the consortium, which included land, the former AstraZeneca neuroscience basic research facility, where Neomed will now be located, and laboratory equipment. It also includes the donation of intellectual property for three AstraZeneca pain molecules and projects, as well as C$5 million to support the activities of the institute. For its part, Pfizer Canada is providing a financial contribution of approximately C$3.5 million, and the Quebec government is contributing C$28 million. More than 100 people are expected to be employed at the institute when it gets up to full capacity.

Fehlmann's knowledge of the research infrastructure in Montreal and its key players was also a plus in brokering the deal. Prior to heading up Neomed he was president and CEO of the Quebec Consortium for Drug Discovery (CQDM) whose funding programs are all aimed at developing innovative technologies and tools that facilitate the development of new drugs. This mission is supported by six major pharmaceutical companies including Pfizer Canada, AstraZeneca, Merck & Co., Boehringer Ingelheim (Canada) Ltd., GlaxoSmithKline Inc. and Eli Lilly Canada Inc.

By focusing on the development of new drugs Neomed will add complementary activities to CQDM.

While Fehlmann couldn't reveal at this stage much detail about the pain molecules that they will be working on, he did say one is already at the clinical stage, while the other two are still in preclinical testing.

"In addition to our own in-house research, we will also be working as a virtual organization providing expertise and funding for academic labs and early biotechs and helping them bring promising therapeutic research across the so-called valley of death," Fehlmann noted.

Revitalization is Gelling

The pieces certainly seem to be falling nicely into place for a revitalization of Quebec's biopharmaceutical sector. The government also has signaled its willingness to pump in the funds necessary to catalyze the industry. The contribution to Neomed followed shortly after the delivery of the province's budget, which included an increase in refundable tax credits for R&D salaries. The tax legislation will be amended so that, for the next five years, a biopharmaceutical company will receive a refundable tax credit for R&D salary equal to 27.5 percent of its eligible R&D expenses – up from the current rate of 17.5 percent.

The government also announced funding of C$125 million for research partnership projects with pharmaceutical companies. The projects will have to attract funding from at least one private partner.

Venture Capital Picking Up

After weathering a severe shortage of venture capital for the past few years it looks like the province will also be benefitting from the recent creation of new biotechnology-focused venture funds. The TVM Life Science Ventures VII, for example, has C$150 million that it will use to invest primarily on early stage drug development and life sciences company opportunities in Quebec. (See BioWorld Insight, June 11, 2012.)

Eli Lilly and Co. is a major investor in TVM Life Science Ventures VII and with its involvement the fund it plans to create numerous single-therapeutic asset companies that will develop drugs from the candidate-selection phase through to proof of concept. To facilitate this, the company is establishing Chorus Canada in Montreal – an autonomous unit of Lilly, a global early phase drug development network. Eli Lilly's Chorus was formed in 2002 to more efficiently move early stage compounds to proof of concept. Using this approach, Chorus has been able to reach decisions on drug development about 12 months earlier and at about half the cost of the current industry model. (See BioWorld Today, Feb. 1, 2010.)

These initiatives are beginning to have an impact. In their recently released Q3 2012 report Reseau Capital, Quebec's venture capital and private equity association, said investment activity totaled C$112 million. Although this figure represented a 2 percent decline from the same period in 2011, the association noted that among the 26 companies receiving funding it was the life sciences sector that stood out with a total of C$51 million invested, more than double the Q3 2011 figure. The lion's share of this total was from a US$35 million investment in Montreal-based Thrasos Therapeutics Inc.

According to BioWorld Snapshots, this is one of the largest investments made in a Canadian biotech firm so far this year.

The funding will be used for the development of THR-184, the company's lead product candidate for the treatment of acute kidney injury (AKI). The round was led by new investor, SR One, with funds coming from the GSK Canada Life Sciences Innovation Fund, which was created in November 2011. Thrasos plans to advance THR-184 through Phase II clinical proof of concept in AKI.

THR-184, a small peptide designed to activate receptors of bone morphogenetic proteins (BMPs), likely will enter Phase II next year.

Thrasos' approach derives from longstanding knowledge that BMPs protect the kidney, but the proteins would not work directly as therapeutics, since they also might grow bone. (See BioWorld Today, Oct. 26, 2012.)

"Quebec captured nearly one-third of all VC funds invested in Canada during the third quarter of 2012," noted Jack Chadirdjian, president and CEO of Reseau Capital in a release.

Although the funding environment remains challenging and any recovery is tentative at this stage, we can perhaps "look forward to results that can compare favorably to previous years," he added.

Nevertheless, the Thrasos financing remains as one of the few bright spots for the Canadian biotech sector generally this year.

More Deals to Come?

Overall, it has been tough sledding for biopharmaceutical-focused firms trying to attract venture capital. The only other deal of note during the year involved Zymeworks Inc., of Vancouver, British Columbia, which completed a private placement totaling $11 million. The company plans to use the proceeds to advance its lead oncology candidates through late-stage preclinical studies and into the clinic. Separately, Zymeworks said it achieved a research milestone in its collaboration with Merck & Co., of Whitehouse Station, N.J., which is using the company's Azymetric platform to develop bi-specific antibody therapeutic candidates. The amount of the payment, part of a potential $187 million commercialization deal, was not disclosed. (See BioWorld Today, Sept. 7, 2012.)

In the wider life sciences space in Canada deal making has been more robust and includes a C$10 million Series A financing completed by Toronto-based Xagenic Inc., a privately held molecular diagnostics company developing a new technology for decentralized, rapid diagnostic testing.

However, it is likely that more deals from Canada's newly created life sciences VC funds will emerge next year after they have had the chance to assess their deal proposals. Lumira Capital II, of Toronto, Ontario, for example, was one of the participating investors in the Thrasos financing.

While Lumira Capital II, with about C$100 million under management, said it will focus on later-stage investment opportunities, the firm also is managing a C$50 million Merck Lumira Biosciences Fund, which will invest in Quebec-based biotechnology companies with products in early development.