With its apoptosis drug AEG35156 moving toward Phase II trials, Aegera Therapeutics Inc. gained access to a second clinical-stage cancer compound through an all-stock acquisition of LymphoSign Inc.

Concurrent with the acquisition, Aegera closed its Series C financing. The first tranche of the financing had closed in November 2006, bringing in $14 million in equity and up to $7 million in venture debt.

Although neither the details regarding the financing nor the terms of the acquisition was disclosed, Aegera President and CEO Michael Berendt said the combination of Series C equity, debt and funding gained through the acquisition was "in the neighborhood of $24 million to $25 million."

Montreal-based Aegera's Series C investors include VenGrowth Advanced Life Sciences Fund Inc., GrowthWorks, Business Development Bank of Canada, Desjardins Venture Capital, Multiple Capital and Solidarity Fund. Markham, Ontario-based LymphoSign's investors, prior to its acquisition, included VenGrowth, GeneChem Therapeutics Venture Fund LP and BDC Venture Capital.

While Aegera acquired some cash from LymphoSign, the driver of the acquisition was LymphoSign's lead product candidate, the small-molecule kinase inhibitor LS104. Originally developed at Toronto's Hospital for Sick Children, the drug targets multiple kinases including Jak2 and Bcr-Abl. In preclinical studies, LS104 demonstrated low toxicity, a short half-life in serum but a long half-life in cancer cells, synergy with cytotoxic drugs including cytarabine (ara-C), and an ability to enhance survival and decrease bone marrow blast counts in animal models of acute myelogenous leukemia (AML).

LymphoSign licensed the drug from the hospital and obtained regulatory clearance to conduct clinical trials in the U.S. and Germany. The company initiated an open-label, dose-escalating Phase I trial in AML and other myeloproliferative disorders, evaluating LS104 both as a monotherapy and in combination with ara-C. Berendt said he expects to complete that trial and begin a Phase II trial with the compound in 2008.

The success of the pioneering kinase inhibitor Gleevec (imatinib, Novartis AG) in chronic myeloid leukemia has spawned significant interest in the development of kinase inhibitors for hematologic malignancies and myeloproliferative disorders. In AML, Cephalon Inc. is in Phase III with the FLT3, TRK and Jak2 inhibitor CEP-701 (lestaurtinib), and Ambit Biosciences Corp. is in Phase I with the FLT3 inhibitor AC220.

Other Jak2 inhibitors in development include MK-0457 (Vertex Pharmaceuticals Inc. and Merck & Co. Inc.) in Phase II, and XL019 (Exelixis Inc.), poised to begin Phase I. Bcr-Abl inhibitors are even more plentiful. In addition to Gleevec itself, the kinase is targeted by Bristol-Myers Squibb Co.'s Sprycel (dasatinib), Novartis' AM107 (nilotinib), Vertex's MK-0457, Exelixis' XL288, Innovive Pharmaceuticals Inc.'s INNO-406, Ariad Pharmaceuticals Inc.'s AP24534 and others.

Although LS104 will face plenty of competition, Berendt said the drug is differentiated by the fact that it "inhibits its kinase targets in a non-ATP-competitive manner." The mechanism may allow the drug to treat cancers in which resistance arises due to mutations in the ATP binding site. Additionally, LS104 appears to be absorbed rapidly by leukemic blast cells and then induces apoptosis in those cells, making it "fit very nicely" with Aegera's apoptosis expertise, Berendt added.

Beyond LS104, Aegera acquired a portfolio of early stage preclinical compounds licensed from the children's hospital. LymphoSign also had been developing second-generation kinase inhibitors, but Berendt said Aegera doesn't see "any problems that need to be fixed" with the first-generation compound LS104 and is pushing it forward.

In addition to running clinical trials with LS104, Aegera has plenty of its own clinical trials under way. Lead candidate AEG35156, a second-generation antisense compound targeting the X-linked inhibitor of apoptosis (XIAP), is finishing several Phase I trials and being studied in Phase Ib/IIa trials in AML and solid tumors. Four additional Phase II studies are poised to begin: three in solid tumors, which should generate data by the end of 2008, and one in AML in combination with idarubicin and ara-C, which should wrap up by the end of this year. If the Phase II AML trial goes well, Aegera plans to begin a Phase III trial in 2008.

Aegera has two other compounds slated to begin clinical trials in early 2008: the small-molecule IAP neutralizer AEG40826, for cancer, and the small-molecule JNK (c-Jun N-terminal kinase) inhibitor AEG33773, for diabetic neuropathy.

None of Aegera's compounds is partnered, which Berendt said was a conscious decision based on the fact that the company wanted to select the lead candidates from its two preclinical programs and better position AEG35156 for Phase II prior to entering any negotiations. With those goals achieved, he said Aegera has "just begun to entertain a number of partnering discussions." Any deals, however, would involve Aegera holding onto value "above and beyond a royalty stream," he added.

For now, Aegera has sufficient capital to complete all its ongoing and planned trials. After that, Berendt said he is keeping his options open and will consider partnering income, private equity, nondilutive debt, an initial public offering, or reverse takeovers and other M&A options.