BioWorld International Correspondent

With its Imvamune smallpox vaccine close to becoming a significant earner, Bavarian Nordic A/S decided the time was right to get back into cancer immunology - and to do so in the U.S.

The Kvistgard, Denmark-based company is establishing BN ImmunoTherapeutics Inc. in the Palo Alto area of California to undertake cancer vaccine research and development based on its modified vaccinia Ankara (MVA) vector.

It also has formed a U.S. holding company, Bavarian Nordic Inc., in Delaware. Although initially a legal rather than an operational entity, it might act as a conduit for the location in the U.S. of activities associated directly with its parent.

BN ImmunoTherapeutics will commence operations in January under CEO Reiner Laus, previously vice president of research and development at Dendreon Corp., of Seattle. Bavarian Nordic will provide DKK26 million (US$4 million) in funding over its first 16 to 18 months, at the end of which it is expected to have between 15 and 20 employees on the payroll. It's not decided whether it then would continue to fund the new entity from its own resources or seek investment from external sources.

"This is a strategic discussion we're going to have in the next 12 months," said Bavarian Nordic President and CEO Peter Wulff.

The venture will focus on three cancers associated with tumor antigens that are in the public domain - breast, prostate and colon.

"We certainly believe that both the breast cancer vaccine and the prostate cancer vaccine will be moving quickly into clinical studies," Wulff said. An investigational new drug application on each program should be ready for filing by 2006, he said.

Although BN ImmunoTherapeutics is a start-up, it will build on previous cancer immunotherapy experience that Bavarian Nordic has accumulated. Academic collaborator Alessandro Gianni, of the Milan, Italy-based National Tumor Institute, led a Phase I/II trial of a vaccine based on the MVA vector expressing tyrosine kinase in six melanoma patients. The results, Wulff said, indicate that MVA promotes the breaking of immune tolerance against self-antigens and can elicit sustained immune responses for at least one year.

"This is incredibly promising data," Wulff said.

Gianni will act as strategic adviser to Bavarian Nordic. Its new subsidiary aims also to form collaborations with academic researchers based in the San Francisco Bay area. BN ImmunoTherapeutics will focus on research and preclinical and clinical development, while leveraging the resources of its parent in areas such as virology, clinical-batch manufacturing and quality management.

Bavarian Nordic Inc. also might become active, beyond its role as a holding company, in a relatively short time frame.

"It is very likely that there will be significant activities from that company over the next few years," Wulff said. Government affairs and intellectual property management could be appropriate activities to locate in the U.S., he said, adding that he would not exclude R&D or manufacturing, either.

Both initiatives have been enabled by the commercial development of Imvamune, an MVA-based smallpox vaccine, which recently attracted a U.S. government order valued at $100 million over the next three years, with a potential option for an additional $41 million. Bavarian Nordic also is part of a two-horse race with Acambis plc, of Cambridge, UK, to supply an even larger U.S. stockpile. (See BioWorld International, Oct. 6, 2004.)

"It seems to be the right time to expand the pipeline," Wulff said. However, the positive gloss was taken off the company's news Monday, when it revised its financial guidance for the year following a delay in an order for its Elstree BN smallpox vaccine. It cut its revenue forecast from DKK400 million to DKK170 million and its earnings forecast from a pre-tax profit of DKK60 million to DKK80 million to a pre-tax loss of DKK80 million. The company's share price dropped about 5.8 percent on the Copenhagen Stock Exchange Monday, closing at DKK525.