BioWorld International Correspondent

SYDNEY, Australia - A stem cell research company being spun out of BresaGen Ltd. in Adelaide, Australia, plans to merge with a U.S. stem cell company, and venture capitalists plan to inject $5 million into the merged entity.

Once the BresaGen division, which already has most of its operations at the University of Georgia in Athens, is merged with San Diego-based CyThera Inc. and the additional funds are raised, the privately held merged entity is expected to have a valuation of $16 million.

BresaGen will own 30 percent of the company, which will hold the rights to a range of stem cell lines, including several held by BresaGen eligible for U.S. federal government grants.

Back in August, BresaGen announced it would create two separate companies out of its stem cell operations and protein pharmaceutical division and move the corporate headquarters of both to the U.S. Some operations would remain in Australia and the listed BresaGen, a holding company for the two U.S. companies, would remain listed on the Australian exchange. (See BioWorld International, Aug. 20, 2003.)

The latest announcement settles the fate of the stem cell side of BresaGen, with a U.S. life sciences venture capital firm, Sanderling Ventures, of San Mateo, Calif., committing $1.5 million to the newly merged entity. In addition, Sanderling has agreed to assist the merged company in raising another $3.5 million.

The agreement is still subject to certain conditions, but is expected to be completed early next year.

BresaGen President and CEO John Smeaton said the new company will have about two years of funding, and by the end of that two years should have sufficient milestone payments from completed research to continue.

"While most of the new company's research will take place in the U.S., there are compelling reasons to conduct new stem cell derivations, preclinical private studies and human clinical trials in Australia," he said.

Smeaton also commented that, although BresaGen's work is on degenerative diseases of the central nervous system and CyThera's work is on stem cell treatments for diabetes, "the companies were doing the same basic work."