Biotechnology Focus February/March 2016

INSIGHTS FOR THE LIFE SCIENCE INDUSTRY

February/March 2016 VOLUME 19, NUMBER 1

PARTNERING WITH PHARMA

It takes more than just luck!

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FEATURES

9

contents February/March 2016 – VOLUME 19 – NUMBER 1

Gene patent eligibility in Canada may soon be evaluated in light of a challenge brought by the Children’s Hospital of Eastern Ontario (By Melanie Szweras and Teresa MacLean)

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Corporate venturing: A VC’s perspective Lumira Capital’s Peter van der Velden discusses the evolution of corporate engagement in the venture capital sector (By Peter van der Velden)

18 Top 5 Canadian Biotech CEOs who elevate their companies

Canada to consider gene patent eligibility

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Calling all startups!

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She’s got the ‘Midas’ Touch

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Top 5 Canadian Biotech CEOs who elevate their companies

Top 5 things you need to know to grow (By Joyce Drohan and Jason Low)

Jacqueline Shan turned COLD-FX into a blockbuster, can she do it again with Allergy-FX? (By Shawn Lawrence)

(Compiled by Shawn Lawrence)

20 Partnering with Pharma: It takes more than just luck!

We’ve asked three Canadian biotech CEO’s to share their pharma partnering experiences, telling us why and how they did it, and where they see these partnerships taking them (Compiled by Shawn Lawrence)

DEPARTMENTS 6

Research news

8

Business corner

IN EVERY ISSUE

29 Calendar of events

28 A Whirlwind Week Called JPM (By Paul Stinson) www.biotechnologyfocus.ca

1:59 PM

26 aCROSS CANADA

Canadian patent office misses the mark on diagnostics (By Mark F. Vickers and Kathleen Marsman)

30

The Last Word

Canadian Biotech’s New Operating System (By Andrew Casey)

February/March 2016 BIOTECHNOLOGY FOCUS 3

PUBLISHER’S note

SENIOR WRITER CONTRIBUTING WRITERS

Andrew Casey

Jason Low

Joyce Drohan

Kathleen Marsman

Mark F. Vickers

Melanie Szweras

Paul Stinson

Peter van der Velden

Teresa MacLean

Director, Content & Business Development

José Labao

GRAPHIC DESIGNER CONTROLLER MARKETING MANAGER

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Elena Pankova John R. Jones Mary Malofy

CIRCULATION DIRECTOR Mary Labao circulation@promotive.net Tel: 905-841-7389

EDITORIAL ADVISORY BOARD Christine Beyaert, Cohn&Wolfe; Pierre Bourassa, IRAP, Montréal; Murray McLaughlin, Sustainable Chemistry Alliance; Ulli Krull, UTM; John Kelly, KeliRo Company Inc.; Peter Pekos, Dalton Pharma Services; Brad Thompson, Oncolytics; Robert Foldes, Viteava Pharmaceuticals Inc.; Gail Garland, OBIO; Barry Gee, CDRD; Bonnie Kuehl, Scientific Insights Consulting Group Inc.; Raphael Hofstein, MaRS Innovation; Roberto Bellini, Bellus Health; Peter van der Velden, Lumira Capital; Albert Friesen, Medicure Inc.; Ali Tehrani, Zymeworks Inc.

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Biotechnology Focus is published 6 times per year by Promotive Communications Inc. 23-4 Vata Court, Aurora, Ontario L4G 4B6 Phone 905-727-3875 Fax 905-727-4428 www.biotechnologyfocus.ca E-mail: biotechnology_focus@promotive.net Subscription rate in Canada $35/year; USA $60/year; other countries $100/year. All rights reserved. No part of this publication may be reproduced without written consent. Publications Mail Registration Number: 40052410 Return undeliverable Canadian addresses to: circulation dept – 23-4 Vata Court, Aurora, Ontario L4G 4B6 National Library of Canada ISSN 1486-3138 \ All opinions expressed herein are those of the contributors and do not necessarily reflect the views of the publisher or any person or organization associated with the magazine.

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Scouring through the headlines and articles on our website this past month, one story in particular caught my eye. It was a story about how the new federal government is investing $29 million into two new commercialization centres in Montreal, QC and Charlottetown, PEI. As Andrew Casey, president and CEO of BIOTECanada mentions in this issue’s Last Word column, Canada’s new Minister of Innovation, Science and Economic Development, Navdeep Bains, has already stated that “supporting incubators, accelerators, business innovation and providing cluster support will be among his core objectives.” And at first glance, the afforementioned funding announcement covers all of these goals.

In Montréal, the Centre for Commercialization of Cancer Immunotherapy (C3i) will receive funding of $15 million over five years to develop, translate and commercialize cancer immunotherapies. Operating out of the Hôpital Maisonneuve-Rosemont’s Research Centre, it will be a one-stop shop for the development, translation and commercialization of ground-breaking cancer treatments in an area of significant interest, not just nationally, but globally.

Likewise, in Charlottetown, the Natural Products Canada (NPC) will receive $14 million over five years, in support of its work to establish Canada as a global leader in the development and marketing of natural products. The federal contribution will be matched by over $10 million from industry and other sources, for total funding of over $24 million over the next five years.

Moreover, the NPC investment not only fills the cluster support and working with industry checkboxes, it also fits the bill as a collaboration catalyst, bringing individual groups from across the country together. For example, while headquartered in Charlottetown, it also includes key partners in PEI (PEI BioAlliance as NPC Atlantic), Saskatchewan (AgWest Bio as NPC West), Ontario (Ontario Bioscience Innovation Organization as NPC Ontario), and Quebec (Institute for Nutrition and Functional Foods as NPC Quebec), expanding its scope to Pan Canadian.

In the case of both commercialization centers, and really both these initiatives, it is about bringing together the existing expertise of universities, scientific research organizations, small and medium sized enterprises, multi-nationals, the investor community, and now finally government as active partners in accelerating the time to market for promising early stage made in Canada technologies.

It’s a good sign for the industry as we approach March 22, the day the new Federal budget will be tabled, and hopefully a day where more such investments will come to fruition.

Shawn Lawrence

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Latest government investment in commercialization centres a good omen

Terri Pavelic

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PUBLISHER/ EDITOR-IN-CHIEF

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If you would like to order hard copy or electronic reprints of articles, contact sales@promotive.net

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R&D news

New cancer stem cell dream to take on brain cancer in children and adults

Toronto, ON – A team of top Canadian scientists, including leading pioneers of stem cell research, are teaming up to develop new treatments for brain cancers in children and adults.

Using genomic and molecular profiling technologies to focus on the cancer stem cells that drive the growth of tumours, the dream team will try to identify vulnerabilities that can be used to develop new drugs that are effective against brain cancers.

“Brain tumours are not as common as many other forms of cancer, but they are devastating, especially when they strike the very young,” said Dr. Phillip A. Sharp, Nobel laureate and institute professor at the Massachusetts Institute of Technology’s David H. Koch Institute for Integrative Cancer Research and co-chair of the Stand Up To Cancer (SU2C) Canada Scientific Advisory Committee (SAC). “The Dream Team will bring new insights to brain cancer research, which has been an underfunded area,” he says.

Dr. Peter B. Dirks will lead the SU2C Canada Cancer Stem Cell Dream Team: Targeting Brain Tumour Stem Cell Epigenetic and Molecular Networks. Dr. Dirks is a neurosurgeon and senior scientist at The Hospital for Sick Children (SickKids) in Toronto, who was the first to identify cancer stem cells in brain tumours in 2003. The co-leader is Dr. Samuel Weiss, director of the Hotchkiss Brain Institute and professor in the Cumming School of Medicine at the University of Calgary, who was awarded the Canada Gairdner International Award in 2008 for his discovery of adult neural stem cells in the brains of adult mammals.

The team will focus on glioblastomas in adults and children and on posterior fossa ependymomas of infants, both of which have 6 BIOTECHNOLOGY FOCUS February/March 2016

a dismal outlook for patients and for which treatment options are limited. Less than 10 per cent of adults are living five years after a glioblastoma diagnosis. In children, cancers of the brain and central nervous system are the No. 1 pediatric cancer killer, even though leukemia is the more common pediatric cancer.

Researchers have found that these cancers contain brain tumour stem cells (BTSCs).

While similar to nerve stem cells that mature during normal brain development, abnormal programming in BTSCs allows them to drive tumour relapse (or the ability of the tumours to grow back again) and drug resistance. The Dream Team’s goal is to understand the abnormalities in BTSCs so that they can identify vulnerabilities that can be used to develop new drugs that are effective against brain cancers.

To achieve this goal, the Dream Team will take a three-pronged approach to understanding and targeting brain cancer stem cells that resist treatment and fuel tumour regrowth. Their first approach is to perform detailed analysis of BTSCs taken from 70 different glioblastomas or ependymomas and grown in the laboratory. They will use cutting-edge technology to understand the full biological profile of these cells – from changes in the cells’ genetic codes, to epigenetic programs that control when genes are turned on or off and alterations in the way the cells metabolize nutrients.

The Dream Team’s second approach will be to screen a collection of chemicals on the same BTSCs for potential new drugs and drug combinations that are effective against these cells. Finally, while they are learning about the biology of BTSCs and screening for new compounds, the Dream Team will test five new potential drugs that they have already identified as very promising by tests performed in laboratory mice to find out which drugs or drug combinations might kill glioblastomas or ependymomas. The Dream Team hopes to bring new drugs for brain cancer into clinical trials in the third and fourth years of their research funding.

“Our understanding of brain cancer stem cells and their role in causing tumours to grow is advancing very rapidly, with significant contributions coming from Canadian scientists that are part of this exciting new Dream Team,” Weiss said. “Our proactive, data-sharing approach, coupled with strategic partnerships with multiple, major pharmaceutical companies, will help accelerate the

search for effective treatments.”

The SU2C Canada Cancer Stem Cell Dream Team is the second Dream Team to be announced by SU2C Canada. The first was the SU2C Canada – Canadian Breast Cancer Foundation Breast Cancer Dream Team.

SU2C Canada is a project of EIF Canada, a Canadian registered charity.

Funding of CA$11.7 million over four years is being provided by SU2C Canada, Genome Canada, the Canadian Institutes of Health Research (CIHR), the Cancer Stem Cell Consortium (CSCC), and the Ontario Institute for Cancer Research (OICR), which will provide up to CA$1.2 million for clinical trials in the province of Ontario. The American Association for Cancer Research International – Canada is SU2C Canada’s scientific partner.

To see this story online visit http://biotechnologyfocus.ca/newcancer-stem-cell-dream-team-to-attackbrain-cancer-in-children-and-adults/

AbCellera to work with Teva on discovery of rare monoclonal antibodies

Vancouver, BC-AbCellera, a biotechnology company specializing in the rapid discovery of monoclonal antibodies from natural immune cells, has struck another collaborative deal with big pharma, this time teaming up with Teva Pharmaceutical Industries Ltd. The two sides will collaborate on research using AbCellera’s high-throughput single cell antibody platform to discover rare monoclonal antibodies. Under the terms of the agreement, AbCellera will receive an upfront payment, research payments, and is eligible to receive undisclosed downstream milestones associated with the development and approval of therapeutic antibodies.

“We are pleased to work with AbCellera utilizing this company’s novel biologics tech-

R&D news

nology,” said Dr. Michael Hayden, president of Global R&D and chief scientific officer at Teva. “This agreement will be complementary to our existing antibody discovery process with the potential to strengthen Teva’s capabilities in novel biologics discovery.”

“These are tough problems that need new technologies to move them forward,” adds Dr. Carl Hansen, president and CEO of AbCellera. “Our platform brings important advantages to enable the discovery of rare antibodies with defined specificity and functional activity against difficult membrane protein targets.”

AbCellera reached a similar deal recently with Merck where AbCellera will use its highthroughput antibody discovery platform to identify antibodies that specifically modulate target function. That agreement granted Merck the option to develop antibody candidates identified through the collaboration for specified therapeutic applications.

To see this story online visit http://biotechnologyfocus.ca/tevaand-abcellera-to-work-together-on-raremonoclonal-antibodies/

Telesta Therapeutics bladder cancer therapeutic faces FDA “setback” Montreal, QC – The U.S. Food and Drug Administration (FDA) has issued a Complete Response Letter to Telesta Therapeutics Biologics License Application (BLA) for MCNA,stating that an additional Phase 3 clinical trial would be necessary to adequately establish its efficacy and safety.

MCNA is a biologic therapy developed to provide high-risk, non-muscle invasive bladder cancer patients who are refractory to or relapsing from first line therapy with bacillus Calmette-Guérin (BCG), with a therapeutic alternative to surgery. It is derived from the cell wall fractionation of a non-pathogenic bacteria.

Dr. Michael Berendt, CEO of Telesta, expressed his disappointment with the FDA’s decision, but said the company would continue to work closely with the FDA to assess the costs of a Phase 3 clinical trial. The FDA also encouraged Telesta to meet with them to discuss further clinical

development of MCNA. “Since we began our dialogue with the FDA in February, 2014, we have clearly communicated that we believe that MCNA is a safe and efficacious agent for the treatment of high risk non-muscle invasive bladder cancer patients who have failed front line BCG therapy,” he said. “The FDA decision, at this point, to require an additional clinical trial, is a setback for under-served bladder cancer patients, our dedicated staff, and our investors who have funded our efforts to obtain MCNA approval in the US.” Had it been approved, MCNA would have been the first new bladder cancer therapeutic to reach the market since 1998.

To see this story online visit http://biotechnologyfocus.ca/telestatherapeutics-receives-completeresponse-letter-from-fda/

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February/March 2016 BIOTECHNOLOGY FOCUS 7

BUSINESS corner Therapure Biopharma postpones IPO

Mississauga, ON – Therapure Biopharma Inc. says it is postponing its plans to sell shares through an initial public offering (IPO), citing that the current IPO market has grown cold.

The biological pharmaceuticals maker, which is owned by Catalyst Capital Group Inc., was seeking to raise about C$130 million through the IPO. With no IPOs concluded in the U.S. or Canada in the first month of 2016, the company felt that current capital markets were too volatile.

Therapure currently operates out of two facilities, a 130,000 sq. ft. cGMP facility that includes biomanufacturing, research and quality control laboratories and is built to meet FDA (US), HPFB (Canada), EMA (Europe) and MHRA (UK) standards, and a new 43,000 sq. ft. facility housing 30,000 sq. ft. of cGMP warehouse, both located in Mississauga.

The Catalyst Capital Group Inc. says it will continue to support Therapure as a core investment in its portfolio, adding that it believes that the positive exposure investors have received to Therapure during this process will position the company for success in considering future options as the company executes its growth strategy.

“We believe that Therapure is the type of company Canadian public investors would want to add to their portfolios, and we will continue to work with Catalyst and Therapure’s management to evaluate capital market conditions,” said Steve Ottaway, managing director of Investment Banking at GMP Securities L.P. To see this story online visit http://biotechnologyfocus.ca/therapurebiopharma-postpones-ipo/ 8 BIOTECHNOLOGY FOCUS February/March 2016

TVM Life Science Ventures VII investment helps launch new company Modulate Therapeutics Inc. Montréal, QC- TVM Life Science Ventures VII has announced the fund’s ninth investment – establishing Modulate Therapeutics Inc., a company based in Montréal, Québec.

Modulate Therapeutics plans to develop, to proof-of-concept, a compound called IMM-01 that is designed to re-engage the immune system in order to recognize and eradicate neoplastic disease. The company will explore the development of a nanolipogel formulation that targets the delivery of nano-doses of both a TGF beta inhibitor combined with Interleukin 2 at the site of the tumour growth, potentially synergizing with immune oncology checkpoint inhibitors and aims to further increase response rates and overall survival for patients with certain types of cancer.

“TVM Capital Life Science is proud to have enabled the creation of Modulate Therapeutics Inc., and to have secured the rights to IMM-01 from Immunova LLC,” said Dr. Luc Marengere, managing partner with TVM Capital Life Science and board member of Modulate Therapeutics Inc. “IMM-01 stimulates T-cell proliferation, increasing the presence of tumour infiltrating lymphocytes while blocking a key mediator of immunosuppression in the tumour microenvironment.”

Brian Horsburgh has been named CEO of the company with Mark Cipriano stepping in as CFO. TVM Life Science Ventures VII is a venture capital fund domiciled in Montréal, Québec, which follows a new investment approach to developing pharmaceutical assets to human proof-of-concept in single-asset companies.

It is a unique collaboration between TVM

Capital Life Science and numerous limited partners, including Eli Lilly and Company (Lilly). The goal of the fund is to finance and access innovation while managing risk and sharing reward.

Modulate Therapeutics Inc. will leverage its extensive product development expertise to potentially bring its asset to human proofof-concept. If and when proof-of-concept is reached, Lilly will have an opportunity to acquire the molecule.

“Oncology is a key therapeutic area for Lilly, given our strong legacy and expertise in this area,” said Dr. Richard Gaynor, senior vice president, product development and medical affairs for Lilly Oncology.

“Chorus, an autonomous unit of Lilly, will also make their clinical-development expertise available to Modulate Therapeutics Inc., enabling an efficient and cost-effective way for the potential medicine to go from candidate selection to clinical proof-of-concept,” said Dr. Luc Marengere.

To see this story online visit http://biotechnologyfocus.ca/tvm-lifescience-ventures-fund-launches-newcompany-modulate-therapeutics-inc/

OncoGenex plans job cuts to conserve cash Vancouver, BC-OncoGenex Pharmaceuticals says it is laying off nearly a third of its workforce and cutting expenses not related to clinical development as part of a plan to extend its cash runway.

The company says it expects cost savings associated with the reduction of employees and consultants (by 27 per cent), together with the elimination of certain planned expenditures not required for the completion of ongoing trials, to extend cash runway into the third quarter of 2017. The company adds that it will remain focused on executing its clinical development plans in order to reach several nearterm milestones for both the custirsen and apatorsen programs.

The custirsen progam is in the midst of two Phase 3 trials in prostate and lung cancers. The first, testing custirsen with cabazitaxel as a second-line therapy in castrationresistant prostate cancer, will wrap up in the third quarter of this year. The second, pairing custirsen with docetaxel in patients with non-small cell lung cancer, is slated to generate final survival data in the first half of 2017, according to the company.

As of December 31, 2015, the company’s cash, cash equivalents and short-term investments were $55.2 million.

To see this story online visit http://biotechnologyfocus.ca/oncogenex-cuts-staff-to-conserve-cash/

By Melanie Szweras, Partner and Teresa MacLean, Associate at Bereskin & Parr LLP

Intellectual Property & Patenting

Canada to Consider Gene Patent Eligibility: Looking Abroad for Insight

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ew and inventive biological substances are generally patentable in Canada. These substances include, for example, genes, proteins, antibodies, hormones, vaccines, cell lines, bacteria and isolated genetic material as well as associated methods that make use of these products. In contrast, some of these types of inventions, primarily genes and methods of their use, have been under fire in other jurisdictions. Gene patent eligibility in Canada may soon be evaluated in light of a challenge brought by the Children’s Hospital of Eastern Ontario (“CHEO”).

The Canadian Intellectual Property Office’s (“CIPO”) practice manual, which is a guide for Examiners assessing applications for patents in Canada, confirms that “claims to nucleic acids, polypeptides, proteins and peptides are … directed to statutory matter.”1 The CHEO case now challenges this practice.

CHEO alleges that various patent claims, including isolated nucleic acid and method claims relating to assessing the risk of Long QT syndrome are invalid as being patent ineligible. Long QT syndrome is an inherited disorder affecting the heart’s electrical activity that can result in arrhythmias. A hearing date has not yet been established. As such, it may prove useful to examine the status of biological patenting in other jurisdictions to deduce how Canada may resolve the issue.

In the United States, naturally occurring genetic sequences are not patent eligible following the Supreme Court decision of Association for Molecular Pathology v Myriad Genetics Inc [Myriad].2 In Myriad, it was held that isolated nucleic acid claims relating to human breast and ovarian cancer related genes, BRCA1 and BRCA2, were unpatentable “products of nature”. However, claims to cDNA, synthetically created nucleic acid molecules that contain only part of the gene (the exons), were held to be patent eligible as cDNA is not naturally occurring. Presently, the US Patent and Trademark Office evaluates the patent eligibility of natural products such as genetic molecules or proteins by assessing whether the product has “markedly different characteristics” than its naturally occurring counterpart.3 If it does, it will be qualified for patent eligibility. If it does not, it is considered a “product of nature exception” and Examiners are to assess whether the claim as a whole recites “significantly more” than the exception.

Australia has recently considered the issue of whether isolated nucleic acid molecules constitute patentable subject matter.6 The High Court of Australia in D’Arcy v Myriad Genetics Inc followed a similar approach to the US in holding that claims directed to isolated BRCA1 nucleic acids were not patentable subject matter as they were not directed to a “manner of manufacture.”4 However, the Australian Patent Office (“IP Australia”) has adopted a different approach towards natural products, noting that the majority of the High Court “did not deliberate about ‘products of nature’ versus ‘artificially created products.”5 The guidance identifies isolated naturally occurring nucleic acid molecules as being “clearly excluded” subject matter.6 Claims to cDNA and synthetic nucleic acids, probes and primers, and isolated interfering/inhibitory nucleic acids are “excluded where they merely replicate the genetic information of a naturally occurring organism.”7 However, where the utility of the invention lies in genetic information that has been “made” (e.g. created or modified by human action), these types of claims may be patentable.8 It remains to be seen how this guidance will apply in practice. Further, IP Australia has expressly confirmed that methods of treatment and recombinant or isolated proteins are technical subject matter that has been previously found by Australian courts to be patent eligible.

The European biological patent landscape is much more permissive than that of the US or Australia. Biological material, whether isolated or produced

by means of a technical process, is patent eligible even if it previously occurred in nature provided its industrial application is disclosed in its patent application.9 However, mere discoveries, such as the discovery of a sequence or partial sequence of a gene, are not patentable without more.10 It is notable that the Canadian CHEO applicants are alleging that the isolated nucleic acid claims are directed to unpatentable subject matter since they are “naturally-occurring genetic sequences that encode for naturally-occurring human genes.”11 Further, CHEO asserts that the “isolation of the claimed nucleic acids from their natural environment requires trivial effort and does not constitute a sufficiently marked departure from the naturally-occurring unpatentable nucleic acids to warrant patentability under section 2.”12 The language used is similar to that used by the US Supreme Court in Myriad and the subsequent USPTO guidelines, suggesting that CHEO hopes that foreign cases may be influential in Canada.

Canada may well maintain its current position since there is no statutory basis to exclude nucleic acids from patentability and there is no prior case law on point. Should Canada follow the Australian approach, the effect on patentees may be not be so detrimental since only isolated genetic molecules that merely replicate information found in nature is expressly excluded subject matter. Biological material including proteins remain patent-eligible. However, should the Canadian decision focus on the “naturally occurring” versus man-made with “markedly different characteristics” dichotomy that looms large in the US, the patentability of biological inventions may be impacted.

If the Court takes its lead from the US, the biotechnology industry will need legislative reform, in order to make such inventions clearly patentable as has been done in Europe. In the meantime, Canadian applicants wishing to claim isolated biological material should prepare by including claims to biologics containing modifications or alterations compared to their naturally occurring counterparts and/or ensure that the patent application contains significantly more than the naturally occurring product itself.

References: 1.

CIPO, Manual of Patent Office Practice, December 2015 update (Ottawa-Gatineau: Industry Canada, 1998) at ch 17.02.04.

2. 133 S.Ct. 2107 (2013).

3. 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed Reg 74618 (2014) at 74623-74624; “July 2015 Update: Subject Matter Eligibility”, United States Patent and Trademark Office (July 30, 2015) online: USPTO <http://www. uspto.gov/sites/default/files/documents/ieg-july-2015-update.pdf>.

4. [2015] HCA 35.

5. Examination Practice following the High Court decision in D’Arcy v Myriad Genetics Inc, Australian Patent Office.

6. Ibid.

7. Ibid.

8. Ibid.

9. European Patent Convention Implementing Regulations, Rule 27(a) and 29 [EPC]; see also EC, Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions, [1998] OJ, L 213/13 at preamble (22) and Art 3 [EU Directive 98/44/EC].

10. European Patent Convention at Art 52(2)(a); see also EU Directive 98/44/EC, supra note 9 at preamble (16) and Art 5.

11. Children’s Hospital of Eastern Ontario v Transgenomic, Inc (14 May 2015), Toronto T-2249-14 (FCTD) (Amended Statement of Claim) at paragraph 54.

12. Ibid at paragraph 55.

February/March 2016 BIOTECHNOLOGY FOCUS 9

Venture Funds

| By Peter van der Velden

A Venture Capitalist’s Perspective

on Corporate Venturing

I

n 2012, Lumira Capital successfully established two new investment funds. It was a pretty abysmal time for venture capital (VC) fundraising in Canada, and in particular for life sciences-focused funds.

We were lucky as early on we had highly supportive lead orders from the Fonds de solidarité FTQ and Northleaf Capital Partners, but the reality at the time was that domestic sources of capital would not get us to a meaningfully sized fund. This despite having a great team, a history of success in the sector, and the unbelievable sector fundamentals that offered the opportunity for exceptional investment returns, and the ability to fundamentally change people’s lives through the development and commercialization of new medicines, devices and therapeutic approaches.

To address this life sciences innovation funding gap, we proactively initiated discussions with a number of potential corporate investors in our sector. While we entered into discussions with many potential partners, early on it became clear that one potential corporate in particular, Merck, had a bigger vision and strategy for the sector.

As Merck was evolving its strategy for innovation engagement in countries like Canada away from physical assets (i.e., large R&D centres), it was nonetheless looking to remain deeply engaged and committed to the Canadian life sciences innovation ecosystem.

As a result, quite independent of us, Merck had already decided to commit a significant pool of capital to five independently managed venture capital funds around the globe.

As such in 2012, Merck became a significant investor in our funds and today, because of their commitment and commitments from a number of leading Canadian VC sector investors including: Northleaf, the Fonds FTQ, Teralys Capital, Fondaction, the BDC and the Canadian Government via its Venture Capital Action Plan, Lumira has made 12 investments in the Canadian life sciences innovation ecosystem. Those 12 portfolio companies have secured over $250 million of additional equity 10 BIOTECHNOLOGY FOCUS February/March 2016

funding (10x the leverage on the capital deployed to date from our funds) and over $450 million of non-dilutive funding.

This capital has come from a combination of domestic and international venture capital firms, public market investors, granting foundations and many strategic investors from within the pharmaceutical industry including; Johnson and Johnson, Celgene, Iljin group, Merck, GSK, Eli Lilly, Mitsubishi Tanabe and Takeda. These companies currently employ over 200 executives, scientists, engineers and clinicians across Canada, and they are building the next wave of life science innovation in Canada.

So what has the evolution of corporate engagement in the VC sector looked like in the past four years?

In 2012, the idea of corporate venturing was clearly growing and becoming more commonplace, but today it is absolutely mainstream. In fact, according to Global Corporate Venturing, there are approximately 1,200 corporate venturing units (CVC), with some 300 having been added in just the past three years. Moreover, it looks like that growth will continue unabated. The impact of this on VC investment and the innovation ecosystem is very clear.

For calendar 2015 the National Venture Capital Association (NVCA) reported that corporate venture groups deployed over $7.5 billion in 905 deals in the entrepreneurial ecosystem, accounting for 13 per cent of all VC dollars invested for the year and 21 per cent of all deals. That number does not even reflect the incremental impact of capital many corporates, like Merck, that have also invested in traditional independent VC funds.

Of the total CVC capital invested in 2015, biotechnology companies received the second largest amount, some $1.2 billion across 133 deals, accounting for 16.3 per cent of dollars deployed by CVCs. This translated into 16.7 per cent of all VC dollars raised by biotechnology companies.

Notable Canadian biotechnology companies that received CVC investments in 2015 include Lumira portfolio companies enGene Inc.,Tharsos Therapeutics, and Zymeworks Inc., as well as companies such as Encycle Therapeutics, Cynapsus Therapeutics and Resverlogix Corp.

In 2012, Merck was part of an emerging

Venture Funds

and growing class of multi-nationals that Start-ups Start-ups recognized that venture investing could be backed backed by corporate an incremental and complementary tool for by independent VC firms VC firms business and innovation development. This was important as in many cases the internal R&D spending at many of the larger technology companies was falling (particular spending as a percentage of R&D –something we Risk-adjusted monthly have certainly seen in Canada in recent years).

Excess-of-market return Today, those fundamentals are even truer with corporate venture investment offering these companies both breadth and depth that goes far beyond their internal programs. The Average annual revenue growth breadth comes from a VC model that typically favours a huge deal flow funnel. The wide front end of the funnel encourages seeing and learning about, and from, as many investment opportunities as possible as a way of identifyIncrease in return on assets ing truly best-of-breed companies to invest in. The depth comes from a VC model that insights, perspectives and experience that are facilitates and supports an in depth undernot typically available outside the corporate standing of market niches and trends, often ecosystem. The third is legitimacy. In some in areas that may be adjacent to the current cases the CVC and their parent company can core focuses and franchises of the corporate lend legitimacy to an early stage venture’s strategy, thereby offering these companies a technology or business model. The fourth is window on future trends and opportunities. likely a consequence of the previous three.

But what has this meant for us? Firstly According to Harvard’s Josh Lerner, start-ups Merck has been a really good value-added that went public after being funded by at partner, providing insight and perspective that least one corporate venture-capital investor isn’t always easy to come by. More broadly, outperformed those funded exclusively by when we look at this from the perspective of independent VCs. For Lumira, more than a our companies, there are a number of clear third of our companies now have a CVC as an rationales for engaging with CVCs beyond investor and we would say that by-and-large the fact that their money is as green as any that engagement has been accretive, both for other investors. the companies and for the CVCs. The first is network. While good VC syndiDespite the positives, not all CVCs are cates tend to be pretty connected, it is hard created equal and the model tends to break to replicate the tens of thousands of employdown when the alignment is less than 100 per ees domiciled within many corporates. The cent. In the healthcare sector this breakdown second is resources. The right kinds of CVCs typically manifests itself in one of three ways: bring access to their marketing, manufactura) Trying to corporatize the development ing, and technology teams who have the opprocess – the CVC can forget that one of the portunity to share with the investee company

0.58%

1.71%

162.8%

189.9%

5.6%

17.3%

things that makes VC-backed development so great is that management teams are all-in and not encumbered by the bureaucracy of a large company. This means that emerging companies often can, and should, do things differently, faster and cheaper than the corporate entity from whence the CVC was born. b) Special rights - these typically manifest themselves as “rights-of-first-refusal” or “territorial access rights”, which leads to differential rights and value streams for the investors and tends to disadvantage the other investors (sometimes this can be compensated for by having the CVC pay an option premium that fairly recognizes the value of the incremental rights), and; c) Information management - while all good CVCs maintain clearly defined “Chinese walls”, there’s always a chance that data or information shared with a CVC investor gets to the other side of their house, giving the corporate parent competitive insight that is not rightfully theirs to have and that may in fact disadvantage the investee company.

Overall, CVCs, can offer emerging companies a number of advantages that when correctly managed and leveraged can be highly accretive. The key is being aware of the opportunities of misalignment and managing them accordingly. Ultimately when it all works well it can be truly fantastic. Just this month Lumira completed a sale of one of our companies to a strategic buyer that had initiated its relationship with the purchaser via an investment from its CVC group. Eighteen months ago investors in the company decided to let a CVC have a modest participation in a new financing. Having built a relationship with management, having seen the data, and recognizing that the evolution of the market would make this company a hot acquisition target in 12 months, the CVC’s parent company preemptively acquired the company through a structured option deal – a win for all stakeholders.

Peter van der Velden is a Managing General Partner at Lumira Capital, he is a Director and the immediate past President of the Canadian Venture Capital and Private Equity Association and a frequent writer and lecturer on topics related to healthcare innovation and venture capital.

Lumira is currently investing from Lumira Capital Fund II, the Merck Lumira Biotherapeutics Fund and its partner’s fund.

To see this story online visit www.biotechnologyfocus.ca/a-venturecapitalists-perspective-on-corporateventuring/ February/March 2016 BIOTECHNOLOGY FOCUS 11

Best Practices

| By Joyce Drohan and Jason Low

Calling All Startups

Top 5

Things You Need to Know to Grow

T

he current economic downturn has driven investor and government focus toward knowledge-based industries such as life sciences. The rising demand for improving patient outcomes through effective healthcare discoveries, changing demographics, and advancements in scientific/technological innovations create an opportunistic environment for life science startups. How will Canadian life science startups beat the odds and transform their scientific discoveries into commercial success?

How can these startups create the conditions that will support their successful and sustainable growth? Lack of understanding of these important aspects of your business puts you at risk of failing very early on.

The answer is not just access to capital but for startups to think like investors and to see their business as others do.

a First-Class 1 Assembling Team

12 BIOTECHNOLOGY FOCUS February/March 2016

Startups have challenges recruiting, attracting, and retaining top talent to grow their company with limited resources for salaries.

Most biotech companies rightly focus on the

scientists who are the ones to first develop their innovations. Where biotech startups often fail is in devaluing the business aspects of growing their startup and failing to obtain the appropriate skills and expertise to bring their product to the next stage of development and overcome the challenges of regulatory issues, licensing, strategy, finance, marketing, and sales. Startups are generally composed of quality scientists and are understaffed in most other aspects. This usually means that the founding scientists are operating outside their expertise by working on business plans, protecting their intellectual property (IP), regulatory filings, finance, marketing, and investor relations which are all activities that divert their core focus.

To be successful you will need to hire the right experience and a level of quality expertise to start building your business. Generally, you will not need a full-time Chief Executive Officer (CEO) at the very start of your company development. You may be able to attract a skilled executive on a part-time basis in exchange for shares in your company (to reduce cash outflow and increase their buy-in to the company’s continued success).

Guiding Questions to Consider

Best Practices

1

2

3

4

5

Assembling a First-Class Team

Developing a Great Business Plan

Obtaining Investment Capital

Finding the Right Advisors

Partnering with the Right Companies

• What type of resources will you need to hire?

• Who is your customer?

• Where can you get investment capital from?

• What advisors do you need?

• What business partners do you need?

• What type of skills and expertise do you need?

• How are you going to recruit, attract, and retain top talent?

• Do you need to have a CEO?

• What is your value proposition to your customer?

• How are you going to commercialize and deliver your product/service?

• How will your business make money and deliver value to shareholders?

• How can you access funding?

• How do you develop a business plan?

• How much funding is available?

• How do you claim tax credits?

• What are the different characteristics of various funding sources?

• How do you maximize cash flow?

• How do you set up the governance structure?

• When do you enter into a strategic partnership?

• How do you choose the right strategic partner?

• How do you structure the agreement?

• What regulatory/ legal issues do you need to consider?

PricewaterhouseCoopers LLP

Other aspects of the business can be managed through your interim CEO who can also manage contractors and advisors, as needed, to complete work on raising capital, legal issues, regulatory affairs, finances, and taxes. If you plan for your company to go public, it would be important to have a CEO who has already taken a company public before and is familiar with the initial public offering (IPO) process.

The critical end goal is to develop and/or obtain a quality management team (which includes a business executive) to secure funding/investment as this adds to the credibility of your company and establishes trust with any future investors and partners.

2Developing a Great Business Plan

You know you have a great product/service but do you have a completed detailed business plan? Nothing kills a startup faster than an innovation with no clear plan to commercialize. Your business plan must be able to robustly answer the following key questions: • What problem does your product solve?

• How is it unique?

• What advantages does it have over the currently available treatments or over the competition?

• Who is your customer?

• How will you attract, retain, and grow your customer base?

• How much is each customer worth?

• What is your business model?

• What is your product lifecycle?

• What funding will you need to get to your milestones?

• How will your investors make money?

Knowing how your product is unique and different from existing products is one of your biggest considerations in bringing your product to market. You will need to prove that your product is backed by credible and compelling science with a real opportunity to have positive impacts on patients. Support and provide detail on the science behind your product claims with high quality, reproducible, and reliable data to convincingly attract partnerships and investment… and put this in your business plan.

It is essential for you to develop a comprehensive business plan backed by market research and market data on how you will attract, maintain, and grow a dedicated customer base in order to generate a return on investment. Customer acquisition costs and overall customer lifecycle costs will need to be considered and will inform the segments that you should target. You will need to define your value proposition for each targeted customer segment(s) and clearly indicate why customers will buy from you and not from your competitors.

Biotech and life sciences startups have inherently more risk attached to them due to

the risky nature of research and development (R&D) to bring a product to market. Your business plan needs to articulate a thoughtful understanding of how to mitigate risk with a defined timeline as your product goes through the various phases of development in order to align with your investors’ and partners’ expectations.

Your business plan needs to be well structured and show a solid case for why you need capital, who you will get funding from, when you need to receive the funds, what you will do with the capital, and how much you need to grow your business and create value for shareholders. You will likely need advice on how to structure your company’s rounds of funding.

If you don’t know how to create a proper business plan that describes how to successfully develop your company, get professional help – skilled business executives, consultants, universities, and government organizations are great places to start. There are also many online services available to support you in developing your plan.

Investment 3Obtaining Capital

The single most important question in the startup community is how and where to raise investment capital? This is an even more important consideration in life sciences because life science startups tend to be more capitalFebruary/March 2016 BIOTECHNOLOGY FOCUS 13

Best Practices

The following table provides a brief summary of the typical characteristics of various funding sources: Requirement Amount of capital available Minimum capital investment Hands-on management expertise provided Turnaround time for funds to be distributed Company control required

Government Programs

Family and Friends

Venture Capital

Angel Investors

High

Low

Medium/High

Low (<$50k)

Low (<$20k)

High Medium/High (millions)

Yes/No

No

Yes

No

Long

Short

Long

Short

No

No

Yes

No

intensive than other startups due to higher R&D costs.

There are four main sources (governmentfunded programs, family and friends, angel investors, and venture capital) of investment capital for life science startups and the ones you choose will be dependent on factors such as: timing, amount of capital required, amount of company control you are willing to give up, and level of expertise required. Note that private equity (PE) has not been included as typical PE firms buy mature companies and will take 100% ownership and control of the company. Also not included is crowdfunding, which is growing in popularity for technology startups but has not been a significant source of capital for biotech startups.

The first place startups typically go to for financial support is government-funded programs that are mandated to support the growth of Canadian life sciences companies and researchers. One such place is the Business Development Bank of Canada (BDC), a federal Crown corporation that is solely funded by the Government of Canada. The BDC has a mandate to support entrepreneurs in all industries and in all stages of development, with a focus on small to medium-sized companies. Specific to life sciences, BDC operates the Healthcare Venture Fund that “invests in transformative Canadian companies that will dramatically increase healthcare productivity by reducing healthcare costs while improving patient health”.1 This fund is specifically looking to invest in devices, drugs diagnostics, and digital health sectors.

Family and friends are usually the next place to go as trusted resources you may 14 BIOTECHNOLOGY FOCUS February/March 2016

turn to for funds to get your company off the ground. They are easy to access and already have an established relationship with you.

Although this may work initially, the amount of available funding is generally low, typically between $1k and $20k. It also becomes exceedingly difficult to raise sufficient capital using this method as both your company and capital requirements grow.

Angel investors are usually wealthy and well-connected individuals who can provide startup capital similar to venture capital (VC) funds but do not necessarily have the same restrictions. Angels can invest in smaller increments, do not require lengthy due diligence processes, and typically take a hands-off approach to management and will not control the operations of your company.2 The downside is that many life science startups would greatly benefit from a more hands-on approach to help facilitate and guide them to the next stage in their company’s life cycle.

Both VCs and angel investors will look for an appropriate and realistic valuation of your company based on sound analysis. An excessive valuation indicates that you may have overvalued your startup.

In order to obtain additional capital, many startups will try and access venture capital funding. Venture Capital funding comes in many shapes and sizes, with some specializing in very specific disease areas and others in general life science investments.

Generally VCs can provide significant value to life science startups by not only providing capital, but by also providing handson expertise in building and maturing the company. VC firms also have due diligence

Low (<$100k)

criteria used to assess the viability of investing in startup companies. This due diligence process takes time and may mean that there is a time lag before funds are distributed, and many VC firms will also have minimum deal size thresholds. For example, they may not invest in amounts smaller than several million dollars. Lastly, VC firms will typically sit on the board of directors at your company to monitor the performance and capability of the management team to protect their investment.

Access to VC funding is oftentimes a critical factor in determining a startup’s eventual success or demise. Fortunately, the availability of venture capital in Canada is increasing ($2.4B in 2014) and is now eclipsing pre-recession levels from 2008; there is a significant opportunity for life science startups to capitalize on this momentum.

Although the magnitude of VC funding in Canada is not nearly as high as in other countries such as the United States, Canadian VC funding is growing in the early stage of company development (54% growth from $392M in 2013 to $602M in 2014) which signals that VC investors are placing increased emphasis on startups. VC investment in the life science sector is also showing good growth with an increase of 78% in 2014 to $451M (from $253M in 2013).3

the Right 4Finding Advisors

It is oftentimes difficult for you to grow and sustain your startup without tapping into a broader mix of expertise. Use of external advisors (business, financial, peer, legal, and tax)

Best Practices will allow you to obtain specialist advice on how your company can improve and grow.

Business advisors function to help provide strategic advice and drive the development/ refinement of all aspects of your business plan (including marketing, organizational structure, operations, etc.). We have seen many life science startups fail at this critical point because they are heavily focused on research and product development and not as focused on the commercialization aspect of their business. The business advisor helps you to take your product/service and bring it to market.

You need to value business advice equally as important as your scientific innovation/R&D to balance commercial growth for your startup.

An important consideration for life sciences startups is the composition of their board of directors. The board should be comprised of individuals with experience that will aid the company (e.g., a clinical stage company will want someone who has previously run clinical trials and understands the trial design and clinical operations). A board composition should also be created based on the company’s future intention to remain private or go public.

Financial advisors serve the important role of helping you to manage your financial planning in order to achieve short and long-term financial goals. Their knowledge of financial laws and legal restrictions will help you in securing funding and identifying investment opportunities. Financial advisors will also assist you in assessing the performance of your company through financial analysis and help you in refining your budgets/forecasts.

Peer advisors are individuals that are similar to you, entrepreneurs who operate in a comparable environment, and have a shared purpose of growing and developing the life sciences sector. The value of peer advisors is through shared experiences and the understanding of each other’s growing pains.

A mentor/mentee relationship is an effective and common way of structuring this type of advisory relationship. You can find these advisors at universities, venture capital meetings, and through online forums.

Legal advisors are critical in the early stages of your company and you should consider lawyers with specific expertise in the life sciences sector and that have previously worked with startups. Quality legal advice will help you structure your company and set up your company correctly to fit your business model (from your business plan). Services include providing advice on IP, filing patents, drafting licensing agreements, developing company share structures, advising on entering the IPO market, etc. Many credible firms will offer heavily discounted advice during the early stages of a startup and increase their fees as

your company grows. Don’t just use your friend who just graduated from law school for some free advice.

Tax advisors are critically important to life science startups who have significant R&D expenses. The federal and provincial governments currently allow significant tax incentives/credits for qualifying expenditures under the Scientific Research and Experimental Development (SR&ED) program. Recent legislation in 2013 has changed the way SR&ED credits are calculated by making capital property ineligible for deduction.4 Tax advisors will be able to assist you in reviewing and filing your SR&ED claims and helping to maximize after-tax cash flows with appropriate tax planning. Tax advisors with experience in life sciences can be found at accounting firms that have special divisions specializing in biotech startups and often have startup programs and other services to support your company.

Same as the legal advice, don’t use your friend who just received his accounting designation for tax advice. It will not be sufficient.

with the 5Partnering Right Companies

Determining the right partners with whom to develop formal business alliances could help drive and grow your startup through expertise, access, and the ability to scale your innovation. There are three types of partners for you to consider: licensing partners, full collaboration partners on R&D and commercialization, and limited partners with agreements such as sales and marketing (co-promotion).

Keep in mind that the goal of the partnership is a two-way, participative relationship and for each partner to help one another in order to further the interests of the partnership. All three types of partnerships could, for example, be achieved by partnering with a large pharmaceutical company to develop and commercialize your innovation. The number of these collaborations is growing as pharmaceutical companies look to rationalize their R&D functions and de-risk their pipelines by forming partnerships with more established startups who have already invested in phase 2 clinical trials.

Partnerships are significant management decisions and key issues to consider when thinking about strategic partnerships are: When do you enter into a strategic partnership?

You need to do your homework to understand the value of your company and enter a strategic partnership at an appropriate point in time. Your company will not be as highly valued if you enter the partnership too early without a solid foundation or too

late when you may have used up all of your cash and don’t want to go it alone. You must balance the business risk and funding requirements of developing the startup on your own against what you could gain or lose in a partnership agreement.

How do you choose the right strategic partner?

Research will need to be done to find the right strategic partner. Will they understand and share your vision? Do they understand the market that your product will compete in? Do they have the capability and capacity to act as your partner? And will they be able to deliver on the benefits you are looking to gain from a strategic partnership?

How do you structure the agreement?

Obtain specialist legal advice to structure an agreement that protects your IP, delivers on the expected partnership benefits on both sides, and clearly defines the level of control you have over your company and IP moving forward.

Finally…

Be passionate and enthusiastic about your company. Be able to tell potential investors and partners about your vision for your company. Be able to describe the science and how your innovation will impact patient outcomes or patient experience. People and companies will want to work with you if you have an exciting discovery to share with the world. Good luck.

References: 1. https://www.bdc.ca/en/bdc-capital/ venture-capital/strategic-approach/ pages/health-venture-fund.aspx 2. http://www.businessinsider.com/ how-angel-investing-is-different-thanventure-capital-2010-3 3. https://www.ic.gc.ca/eic/site/061. nsf/vwapj/VCMonitor-MoniteurCR_Q4T4_2014_eng.pdf/$FILE/VCMonitorMoniteurCR_Q4-T4_2014_eng.pdf 4. http://www.cra-arc.gc.ca/txcrdt/ sred-rsde/clmng/cptlxpndtrs-eng.html Joyce Drohan is a Consulting Director for Healthcare and Pharma Life Sciences for PwC Jason Low is a Senior Consultant in Financial Operations for PwC For more information on PwC, or to see more PwC content visit www.pwc.com/ca/healthcare To see this story online visit www.biotechnologyfocus.ca/calling-all-startups-top-5-things-you-need-to-know-to-grow/ February/March 2016 BIOTECHNOLOGY FOCUS 15

Innovator

| By Shawn Lawrence

She’s got the ‘Midas’ Touch She made COLD-FX into a winner-Can she do it again with Allergy-FX? Dr. Jacqueline Shan is well regarded in the industry for her accomplishments, first and foremost as the woman behind one of the greatest product success stories in Canadian biotech history, COLD-FX, and secondly as a pioneer in the field of natural medicine. Few have achieved such a large national profile and stardom in such a short period of time.

16 BIOTECHNOLOGY FOCUS February/March 2016

A

s the co-founder of Afexa Life Sciences and co-creator of COLD-FX, she was able to take a natural product made of North American ginseng, and make it mainstream. The product would ultimately outsell the biggest brand-name products and become Canada’s #1 cold and flu remedy.

Now, with the page turned on the next chapter in her career and with her new company, Afinity Life Sciences, the scientist turned entrepreneur is trying to apply her ‘Midas’ touch on a whole new generation of natural medicines.

Among her line-up of products are a series of remedies which target joint inflammation and pain (Afinity Arthritic Care), blood pressure and improved heart function (Afinity Cardio Health) and dementia (Afinity Cognitive Care). But according to Shan, it’s the company’s latest new product

that could prove to be a real winner.

The product, Allergy-FX, is a natural health remedy used to treat seasonal and environmental allergies. Derived in a special, proprietary process from certified organic eggs (from the egg white and yolk only) obtained from a special species of Japanese quails (Coturnix cortunix), it is the product of roughly 50 years of research and development. It started with the work of a French doctor whose patients included quail farmers and their families. He noticed that they seemed to have fewer allergies than the general population and theorized that quail eggs were the reason why.

Explaining how Allergy-FX works, Dr. Shan says that many allergens such as pollen, dust mites, mold, and cat and dog dander contain specific proteins called tryptases. Upon inhalation, tryptases stimulate the release of histamines from mast cells and cause allergy symptoms such as itchy nose, watery

Innovator “I’ve always known that before there can be acceptance of natural health products by the Western medical community, questions related to active ingredients and mechanisms of action need to be answered.” eyes, scratchy throat etc. Allergy-FX utilizes a unique mechanism of action that prevents tryptases from initiating and compounding the physiological cascade of events that leads to a full-blown allergic response.

“If you understand the whole mechanism behind how allergies develop, most are the overreaction of the immune system to an allergen,” she says. “The majority of OTC drugs are synthetic or histamine blockers. The active ingredients in Allergy-FX are working more upstream, blocking the actual allergen by attaching to the mast cells which are producing the histamines or what is called tryptase inhibition.”

From the moment Dr. Shan encountered it, she knew she had to have it.

“It’s pretty evident as I’m getting up there in age, that I don’t have another 20 years to start from scratch, develop a product in the lab and take it all the way to market. So I decided this time around that you can adopt your baby, you don’t have to give birth to it,” she says.

After licensing the product, the next step involved finding a way to provide medical credibility to it as an allergy remedy. She explains the reason for taking this approach comes down to the fact that most natural medicinal products are made up of multiple active ingredients, and as such, they are like a “black box” to drug developers.

“I’ve always known that before there can be acceptance of natural health products by the Western medical community, questions related to active ingredients and mechanisms of action need to be answered,” she says. She adds that standardization is also critical to ensuring consistency and safety of the product.

In developing the product that put her on the map, one of Dr. Shan’s first steps was developing such a standardization technology called ChemBioPrint. The technology characterizes chemically (chemical fingerprinting) and pharmacologically (biological fingerprinting) through a variety of activity assays. COLD-FX underwent extensive clinical studies using the technology to identify the active compounds in it and to explain its efficacy. The approach was not only crucial to validating COLD-FX, but it was also a big reason that it was one of the first natural remedies that big pharma took seriously.

It’s not just the multiple active ingredients

that make natural products hard to standardize either. Natural products can also be differentiated by where the raw material comes from. Again, this was the case with COLD-FX and its main active ingredient which were isolated from North American ginseng.

“When we did our own evaluation on COLD-FX and the ginseng we used, even in Canada, the product harvested in Ontario compared to what we harvested in BC had different chemical profiles. It was still the same species, but the multi-chemical ingredients were variable.”

She explains these are just some of the reasons that natural health medicines have a bad reputation and why people question the science behind them.

“This was the genesis of the ChemBioPrint technology. We needed to have a technology that could help us better understand the active ingredients and to assure consumers that the natural health products they purchase were scientifically proven safe and effective with exceptional consistency.”

It is the same methodology she’s taking with Allergy-FX, but this time the technology being used is called Afinity Fingerprinting Technology.

In addition to this approach, the company has also conducted a double-blind placebo controlled study on Allergy-FX that Shan says produced very promising results which were published in a medical journal.

“It was a very interesting study in which we included pollens and other environmental allergens, mixed them and had our test subjects inhale them,” she explains. “So you’re artificially infecting them, then, you have one group take Allergy-FX, the other the placebo. Then we measure their response in two ways. The first is using an instrument that can measure the air flow going through their nose, because when you have allergy symptoms you get a blockage, therefore the flow coming in will be smaller. If the product works they will have more air flow. The other form of measurement is through a response diary. We measure the symptoms, like red, watery eyes, sneezing, itchy nose, those kind of symptoms using a scoring system.”

According to Dr. Shan, the people in the treatment group experienced better nasal flow and their allergy symptoms were significantly

lower. Additionally, the clinical results showed that Allergy-FX provided relief in as quickly as 15 minutes for a range of allergens including tree, grass and ragweed pollen, dust mites, mold, as well as to cat and dog dander.

In addition to the clinical trial, the product also performed well in an independent marketing study against its competitors.

“When you’re launching a customer-based product usually the larger companies conduct such a study, but for smaller or natural product companies they’re actually very rare,” she says. “With the promising clinical trial results, we thought why not see how we stack up against the competition.”

In this study, approximately 100 people were given a simple questionnaire, comparing Allergy FX to other products on the market. Questions ranged from packaging, claims of effectiveness, value of the product and pricing. The product scored high surpassing the biggest sellers of allergy drugs. Even more surprisingly, after using the product, the same test group responded even more favorably to the product.

“I was shocked, because typically in these market studies you see a decline after participants try it, but when they polled them again after trying it, they actually liked it even more,” she says.

It’s also no accident that much of AllergyFX’s branding, including its name and packaging bears such a striking resemblance to COLD-FX. When it comes to marketing Dr. Shan says she won’t distance itself from the brand that made her famous. Moreover, the results of both these studies have given Dr. Shan more confidence about the prospects of Allergy-FX, and she has begun the commercialization process with the product already available in natural health food stores and select chain and drug stores.

“It’s a big market, as a lot of people in developed countries have allergies, especially in Canada, where there are approximately 10 million allergy sufferers of one kind or another,” she says, “If we do our job right, this spring we should see it everywhere.”

To see this story online visit www.biotechnologyfocus.ca/shes-got-themidas-touch February/March 2016 BIOTECHNOLOGY FOCUS 17

The Top 5

| Compiled by Shawn Lawrence

The Top 5 Canadian Biotech CEOs who elevate their companies

Ali Tehrani

They are industry leaders that capture the attention and confidence of the Canadian biotech investment community. They represent some of the best and brightest Chief Executive Officers on the Canadian biotech scene and the who’s who of the industry. With the help of some leading Canadian biotech analysts and investors, we’ve put together a list of who we think the Top 5 CEOs who elevate their companies are.

The criteria for making the list: They are CEOs who have delivered in the past and are with companies where they have a chance of delivering in the future. They aren’t necessarily leading the best companies, but rather, they qualify because they are the best leaders.

Cheung Anthony

David Main

Clarissa Desjardins Simon Pimstone

Ali Tehrani Founder |CEO and President | Zymeworks It should surprise no one that Dr. Ali Tehrani was a unanimous choice to appear on this list. In just 13 years, he has turned Zymeworks into one of the most talked about companies in the sector. As Tehrani puts it, ‘We’ve gone from geek to sheik.’ It starts with the man at the top, coupled with the 18 BIOTECHNOLOGY FOCUS February/March 2016

company’s two most successful platform technologies, Azymetric™ and Effect™.

Both technologies have drawn significant interest from big pharma companies, with Zymeworks signing collaborative deals with Eli Lilly, Merck; and big biotech Celgene for use of the Azymetric platform in the development of bispecific antibodies and antibody-drug conjugates. Additionally, GSK is using the Effect™ platform to enable its own regular mono-specific antibodies to bet-

ter recruit immune cells for the destruction of disease cells. On top of these marquee partnerships, Zymeworks has also completed several multi-million dollar rounds of financing, licensed new technologies, while continuing to strengthen its own R&D capabilities. It’s not just its strategic investments, acquisitions, mergers, and licensing deals that have people talking, Zymeworks has been growing fast and furious both in terms of its internal activities and its staff.

THE TOP 5 CLARISSA DESJARDINS FOUNDER AND CEO | CLEMENTIA Dr. Clarissa Desjardins founded Clementia in 2011 and has served as the company’s chief executive officer ever since. Her company is rapidly developing its lead product candidate, palovarotene, as an oral therapy for fibrodysplasia ossificans progressiva (FOP), an extremely rare and disabling genetic disease of the connective tissues. The drug is currently in Phase 2 clinical trials. Moreover, just last year she led an oversubscribed $60 million mezzanine financing round, which is a very good indication that investors are very confident not just in Clementia, but Clarissa as well. Prior to Clementia, she founded two other successful biotech companies, including Advanced Bioconcept, a research reagent and diagnostics company sold to NEN Life Sciences (Perkin Elmer) in 1998 and Caprion Pharmaceuticals (now Thallion), a biotechnology company focused on proteomic biomarker discovery and drug development.

SIMON PIMSTONE FOUNDER, CEO | XENON Dr. Simon Pimstone is the long-time CEO of Xenon, a company focused on discovering

therapies using an informatics approach.

While a long time in the making (the company was founded in 1996), under his watch Xenon has over the last several years been able to forge excellent partnerships with such big pharma companies as Teva, Merck and Genentech (Roche). Xenon also has a pipeline of its own products in clinical trials.

Moreover, the company’s platform technology was used to develop uniQure’s Glybera treatment for the orphan disease lipoprotein lipase deficiency, the first gene therapy approved in the EU. For these reasons, Dr. Pimstone is regarded as one of the top CEO’s on Canada’s west coast.

DAVID MAIN FOUNDER | PRESIDENT & CEO | AQUINOX PHARMA David Main is a co-founder, president and CEO of Aquinox Pharma, a clinical-stage pharmaceutical company discovering and developing novel drug candidates to treat inflammation and cancer. He has overseen the advancement of the company’s lead product, AQX-1125, from being a target validation program to now entering Phase 3 studies.

During this time he has also been responsible for the transition of Aquinox from a private company to a NASDAQ-listed public com-

pany following its IPO (a rarity for Canadian biotech), while raising over US$200 million. In addition to his position at Aquinox, he plays a key leadership role in Canadian biotech as the current chair of BIOTECanada and director with the Bio Organization.

ANTHONY CHEUNG PRESIDENT & CEO | ENGENE INC. It’s been five years since Dr. Anthony Cheung stepped into the position of CEO of the Montreal-based company he founded (serving as its chief scientific officer prior to that), and he has notched a few victories on his belt in that short period. Among his major accomplishments, he’s led a $13.5M Series B financing while increasing his company’s deal flow through two major pharma partnerships with Japanese pharma company Takeda and industry heavyweight Johnson & Johnson. Much of the interest from pharma focuses on the company’s discovery and development of a unique gene delivery formulation or “Gene Pill”, which has the potential to be a platform for oral delivery of a wide range of protein drugs.

To see this story online visit www.biotechnologyfocus.ca/ the-top5-canadian-biotech-ceos-who-elevate-theircompanies/

HONOURABLE MENTIONS Perhaps one of the most interesting aspects of our selections was that there were so many outstanding CEO’s to choose from. In fact there were many beyond the Top 5 that received multiple votes and narrowly missed the cut. We’ve included them in the Honorable mention list below:

MARK THOMPSON CEO of Concordia Healthcare

ANTHONY GIOVINAZZO Director, President and CEO of Cynapsus Therapeutics

ROBERTO BELLINI President and CEO of Bellus Health

JONATHAN GOODMAN, Founder, President and CEO of Knight Therapeutics Inc.

ANDY SHELDON President and CEO of Medicago

NIC STIERNHOLM President and CEO of Trillium Therapeutics February/March 2016 BIOTECHNOLOGY FOCUS 19

Pharma Partnerships

| Compiled by Shawn Lawrence

Explain what it is about your technology that has attracted interest from big pharma?

Q&A

Partnering with Pharma: It takes more than just luck!

In this special Q&A roundtable, we’ve asked three Canadian biotech CEOs to share their pharma partnering experiences, telling us why and how they did it, and where they see these partnerships taking them.

Participating in this roundtable are Zymeworks president & CEO Dr. Ali Tehrani, enGene Inc. president &CEO Dr. Anthony Cheung, and AbCellera CEO Dr. Carl Hansen

Ali Tehrani: At the highest level, our platforms enable the development of biologics. In the world of therapeutics you really have two types of therapeutics, those being developed using synthetic chemistry or small molecules, and therapeutics that are large molecules also known as biologics. And biologics today have generated a lot more buzz because they tend to be more specific, less toxic, and in many cases more potent and efficacious. If you look at the top four or five selling drugs in the world today, they’re all large molecule protein-based biologics that tend to provide less toxicity, more specificity and more potency to the benefit of patients.

What our platforms bring to the table is that they enable the development of multi-specific biologics, which are even more specific for binding to disease targets than traditional protein based therapeutics.

Currently, the top selling protein therapeutics are antibody therapeutics. Typically these antibodies bind to a single disease target, which they either neutralize or the binding results in an immune response from the body to destroy the respective disease cells. At Zymeworks, we build bi-specific antibody-based therapeutics that bind to two disease targets simultaneously. By having a bi-specific, you’re able to not only be more specific towards the disease cells, but also take advantage of the synergies in the biology’s of these disease targets, shutting them down even more effectively. In a very broad setting, that’s what our platforms have enabled for our pharma partners, and why they have chosen us specifically. With the Azymetric™ scaffold, it’s like having an engine that can be easily tailored and tuned to target two different disease targets at the same time. It is very easily tunable and tailored, and that’s why we can license it to different pharma partners. Celgene, Elli Lilly and Merck are using the Azymetric™ platform to develop their own desired bi-specific antibodies. GSK is using a different platform called EFECT™. This is a platform that enables a regular mono-specific antibody, like the type that is in your body right now, to better recruit immune cells for the destruction of the disease cells. Right now they’re not interested in the bi-specific feature, but they do want to supercharge the very same antibodies that bind to a single disease target in everybody’s bodies, to better recruit other cells to come along and destroy the disease cells.

20 BIOTECHNOLOGY FOCUS February/March 2016

Anthony Cheung: EnGene is a gene therapy company. What EnGene does very well is that we are able to deliver genes safely and effectively to mucosal cells in the

gastrointestinal (GI) tract. The benefits of our technology are two-fold; first, it’s a unique way of concentrating protein drugs to the gut, and secondly our platform is capable of delivering protein drugs orally.

Unlike other gene therapy companies, we’re not using a viral vector to deliver the DNA payload. Rather, we’ve developed a proprietary vector specifically for the gut cell and a differentiating feature of our vector is that it can be administered orally. In fact, we have demonstrated that we can deliver a “Gene Pill” in animals and have the gene expressed by the cells that line the GI tract. We call it a “Gene Pill” because essentially we’re delivering genes in the form of a pill.

When this pill gets to the right area of the gut, the payload, consisting of little nanoparticles made with the polymer proprietary to EnGene, and these little nanoparticles will shuttle or carry the DNA into the mucosal cells that line the GI tract. Once they’re in the cells, the genes get expressed and then the protein is made and subsequently secreted into the blood. There is great potential to turn this technology into a platform to deliver proteins orally. Just as important, our technology offers a way to concentrate proteins to the gut, while limiting the drug from being broadly distributed in the body. The pharma industry is very excited about using our “Gene Pill” technology to address various gastrointestinal diseases, such as inflammatory bowel disease and gut dysmotility.

The global partnership we announced with Johnson & Johnson last October was to collaborate on a program where we deliver a tolerogenic and anti-inflammatory cytokine IL-10 locally to the GI tract to treat ulcerative colitis. The second pharma partnership transaction we announced with Takeda last month involved using our ‘Gene Pill” platform to achieve gut-localized delivery of two undisclosed targets for GI diseases. In addition, Takeda will collaborate with enGene in developing ‘Gene Pill’ into a platform for oral delivery of antibodies.

Carl Hansen: We started the company about three years ago to develop a technology platform that brings high-throughput single cell analysis and genomics methods to immunology, to enable the deep analysis of natural immune repertoires to discovery high value molecules, antibodies or T cell receptors, for therapeutic development. Our main focus to date has been on the discovery of antibodies from people or immunized animals. However, I think in the next year or two, it is also going to make a very significant impact on immunotherapy through the discovery of antigen specific T cells or TCRs. The thing that distinguishes this over what has been done before is really the combination of speed, flexibility, throughput, Continued on page 22

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Pharma Partnerships Continued from page 20 and efficiency. On the one hand it is dramatically faster and can look more deeply into the repertoires to find antibodies with rare properties, but perhaps equally important is that it is amenable to a wide array of different assays and different immune sources, both in terms of species and tissues. One of the things about AbCellera’s platform is that we’ve attracted interest from several groups and we’ve done several deals in addition to the ones that were announced, and these have been driven by very different problems and specifications. I think that speaks very well to the versatility of this technology. In terms of the our pharma partnerships with Teva and Merck, I would say that they are both similar in the sense that they address antibody discovery problems that have proven intractable in house, and they’re looking to see if faster, more efficient, higher throughput technologies can be more effective at generating panels of candidates that they can bring forward into development. That’s what’s common between the two. One of these partnerships also has a strong interest in the potential for a future transfer of technology, to bring it in house.

wasn’t for that deal, honestly, I don’t know if we would be around to have this discussion right now. It came at a very crucial time, it validated us in the eyes of many investors. It’s like the release of your first hit song, people become curious about your album. They ask are if you a one hit wonder? The questions start to linger, can you do it again and is there really substance there? When we did the Elli Lilly deal, especially two deals with them in the same year, people went alright, I don’t think you’re a one hit wonder, but I still want to hear the rest of your album before deciding. Then when we did the Celgene and GSK deals, people started to say now there’s real substance here, you guys have released a good album, now I’m willing to buy it and listen to it over and over again.

So now is the time that people are coming to us, they’re knocking on our door, and people are saying I think there’s something really good here. Many are getting nervous as well because we’re doing deals with their competitors, and more so because they have needs and they’ve gone around and they’ve tried other technologies and companies and

Canadian biotech companies have a hard enough time finding one pharma partner, and yet you’ve all managed to find multiple partners. Is there a secret formula or method to forging these partnerships?

Ali Tehrani: In a world of analogies, this is very similar to what they say about making your first million dollars: It’s the hardest to make and after that, it gets easier. Getting the very first pharma partnership is absolutely critical but it too is extremely difficult.

Our very first pharma partnership was with Merck and that followed the classic formula that you need to find a champion in the companies that you’re targeting. And that champion really needs to go to bat for you to get a partnership together. That’s the hardest part, and if there was going to be a formula, I would say that is it. Finding that champion, and not just someone who really likes you, but rather someone that can really speak up for you is the hardest part. Once someone is willing to go to bat for you, then it all comes together. Of course the second piece of the formula is don’t be greedy. When someone decides to take a chance on you, you can’t think you’re all that. Perhaps if I was going to say we did anything right in our Merck deal, we found the right champion and we did not greedy. Merck was a very fair partner and if it 22 BIOTECHNOLOGY FOCUS February/March 2016

it hasn’t quite worked out for them. Now they see that we have helped four other companies to go forward, especially their competitors, and they go damn, I have have to have access to that too. But again, that very first deal is the critical one and the hardest one to get.

Anthony Cheung: I believe first and foremost the science needs to be solid. The technical due diligence conducted by our pharma partners has been very intense and in-depth. Secondly, you really have to understand what unmet needs that these pharma companies are looking to address and succinctly communicate to them how your technology offers a solution to their needs. Of course, these types of partnerships don’t happen overnight, it is essential to build strong relationship with your internal champions within the partner organizations. In addition to letting them understand what your technology is about, it is also important to demonstrate to them that you have the ability to deliver on your prom-

ises. For example, in the case of our partnership with J&J, they had been tracking us for some time. They knew what we’re doing, what the technology was about and we have repeatedly demonstrated to them our ability to address their concerns with empirical evidence. For each partnership, it is really important to invest the time and effort to cultivate relationships and build trust.

Carl Hansen: There’s quick answer to this question, but I can relate our experience and our philosophy for doing these types of partnerships. You need to appreciate that these partners are very sophisticated in what they do and if you are a technology platform company, you’re trying to engage with groups that have invested heavily and that have made themselves already worldclass in this field. Based on that, the bar is going to be very high in terms of the science, and you will have to come to them with something that really has disruptive potential or is really transformational - something that addresses a problem that falls outside of current solutions.

In terms of getting noticed I believe you need to do your homework identify where you can bring real value. Next is finding the best venue for getting their attention. I find that this is usually at conferences and scientific meetings, because in my experience, this kind of sell happens both through the science and through the personal interactions. If you can stand up there with great data, and passion, and with a compelling story of what the technology can bring to solve a real problem, than you will start to get their attention and that starts the conversation down the road. And so far, that kind of outreach has been the most successful for us and I think that many groups would say the same thing.

Going back to your first deal, how much homework did you do on them as a partner and how did you know they were a strategic fit?

Ali Tehrani: It’s a lot like picking the school you want to go to. Either you have one favorite and bet everything on it, or you sit back and research all these schools

Pharma Partnerships We’re always looking for opportunities to strengthen our R&D capabilities. And of course there’s the financial benefits and having a regular revenue stream.

— Ali Tehrani

Anthony Cheung: In that might be a potential fit. You go visit them, look at the campus and you do your homework end-to-end before committing. In the case of Merck, we knew exactly that they were going to be the right partner for us because they hadn’t done a bi-specific deal with anyone else. Secondly, we knew the folks who were in charge of biologics research at Merck, their caliber and reputation. We even did a big SWOT organizational chart on the company to know exactly how the decisions flow up, who would make the ultimate calls.

We did have alternatives, and it wasn’t like Merck was the only one who answered our calls. As a matter of fact when we did the deal with Merck, we were simultaneously negotiating with another big pharma. You have to be very strategic about these things and it’s not about who answers your call, it’s about who you target and how you get it across the finish line. Also, it’s important to note that we went to them first. When you’re unknown, sitting in Vancouver, BC or any other place, it is your job and responsibility to do the convincing.

We were very active in the networking circles, scientific conferences, and all the places that these folks go to and in a very targeted fashion we would approach them. We knew exactly what their points of pain were and we tailored our solutions as such. And if you do that well enough, they will say ok, I’m interested to hear more, here’s my card and give me a call. From there, you can set up a meeting to tell them exactly how you’re going to deal with whatever it is they want to do. And if you’re good enough and you’ve done your homework, then you get a second date and a third date and ultimately they go this is good enough, we should really consider doing a partnership together. It’s a process.

the case of J&J, it was not difficult for us to see a good strategic fit with enGene.

They are one of the largest pharma companies in the world and a leading drug developer with an impressive track record in bringing several blockbuster biologic products to the market for inflammatory bowel disease. So we did’t really need to do a lot of homework on them to see the value that they’re bringing to a partnership. Takeda was a little more interesting because they only recently announced that they have aspirations to be a leading pharma company in the GI space, building on the success of their new drug for inflammatory bowel disease called Entyvio™ (vedolizumab). They are investing heavily to expand their pipeline in the GI area. This was something we didn’t know when they first knocked on our door, so we had to conduct some due diligence to learn more about their commitment and strategy in developing new therapies for GI diseases and how that fit with the overall development plan for our platform technology. In the end, we felt that they truly appreciate how our technology could provide them with a competitive advantage in targeting multiple GI indications by more effectively delivering biologics to the target tissue.

Carl Hansen: In either case we did not need to do any extensive due diligence.

Those two deals in particular came from different avenues. In one case, the partner, Teva, came to us after meeting at a conference. In the other (Merck), which was initiated first, we were introduced by the local Merck representative Steven Xanthoudakis,

who did a great job of making the introduction to the antibody discovery team led by Gary Starling. In fact, the Merck relationship was first initiated by Ali Tehrani of Zymeworks who introduced me to Steve. I think this is a great example of how a strong connection to the local biotech community, through the success that Zymeworks has had, can open doors to other companies in the space. Obviously, Merck has a sterling reputation in the field, and Ali was very complementary regarding their interaction. Establishing the personal relationships is really critical when starting a new collaboration. This is definitely also true in our Teva collaboration, which is off to a great start. I would also add that there is a lot of noise and usually there is no quit route to getting noticed. You need to show up, tell people what your vision is, plant the seed, then you show up again the next year when you’re further along, and then at some point it becomes obvious that the platform is working and that the trajectory is very strongly upward. Like in anything it’s really about getting your name out there, having strong science, and keeping that message consistent as to what you’re doing and where you’re going, and then actually being able to deliver on it.

What are some of the benefits to partnering with pharma?

Ali Tehrani: The biggest benefit for us is validation, particularly of our platforms.

When you’re a startup and you go after a big problem, you really don’t have a lot of data to support the fact that you can solve a key problem. It’s harder to get the imagination rolling. This was the case when we went to Merck, we had to go ‘Look guys, we haven’t quite finished the work, but here is computational data on why it’s possible, and we want you to give us the benefit of the doubt.’ So by working with them we were able to generate data and show we were onto something. It made it easier to approach other partners, and at the same time, as an added benefit, Merck went on the road and started talking about us.

Not that we asked or that they had to, just that they were really impressed by the fact there was a direct translation between theoretical to actual. The other benefit of course is having access to expertise that otherwise we wouldn’t have. We’re always looking for opportunities to strengthen our R&D capabilities.

And of course there’s the financial benefits and having a regular revenue stream.

February/March 2016 BIOTECHNOLOGY FOCUS 23

Pharma Partnerships we’ve done and the one or two more we hope to do, there is going to be a shift at Zymeworks to get our own pipeline into and through the clinic. Ultimately, we’re not a contract research organization, we are a biotech company. Through 2016, 2017 and beyond, more of our focus is going to on our own pipeline that consists of many therapeutics that can help a lot of patients that don’t have a very efficacious treatment option right now. We have chosen to do strategic deals to fund our research, generate validation, but our objective is not to just keep doing pharma deals; rather our objective is to develop therapeutics that help patients. And we have the capability to innovate faster than pharma because we’re smaller, we are more nimble, we don’t have four or five different levels of approval to got through. We are just a bunch of folks that can decide, do the experiment and generate the data and we’re not afraid to fail and take chances.

Anthony Cheung: In terms of benefits there are many. For starters, they’re not only validating our technology, but they’re also bringing quite a lot of expertise to our company, particularly in the areas of CMC and clinical development expertise.

The CMC expertise is especially attractive to us because our Gene Pill technology is novel, so there are still bugs in the system that we need to work through and having experienced formulation scientists from the pharma side will really help us speed up this process.

There are also financial benefits, but I will say we didn’t do it for the cash because we already have enough money to carry the program forward.

Carl Hansen: I would say that it’s a great way for a small biotech to get validation and to get a stream of revenue. That is very valuable in the early stages and something that some biotech companies never actually get to. But even beyond that, by working with other groups, you’re picking up so much information and know how, and you’re building the relationships that you’re going to need to have when you have your own programs going forward and you’re looking to partner these out for clinical development with a pharma company or a biotech.

For all those reasons, our philosophy has always been that we want to be a company that people want to work with, that is outward facing and collaborative in a way that helps to build value on important programs. This builds our case, our team and our technology.

Both the Teva and Merck partnerships have been very collaborative and I think a great example of how a small company can work with a large pharma and not become an anonymous player at the table.

When did you decide partnering with pharma was the way to go?

Ali Tehrani: The decision to partner with a bigger company, not specifically pharma was something that I had decided upon from the onset. I knew that was the way to go. Of course back then we were more focused on the industrial biotech side, 24 BIOTECHNOLOGY FOCUS February/March 2016

Ultimately, it was from those discussions that it began to feel like what they proposed really made sense to our overall objectives. — Anthony Cheung but when we made the switch to the therapeutics side, it still made sense to chase these types of partnership deals. From the get go our business model was to have a direct and indirect channel for validating our technologies and platforms. The direct channel is obviously our own therapeutics pipeline, which is the reason we’ve raised the investments that we have so we can support the research and development of these therapeutics directly into clinical trials and ultimately into the hands of patients. At the same time, if our own therapeutics ended up not working as envisioned, then our pharma licensing deals provide an indirect channel for validation as they build therapeutics with our technology and take it into the clinic. As a result, Zymeworks potentially could be a company that has dual validation, dual streams of revenue for its business model. One through its own therapeutics that have gone through the clinic and the other through its pharma partners that plan to do the same. As far as whether or not we are going to continue this trend, we do have one or two more partnership opportunities that are in very late stages of negotiations, but I would say after the four

Anthony Cheung: Although we have long standing relationships with several pharma companies that have expressed interests in our platform technology, we were not actively pursuing a partnership for our most advance program in inflammatory bowel disease. In fact, we had just completed a round of venture financing which provided us with sufficient funds to conduct a proof of concept clinical trial for our first program. It was our pharma partners who initiated the partnership discussions. Ultimately, it was from those discussions that it began to feel like what they proposed really made sense to our overall objectives. We saw that it would strengthen the company, validate our science, increase our profile and bring a lot of non-financial benefits to our Company. That’s why and when we felt it was a good idea to do it.

Carl Hansen: I think it was in our mind very early, that we didn’t want to be a company that closed its doors and worked exclusively on internal things. We were always of the mindset that today, if you want to succeed and build value in a company, it’s about getting your technology out there, learning through working with people and building a reputation for both innovation and for delivering innovation. That was always very high on our priority list. We started early on focusing on pharma, but in recent years I think we’re making an even stronger effort towards smaller biotech companies as well.

Pharma Partnerships

What secrets can you share in maintaining relationships with your pharma partners?

show it to them first. We will give them a first look. And if it fits their mandate great, we can do another deal. If not, at least they’ve earned the right to see what else we’re working on and they really appreciate that.

Ali Tehrani: We have a

Anthony Cheung: The

very strong in house business development team, currently led by our senior director, External R&D and Alliances David Poon and they are very good at maintaining the relationships we have in place. It’s not just getting the deal that’s important. It’s also ensuring that you do everything possible to get your partners across the finish line. In terms of the metrics themselves or the details, we meet at the very least once a quarter with each of our partners about current projects and we also discuss what else we’re working on. This is one of the advantages of working with us, that as we develop a platform or something new in our pipeline, because they are our partner, not out of obligation, but because we believe in it, we will come and

deals that we have with our partners are structured in a way that we don’t just hand over a product to them, sit back and wait for results. In fact, we wanted it to be the other way around where we will be responsible for driving the product development forward while they will provide financial support and development input to us.. Given the early stage of our technology, it’s important for us to maintain a certain level of control and work collaboratively with the pharma partner because we believe that’s an effective way for us to learn from our more experienced partners and mature our Company quickly during the course of the partnership. I believe to maintain a productive relationship with pharma partners, it is important to have frequent open communications

and a strong commitment to provide the deliverables to your partners on time and on target. Although you can’t always predict outcomes in science, you have to make sure your partner is with you every step of the way, so they understand the rationale of any chosen path.

Carl Hansen: Obviously you have to deliver on the promises of each project, that’s paramount. I think for me, success in these partnerships is going to be most evident by follow-on interactions and additional projects. In everything we do, we’re looking not to do one-offs, but rather, we want to make an impression and build a collaboration that gets bigger and better over time. I think there’s a really good chance that will be the outcome with Merck and with Teva.

To see this story online visit www.biotechnologyfocus.ca/partneringwith-pharma-it-takes-more-than-just-luck/

CELEBRATING

7YEARS

Of Delivering High Impact Results

Ontario Bioscience Innovation Organization Taking thought leadership into action

OBIO RESPONDS TO INDUSTRY NEEDS: Capital Access, Innovation Adoption and Interconnectivity initiatives.

OBIO REPRESENTS A POWERFUL AND MOTIVATED RESOURCE: Our member companies, partners and sponsors.

TOGETHER WE ARE BUILDING AN ONTARIO that will lead the way in providing health technology, products and services to the international marketplace. Join today and experience the benefits of membership.

www.obio.ca February/March 2016 BIOTECHNOLOGY FOCUS 25

Across Canada

| By Mark F. Vickers, PH.D. and Kathleen Marsman, PH.D.

Canadian Patent Office

Misses the Mark on Diagnostics

A

ccurate diagnosis of disease, early detection of disease and personalized medicine stand to introduce much-needed efficiencies in the healthcare systems in Canada.

Personalized medicine holds the possibility of an individualized approach to the treatment of disease based on the unique (often genetic) parameters of a patient and/or the subtype of the disease afflicting the patient. The appropriate drug(s), dose, timing of dosing, etc. for a given disease, or subtyped of the disease, may be determined, thereby providing the option of tailoring of treatment. This is in contrast to, for example, those treatments which are provided to a population of patients, but only a subset of which may benefit from treatment.

Ideally, personalized medicine technologies will maximize the likelihood of successful treatment of a unique patient.

The demand for new discoveries and inventive approaches in personalized medicine is great. The risk involved in the development of personalized medicine technologies may be worth the rewards of success. However, one of the incentives to invent new diagnostic approaches is under threat in Canada and elsewhere: the option of seeking patent protection to maintain a proprietary position 26 BIOTECHNOLOGY FOCUS February/March 2016

during development may no longer be an alternative.

Canadian patent examination guidelines for diagnostic inventions were released in June of 2015, entitled: “Patent Notice: Examination Practice Respecting Medical Diagnostic Methods – PN 2015-02.” This Notice is an open letter to Canadian Examiners, outlining the way in which they are to approach examination of diagnostic-related inventions.

For three years prior to the release of this Notice, the examination of patent applications for diagnostic inventions had ground to a halt at the Canadian Patent Office. Patent Agents noticed this lack of examination activity in the diagnostic area and we made inquiries and launch complaints at the Patent office, out of concern for the prejudice to Applicants for these delays in the Examinations of patent applications by the Patent Office.

The patent term is 20-years from filing regardless of the date of issuance. This term was ticking away for all pending diagnostic applications while the Patent Office carried out internal deliberations about what should be patent-eligible subject matter. Unlike the U.S., Canada offers no patent term adjustment for delays in Examination attributable to the Patent office.

It was soon revealed that the Patent Office was trying to interpret a Federal Court of Appeal decision regarding computerimplemented inventions (Canada (Attorney General) v Amazon.com Inc, 2011 FCA 328 [Amazon]) for implications relevant to diagnostic methods. Until the interpretation by the Patent Office could be entrenched in a Notice, Examination of diagnostic inventions would not occur based on current practice. Although the Amazon decision had a favorable result to the patentee, it did not adequately counter statements made in the lower court decision regarding patent eligibility of personalized medicine method claims per se. It is widely believed among Patent Agents in Canada that the analysis offered in the Practice Notice regarding diagnostic inventions is flawed.

Ultimately, the Patent Office decided it was

time for a change in the examination of diagnostic invention. The uncertainty provided by the Notice places a chill on the patentability of diagnostic methods in Canada, even for useful inventions that would permit early detection, personalized treatment, or identification of susceptible individuals for disease prevention.

The Notice teaches a problem : solution approach (or “contribution analysis”), in place of the standard of purposive construction, which it purports to employ. Under the Notice, Examiners are now advised to assess a claim based on its essential elements. Under this approach, Examiners may ignore features they deem not to be critical to the solution offered by the invention, and if merely left with data acquisition and data analysis steps, the claim can be deemed “disembodied” and thus ineligible for patent protection. Inventions pertaining to diagnosis typically require that a sample be acquired from a patient and be tested for one or more parameters of interest (data acquisition) and subsequently that the level or presence of the parameters detected in the sample be compared with a level indicative of the condition to be diagnosed (data analysis). We are finding that diagnostic claims which represent true advances in the field, which are novel and inventive absent any “prior art” objection, are now rejected as ineligible subject matter on the basis of this examination approach.

Recent high profile situations have come to light in which diagnostic tests are considered unaffordable. It is possible that the Patent Notice was formulated in a manner that reflects a direction in public policy, more than an objective interpretation of intellectual property laws. It is not an uncommon sentiment that inventions relating to a new biomarker, a genetic variant, or a biological correlation indicative of a health condition should made freely available to the public, regardless of the effort expended in arriving at the invention.

Canada has leading researchers active in the field personalized medicine technologies. However the research efforts leading to these inventions, and taking them through

Across Canada

the validation process is a lengthy and expensive path. Rarely is the expense borne entirely by public funding. The private sector involvement in commercial aspects of testing and developing diagnostic assays and kits is inevitable. Would industry concede to doing such testing if there was no option for a proprietary position for the 20-year patent term, when it is available to all other categories of invention? Are diagnostics simply too important to be patented? Has the Patent Office permitted the popular public outcry for unrestricted access to diagnostics to influence its Examination guidelines?

The approach of the Canadian Patent Office to patenting diagnostic inventions is not consistent with other countries. In the European Patent Office, there is no subject matter restriction that would exclude diagnostics from patent eligibility, claimed as either kits or methods. While there is a similar trend in the United States Patent Office away from granting patents for diagnostic-related inventions, in practice diagnostic kit and method claims are still eligible subject matter, provided adequate tangible details of a test to be conducted are recited in the claims. Patent

decisions in the U.S. courts have refined the subject matter restrictions pertaining to diagnostic inventions, but importantly, these have not resulted in a ban on an entire subject matter classification. The 2012 US Supreme Court decision in the case of Mayo Collaborative Servs. v. Prometheus Labs., Inc. deemed a method pertaining to personalized medicine to be patent-ineligible. Further, the US Supreme Court ruled certain claims pertaining to genetic markers of breast cancer susceptibility to be ineligible for patenting, in the controversial 2013 case of Association for Molecular Pathology v. Myriad Genetics. Nevertheless, including tangible components in such claims can render diagnostic claims patent eligible, in the view of the U.S. Examiners. In Canada, the addition of similar tangible components, according to the position of the Practice Notice, may have no impact, as the Examiner may rule out such components as “inessential elements”, unless the tangible component is entirely novel in itself. This approach would put Canada at odds and out of step with other jurisdictions.

Personalized medicine technologies have the potential to transform health care, by spe-

cifically identifying and targeting treatments to those patients that will benefit most. We are in the early days of the implementation of the “Patent Notice: Examination Practice Respecting Medical Diagnostic Methods” of the Canadian Patent Office, and are only now starting to Respond to the Examiner’s recent objections under this Practice Notice.

It remains to be seen how personalized medicine technologies will fare in the Canadian Patent Office. We expect that there will be an evolution in what the Patent Office considers patent eligible as experience is gained in implementing the Practice Notice, and from the Responses submitted by the Applicants through their Patent Agents.

Dr. Kathleen Marsman is a Patent Agent at Borden Ladner Gervais LLP in Ottawa, Canada.

Dr. Mark F. Vickers a Partner and Patent Agent at Borden Ladner Gervais LLP in Ottawa, Canada.

To see this story online visit www.biotechnologyfocus.ca/ canadianpatent-office-misses-the-mark-ondiagnostics

Canada Talks Pharma

February/March 2016 BIOTECHNOLOGY FOCUS 27

JP Morgan

| By Paul Stinson

A Whirlwind Week Called JPM!

E

very year, during the second week of January the biotech world descends upon San Francisco.

If your company is raising money, if you are interested in presenting, and if you are invited by JP Morgan, then you have a chance to tell your story to qualified investors with deep pockets at the event. If your company is smaller, then you have an opportunity to present at one of a few sister conferences (Biotech Showcase, Medtech Showcase, and RESI, among others) that the JP Morgan event has spawned. Aside from the annual BIO convention, I suspect that JPM generates more business leads in life sciences than any other conference, all within a ten-block radius around Union Square.

Arriving Sunday evening from Victoria, BC, I prepared myself for what would be three days that I fondly call “JP Madness.” I had received a list of events and receptions being held during the week and planned my time accordingly. Monday morning, the Canadian Consulates in San Francisco and San Diego, and BIOTECanada co-hosted a reception for Canadian delegates, sponsored

by Wilson Sonsini. Whereas last year’s event was hosted at the Consulate, this year’s reception was at the Marriott and was buzzing with activity.

Kudos to Canada’s Trade Commissioner

Service for planning this event; what a terrific way to start the week, becoming re-acquainted with friends from the biotech community!

For those who haven’t ever attended, JPM can consume you, if you do not pace yourself.

I recall that in previous years, I had checked the list of evening receptions and attended two or three each night. This year, I limited my choice to two - Monday’s was hosted by BIOCOM and BioMed Realty from San Diego, and Tuesday’s was the WuXi Global Forum reception, hosted by WuXi AppTec from China. At both I met with people whom I knew would be attending, along with some new contacts who share similar interests to mine. During the day, when not attending pre-planned meetings, I simply sat in Union Square and waited for people that I knew to pass by en route to their next event. I was not disappointed.

My focus at JPM this year was two-fold: to reconnect with life science friends from Canada and to attend two events related to China.

Companies from China have “discovered” JPM, particularly over the past four years.

The 3rd Annual WuXi Global Forum from 3 to 6 pm on January 12 drew more than 700 guests, who were keen to learn about opportunities in China. The number of Life Sciences deals has exploded there in the last three years, especially in 2015. The forum was divided into three parts: The Future of Medi-

cine and Beyond; Venture Investing Today and Tomorrow; and China: The New Horizon.

Invited speakers came from a broad spectrum of companies including Illumina, Google Ventures, 23andMe, Soffinnova Partners, Eli Lilly, Bill & Melinda Gates Foundation, WuXi AppTec, and ChinaBio LLC, just to name a few.

Following the seminar, a reception allowed guests to meet others who were keen to learn about opportunities in ‘The Middle Kingdom.’

On Tuesday (January 13), a leading law firm hosted the CABS Investor Forum 2016 in conjunction with the Chinese American BioPharmaceutical Society. There, three Chinese company CEOs, a leading Chinese venture capitalist, and an American lawyer reviewed the landscape of Life Sciences in China, moderated by Greg Scott from ChinaBio LLC. The Q&A session that followed demonstrated interest both from people who had never been to China and others who have watched the Life Sciences revolution unfold, especially since 2006.

Overall it was a wonderful few days, and I encourage everyone to make it to San Francisco for JPM next year. It’s fun, hard work, and opportunities for business abound.

Over a 43 year career, Paul Stinson has been a senior manager and entrepreneur with extensive international experience in developing strategic collaborations in both the public and private sectors. He has worked for Ciba-Geigy in Switzerland, Canada and Zimbabwe and for Boehringer Mannheim in India. In January 1997, he established CAPRA International (Canada-Asia-Pacific Rim Alliances), aimed at building strategic alliances between North America and Asia. Paul has worked in industry association management at BC Biotech in Vancouver, Human Proteome Organization (HUPO) in Montreal, and BioAlberta in Edmonton. Since 2006, he has focused most of his efforts in Greater China, having worked for the Hong Kong Science and Technology Parks, and The Balloch Group, Beijing. He currently lives in Victoria, BC. To see this story online visit www.biotechnologyfocus.ca/a-whirlwindweek-called-jpm/

28 BIOTECHNOLOGY FOCUS February/March 2016

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LAST word

| By Andrew Casey, President & CEO BIOTECanada

Canadian Biotech’s New Operating Environment

A

s the flurry of early activity associated with the changing of a government diminishes, and the Trudeau lead Liberals find their stride, there are some increasingly clear signals as to the direction and tone the government intends to take over the period ahead.

Importantly, from the biotech community’s perspective, early indications are that the government understands the sector’s strategic and economic importance.

Shortly after being sworn in, all Ministers received explicit direction from the Prime Minister in the form of mandate letters which provided clear objectives and overarching working style for each of the Ministers.

Navdeep Bains, the Minister of Innovation, Science and Economic Development, will have as one of his core objectives “expanding effective support for incubators, accelerators, the emerging national network for business innovation and cluster support, and the Industrial Research Assistance Program.”

These investments will target key growth sectors where Canada has the ability to attract investment or grow export-oriented companies.” The Minister has also been tasked with the development of an Innovation Strategy for Canada. In early discussions with Minister Bains, he has indicated he will begin developing the strategy after the 2016 budget is delivered. His development process will involve consulting key stakeholders through 2016.

In addition to his areas of direct responsibility, the Minister of Innovation, Science and Economic Development was also mandated to work closely with his colleague the Minister of Science Kirsty Duncan, who will be establishing “a Chief Science Officer mandated to ensure that government science is fully available to the public… and examine options to strengthen the recognition of, and support for, fundamental research to support new discoveries.”

All told, the titles and clearly defined mandates for the Ministers send a very strong signal the government views science and innovation as key catalysts for the Canadian economy. As defined, it is also clear the new Ministers will play a central role in shaping the industry’s overall policy environment over the period ahead. Interestingly, the political change has also led to a significant change within the public service.

In addition to being instructed to work closely with their colleagues, Ministers have also been given direction to work with and rely on the expertise within their departments. These instructions and the cor30 BIOTECHNOLOGY FOCUS February/March 2016

responding behaviour on the part of Ministers and their political staff has breathed new life into federal departments as their expertise and input are again sought as part of the policy-making process. This new energy bodes well for public policy development broadly.

Importantly, the belief in the new science and innovation mandate does not sit only at the Ministerial and departmental levels. At the recent World Economic Forum in Davos, the Prime Minister bragged of Canada’s “extraordinary hightech sectors... and really strong biotech” in response to questions about Canada’s economic prospects in the face of a sagging oil and gas sector. That biotech was top of mind for the Prime Minister sends a strong signal that the whole of government recognizes the importance of the biotechnology sector in supporting the global competitiveness of industries such as forestry, mining, agriculture among others.

The new focus on science and recognition of biotech comes at an important juncture. 2015 was a strong year for the industry as new companies emerged across the country and man established companies making significant advances towards commercial reality. It is vital that this momentum is maintained. As the BIOTECanada Ecosystem Report (http://www.biotecanada-ecosystem.com/) demonstrates, successfully going from lab bench to commercial success requires all parts of the ecosystem to be working effectively and together. Canada is not alone in the biotech space. Other nations also recognize the importance of establishing their own biotech sectors and are quickly mobilizing to support the development of domestic ecosystems that will attract entrepreneurs and investment. Canada must continue to keep pace if it is to maintain its global leadership position. Fundamental to Canada’s ability to attract investment and keep pace is a supportive public policy environment. In this context, a federal government that recognizes the industry’s strategic importance is a definite asset. Correspondingly, BIOTECanada will be working closely with the new Government to support the development of the National Innovation Strategy and ensure the industry continues to play a central role in the government’s thinking and planning.

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