The Toronto Star
BUSINESS, Monday, July 2, 2001, p. D01
Rachel Ross
TECHNOLOGY REPORTER
Biotech firms gain power, D5
Imagine you're trying to get to a friend's new house.
You know she lives in the city, but you don't know her address.
The Beaches, Thornhill, Parkdale, Leaside. She could live anywhere.
Even the best map of Toronto won't help without a street name.
That's about where we're at with the study of human genetics right now.
We've got a map of human DNA, but we don't know the address for many diseases. We're just beginning to figure how each gene expresses itself, what it's responsible for in the grand scheme of the human body.
The potential to change and save lives is enormous. That's why in spite of the dot-com fallout, the biotech sector has just kept plugging along. A lot of biotech stocks were pulled down in the market turmoil of the past year but unlike e-businesses, the biotech sector has a definite market and a promising future.
Dozens of Toronto businesses are involved in addressing diseases. Some are focused on a single disease, hunting down the part of the genetic code that's responsible and developing tiny tools for drug testing. Others work on the software side of things, writing programs for modelling drugs on a molecular scale.
"In bull or bear markets, people still get cancer, so we look at our industry as somewhat recession-proof in that respect," said Peter Morgan Cash, senior managing director at Paramount Capital.
Cash, who has been a biotech venture capitalist for 13 years, said the industry's prospects have never been more exciting than they are right now.
"What physics was to the 20th century, biotechnology will be to the 21st century. But the way that we'll benefit most is from the integration of both physics and biotech. That is the future."
The biotech sector has certainly attracted some big wallets.
Cash said that several "family offices" venture capital groups that manage funds for families with $30 million or more to invest have biotech analysts on staff.
"Bill Gates, Paul Allan, Larry Ellison: those are the three largest investors in biotech," he said. "The wealthiest people invest in biotech because they believe in the industry and they believe that it will have a direct impact on their children and grandchildren."
According to the industry association BIOTECanada, the country's biotech sector is second only to that of the United States. The association estimates there are more than 360 companies and over 62,000 people involved in the biotech industry across the country. While the majority of the firms are small, their combined impact is large. By next year, biotech is expected to be a $5 billion business in Canada.
That's when Toronto's biotech star should really shine. Next June, Toronto will host the BIO 2002, an international conference and exhibition that is expected to draw over 15,000 researchers, investors and business people from around the world.
The conference may be just the boost the city needs to pull even with the country's biotech hot spots Montreal and Vancouver.
"It's very strange that we don't have a stronger biotech community because we have extremely good science here and good universities," said Dr. David Caspari, president of Toronto biotech firm ChondroGene Ltd.
The company is developing new treatments for osteoarthritis using a DNA-based approach.
"The Human Genome Project recently announced completion of sequencing of the human genome," said Dr. Wayne Marshall, the company's chief clinical scientist.
"ChondroGene has taken the next step by using a disease-specific approach and focusing on the comprehensive identification and sequencing of the genes expressed by human cartilage cells."
It's a long, tedious process finding the genes responsible for cartilage. Tens of thousands of possibilities had to be narrowed down to a couple of thousands. But the company now knows the difference between the genetic codes of normal and diseased cartilages.
"If you have cartilage from a person whose condition is unknown, you can test it . . . to form a diagnosis," said Caspari. "It can also be used to test drugs."
The company raised its first round of financing $1 million in late 1999. Another $5.5 million was raised when they had their initial public offering in May, 2000.
"It was a great time. I wish we could get it back again," Caspari said. "There's certainly a more limited market today than there was a year ago."
The city isn't devoid of money for biotech. Toronto is home to MDS Capital Corp., a major player in industry funding and development, with a $30 million investment portfolio. But not all of that money is invested locally, or even nationally. Much of it winds up south of the border.
Toronto-based Generex Biotechnology Corp., for example, found it had to look outside Canada for funding.
"Biotech requires a fair amount of capital," said the president and CEO of Generex, Anna Gluskin. "We couldn't go public here . . . so we had to go to (the) Nasdaq."
The company develops new ways to deliver drugs, including an oral insulin formula that diabetics can take using a device that resembles an asthma inhaler.
Moving drugs from the needle to the spray isn't easy. It takes a special formulation to make an inhaler work for substances with large molecules.
With it's oral insulin technology in the final phases of development, the company has set its sights on the same kind of delivery method for other drugs, including morphine and a flu vaccine.
Because the testing and approval process for new drugs can take years, biotechnology companies often take a long time to reach profitability.
Vasogen Inc. of Toronto currently has six clinical trials on the go, some in Canada and others in the United States. Their immune modulation therapy, which lowers problematic inflammation, could potentially impact a number of diseases, including leukemia, cardiovascular disease and psoriasis.
"We're developing a platform technology which uses a patient's own immune cells," said David Elsley, president and CEO of Vasogen.
A small sample of the patient's blood is taken and exposed to ultraviolet rays, heat and oxygen. When the stressed cells are injected back into the patient, the inflammation goes down.
At the same time as it develops its therapy, the company has to keep a close eye on competitors.
Vasogen's stock lost more than 20 per cent of its value on the Toronto Stock Exchange last Thursday when an analyst reported that a European competitor had achieved better results.
Vasogen pointed out that the European therapy hadn't received government approval and by the end of the week, the stock had gained back more than half the loss.
With time it takes to bring a drug to market such a critical factor and financiers hot for drugs in their final, phase three stage, biotech companies are eager for new technologies that can speed up the process of drug discovery.
SimBioSys Inc. of Toronto develops just those kinds of tools. Aniko Simon, vice-president of SimBioSys business development, said their chemical modelling software can greatly speed up the time it takes to find a new drug candidate.
The software deals with proteins, not DNA. But protein research is equally important in fighting disease and the methods for that research are going through a major paradigm shift.
Under the old system, drug companies would have to run thousands of possible drug candidates through tests to see how they would react with the protein in question.
Now, testing can be done using software to narrow down the number of drug candidates that will go through expensive and time-consuming physical tests.
Once researchers know which proteins are responsible for a disease, they can take a three-dimensional image of that protein, pop it into SimBioSys software and find all the possible molecules that will bond with that protein.
Bonding is essential for a drug to work. It may block another molecule from bonding with the protein to cause disease or it may start a series of chain reactions that alleviate the problem.
There are other software products that will run a similar search, but Aniko Simon, vice-president of business development at SimBioSys, said that their software is more comprehensive.
"Usually these products use some kind of random function, so you find some solutions but you don't know what you're missing. This software will give you an exhaustive search," said Simon.
Twelve major pharmaceutical companies already run SimBioSys' drug-design software, called Sprout.
Small, innovative firms need more capital to move to the next level
The results from Sprout can be used in another SimBioSys program, called Ceasa, which ranks the drug candidates by how easy they will be to produce.
In addition, the company recently completed tool kits that will let researchers tweak their molecular models until they have exactly what they want.
The better the fit between protein and drug the more likely the drug will react to that protein and nothing else which means fewer side effects for the patient.
Whether it's proteins of genes, drug testing or delivery, Toronto's biotech sector is strong and growing.
So while the average person may be struggling with moral and ethical questions about the implications of messing with genetic code and the proteins it creates, businesses are moving ahead with DNA and protein research for tailor-made medication.
Next year's biotechnology conference could turn the corner in terms of funding and get the capital to the small, innovative firms that need it to get from phase one to phase three.
Illustration(s):
TONY BOCK/TORONTO STAR FILE PHOTO
DNA DRIVEN: Dr. Lap-Chee Tsui, chief geneticist at
Toronto's
Hospital for Sick Children, holds a model of the DNA molecule. Advances
in understanding the human genetic code have spawned new avenues of
biotechnological research and development.
DAVID ELSLY: President and CEO of Vasogen.
ANNA GLUSKIN: President and CEO of Generex Biotechnology.
MODEL DRUG: SimBioSys of Toronto uses 3-D computer modelling to find the best fit between drug candidates and proteins.
Category: Economy
Uniform subject(s): Computer and electronics industries;
Diseases, therapy and prevention; Pharmaceutical and biotechnology
industries
Edition: Ontario
Length: Long, 1382 words
Copyright © 2001 Toronto Star, All Rights Reserved.
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news·20010702·TS·1190868
news·20010702·TS·1190868