BresaGen to spin off cell therapy business

BresaGen (ASX:BGN) is likely to become a holding company with stakes in several businesses, including a new stem cell company formed by the merger of BresaGen's cell therapy division with San Diego stem cell company CyThera, CEO John Smeaton told the company's AGM yesterday.

The company announced that an agreement, subject to approval by US regulators, had been reached with CyThera to combine BresaGen's US-based cell therapy division, which has focused on degenerative diseases including Parkinson's disease, with CyThera, which is working on cell therapy for diabetes. Both companies have US NIH registered embryonic stem cell lines, making them eligible for US government funding.

US venture capital firm Sanderling Ventures has committed US$1.5 million to the new entity, and there are plans to raise a further US$3.5 million, which will give the newly formed company a combined valuation of $16 million.

"It's a good marriage in good hands," Smeaton told Australian Biotechnology News after yesterday's meeting.

The combination of cash received and grants available from the US government should be enough to fund activities for two years, Smeaton said, and by then significant milestones should be achieved to attract further funding.

Smeaton did not discount continued relationships with Australia, noting that new stem cell derivations, pre-clinical primate studies and human clinical trials could be performed here.

CyThera CEO Fred Middleton is acting CEO for the new company, which is likely to be renamed in the near future.

Options

At Thursday's AGM, Smeaton told shareholders that the next step would be to pin out the protein pharmaceuticals business into a new entity. Two options are potentially open to the company here. Earlier in the year BresaGen engaged US merchant bankers Caymus to raise funds for a new private company to hold the protein pharmaceutical division's assets, but so far no firm offers have been received by US investors.

But the company has approved a term sheet with Queensland VC group CM Capital, involving formation of a new private company to which BresaGen would contribute its protein pharmaceutical assets, including IP and personnel. Smeaton said an extraordinary general meeting would be held in late January or early February to vote on the transaction.

Earlier this week, BresaGen sold its cell delivery catheter technology for about AUD$380,000 to NexGen, which was formed to develop and commercialise the technology, retaining the rights to use the FDA-approved system for neurological cell therapy. BresaGen also has a small share in the company, which was founded by one of BresaGen's directors, John Kucharczyk.

Smeaton said that as a holding company, BresaGen could become a vehicle to do other things within the biotechnology sector. He drew parallels with long-time public biotech investment companies like Circadian Technologies, which has been behind the formation of several listed companies including Metabolic Pharmaceuticals, Optiscan, Axon Instruments and Antisense Therapeutics.

The company also cancelled its plans to raise $5 million through a private placement of convertible preference shares.

Investors reacted cautiously to yesterday's announcements, and at press time today the company's shares were trading slightly lower at $0.26 on moderate volumes.