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Biotech startup StemPath lands $1M infusion from Genesys

February 25, 2006

By Andrew Mayeda
The Ottawa Citizen

An Ottawa biotechnology startup that hopes to harness the body's natural ability to repair itself has landed $1 million in venture capital financing.

The investment in StemPath Inc. will come from New Generation Biotechnology Funds, a family of funds managed by Genesys Capital Partners of Toronto, a venture-capital firm that has invested in a number of biotech startups around the national capital.

StemPath president Jan Alfheim said the company will use the money to select a lead drug candidate for its heart program, which seeks to develop a drug that regenerates heart muscle damaged by a heart attack. The company hopes to enter preclinical testing in animals by early 2007, setting the stage for clinical trials in humans.

"The funding will bring us to the next level," said Mr. Alfheim.

StemPath was founded in December 2002 by Lynn Megeney and Michael Rudnicki, senior scientists at the Ottawa Health Research Institute, which is affiliated with both the Ottawa Hospital and the University of Ottawa.

Their work led to what the company describes as the "first-ever identification of a stem cell-like population" in adult heart tissue.

Stem cells are undifferentiated cells that can develop into a variety of cell types. Some researchers believe that they can be harnessed to develop a new class of drugs that will enhance the body's ability to repair itself.

Mr. Alfheim said most researchers in the field attempt to remove stem cells from the body, grow them in cell cultures, then reinject them into patients.

By contrast, StemPath is working on a drug that, when injected into patients, will activate stem cells within the body.

"Our treatment we see as being much more patient-friendly, less invasive and therefore safer, with as much if not better efficacy," said Mr. Alfheim, who was director of business development at Laval, Que., biotech firm Neurochem Inc. before joining StemPath last summer.

The company also has a less-advanced skeletal-muscle program that is targeting a drug to combat degenerative muscle conditions such as muscular dystrophy.

The Ottawa Health Research Institute is a major shareholder in the company, which rents lab space and contracts researchers from the institute. Mr. Rudnicki and Ms. Megeney continue to advise the company.

Mr. Alfheim said the company's ties to the institute have helped.

"It's a very good incubator model," he said. "It makes it possible to achieve a lot more with your money, because you have less overhead and a lot of facilities that would cost money you just don't have as a startup."

He said the $1 million in funding should keep the company in business for at least another year, by which time it will be gearing up for clinical trials.

Genesys will buy $700,000 in convertible debentures from the company, followed by a further $300,000 if it meets certain performance milestones.

It is the second round of investment by Genesys in the company. In 2003, a separate Genesys fund kicked in $1 million in seed capital.

Note: Reprinted with permission from the Ottawa Citizen.