Lifesciences: Researchers organize to realize region's potential

May 4, 2006

By Kristin Harold,
The Ottawa Business Journal

The front-end investment needed by biotechnology startups often scares investors away, but one venture capitalist says the city's brain power regarding regenerative medicine has revolutionary potential.

"Ottawa is a rich source of deal flow," says Jamie Stiff, principle with Toronto's Genesys Capital Partners Inc. "From the life sciences perspective, there's the OHRI (Ottawa Health Research Institute), the University of Ottawa, Carleton and the NRC (National Research Council). Collectively there's an enormous amount of research that goes on in Ottawa and it's good for us that it's relatively untapped."

StemPath Inc., a local biotechnology company, recently entered into a definitive agreement for a $1 million private placement with New Generation Biotechnology Funds. Genesys is the manager of that family of funds. Mr. Stiff says the work being done by StemPath towards developing peptide-based pharmaceuticals to stimulate heart and skeletal muscle regeneration is innovative.

"The company itself represents an absolutely novel way to treat patients that have suffered a heart attack," he says. "Currently the therapeutic regimes only slow the further degradation of the heart tissue. The StemPath drugs will actually replace some of that damaged tissue and to say that they totally rebuild the heart is probably a bit generous, but anything that restores function and tissue to your heart muscle clearly has advantages to what's currently state of the art."

It's this kind of development in regenerative medicine that has encouraged Genesys to provide the funds needed to accelerate research to the next stage of development.

Mr. Stiff says Genesys has found repeated success by providing funding for a number of local biotech companies.

"We were the first investors in StemPath, Ionalytics, Epocal and Zelos – four successful companies in the Ottawa area that have shown some significant progress," he says. "We're probably the most active seed investor in life sciences in the Ottawa area."

This financial support is crucial to the development of emerging biotech companies and the eventual success and marketing of the pharmaceuticals they're producing, says Jan Alfheim, president of StemPath.

"The money was crucial for us to move our company ahead to the next level and towards clinical testing," he says. "The key is to get proof-of-concept data in different large and small animal species so that we can attract further investment in the company."

StemPath was founded in 2002 by two of the OHRI's senior scientists and the privately held company has laboratory operations on the institute's campus. It aims to become the first pharmaceutical company to specialize in therapeutic solutions that modulate the body's natural regenerative capacity by replacing damaged tissues with new tissues through the use of drugs.

Mr. Alfheim points out that along with the difficulties associated with attracting VC dollars, Ottawa companies are also encountering a skills shortage when it comes to staffing certain key positions.

"It's a good environment for building biotech, but the real issue is finding enough of a base of personnel to develop the companies," he says. "We're looking to hire a VP of pre-clinical and clinical development this summer and I'm not sure if I can find such a person in Ottawa at this point. I may have to look towards Montreal, Toronto or even south of the border."

Mr. Alfheim says he thinks this shortage will have to change in order to guarantee the success of the biotech industry in the nation's capital, but he points out that the area is finally receiving recognition for its accomplishments, which is leading to more VC money and government support. He says the city's reputation will be further enhanced with the opening of the Stem Cell Research Centre later this year.

The centre is currently under construction and is expected to open in August, says Dr. Ron Worton, CEO and scientific director of the OHRI.

"It will be one of the top stem cell research centres in the country and it will house about 10 scientists and their research staff, so probably in the neighbourhood of 120 people," he says. "We've had quite a lot of success at the level of basic research and understanding stem cell processes in Ottawa. The thing that makes us most visible across Canada is the fact we're also the centre of the Stem Cell Network in Canada, which includes 65-70 scientists across the country all geared towards the development of stem cell therapeutics for degenerative disease."

Dr. Worton says the Stem Cell Network has recognized the difficulties faced by Canadian researchers in securing funding and as a result, developed a unique company last year to commercialize and build a strong biotech industry.

"It created a nation-wide company called Aggregate Therapeutics because it's an aggregation of scientists from across the country," he says. "The company then has access to the intellectual property of almost all the research groups involved in the network."

The biotech industry is known for once-promising startups that fail to find financing to advance their innovations, but Dr. Worton says Aggregate is a bold, new approach that could become a model for other technologies in Canada.

He says Aggregate is designed to help scientists bring their discoveries together because it's unlikely that just one scientist or institution will have all the pieces of the puzzle, especially in the field of regenerative medicine.

By involving the important players in the industry, including scientists from around the country, about 14 universities and the OHRI, the company plans to take the intellectual property, commercialize the research, then secure investment and spin it off into the marketplace.

"Aggregate is out now looking for major venture capital money at the moment, but it's had quite a lot of support in terms of seed money," says Dr. Worton. "This is something that's never been done before."

Reprinted with permission from The Ottawa Business Journal.