West Coast Editor

About five months after withdrawing its Canadian initial public offering because of unfavorable market conditions, Montreal-based Caprion Pharmaceuticals Inc. is taking over Ecopia BioSciences Inc., also of Montreal - which backed away from a financing effort last year - and starting a private placement of at least C$30 million (US$25.4 million).

"The strategic imperative and the opportunity to build a company with a scaled-up, critical-mass portfolio was much bigger than raising money," said Lloyd Segal, Caprion's president and CEO, who will hold the CEO position with the new firm as well.

Ecopia's Phase I/II-stage cancer drug candidate, ECO-4601, is undergoing tests as a potential therapy in various tumors refractory to chemotherapies. The drug is described as a potent inhibitor of the RAS-mitogen-activated protein kinase pathway, recalling the $40 million deal disclosed this week between South San Francisco-based firms Exelixis Inc. and Genentech Inc. (See BioWorld Today, Jan. 4, 2007.)

The Exelixis/Genentech arrangement is focused on XL518, yet to reach the clinic. ECO-4601 is "in the same pathway [as XL518], but actually earlier in the pathway," Segal said. "At Caprion, we have a very different oncology program, but also a multi-tumor therapy" - CAP-232 for metastatic melanoma, which has completed Phase II. A cyclic peptide that acts on the glycolytic pathway in tumor cells, CAP-232, is expected to enter the clinic this year for pancreatic cancer.

"We have a plan we'll articulate a little more fully" soon, regarding CAP-232's path forward, Segal said. Meanwhile, Pierre Falardeau, president and CEO of Ecopia, said the combined firm - with two candidates for cancer, one for E. coli infections, and a new infusion of money - will be strong.

Caprion's Shigamabs, a dual antibody for Shigatoxin-producing E. coli infections, has been awarded fast-track status by the FDA. Designed to work against strains including O157:H7 - the bug implicated in the recent, headline-making spinach outbreak - Shigamabs is expected to move into a pivotal trial this year.

"It's not a matter of which [compound] is more advanced than the other," Falardeau told BioWorld Today, and all will be advanced with dispatch. Falardeau will become chief operating officer of the new firm.

In the merger, shareholders of privately held Caprion will get about 69.8 million common shares of the amalgamated company, which is about half the stock outstanding after the closing of the merger. The deal is subject to the completion of the financing. Desjardins Securities Inc., of Montreal, and Toronto-based Dundee Securities Inc. are acting as co-lead agents in connection with the proposed issuance of units of the combined firm on a "best-efforts" basis.

Picchio Pharma Inc., a joint venture health care investment firm owned by FMRC Family Trust, and Power Technology Investment Corp. (a subsidiary of Power Corporation of Canada), has placed a lead order of C$4 million in the proposed financing, and the price is likely to be C25 cents each, which is based on the share price during negotiations for the placement.

Each unit entitles the holder to one share and of a warrant, with each whole warrant allowing the holder to buy one common share of the merged company at a price of C37 and a half cents, for a period of 36 months.

A beneficiary of the FMRC trust is Francesco Bellini, president, chairman and CEO of Neurochem Inc., of Laval, Quebec. It was Bellini who put Segal and Falardeau together, and the synergy "became obvious to us in the first five minutes," Segal told BioWorld Today.

The merger will close "as soon as we can get our ducks in a row," he added. Those birds are lining up well, "given how fast this has evolved since Pierre and I first sat down for a quick drink," and final paperwork should be finished in eight weeks to 12 weeks, Segal said.

Under the terms, outstanding and unexercised options and warrants to acquire shares of Ecopia will be exchanged on closing for options and warrants to acquire common shares of the new firm, and all of Caprion's outstanding and unexercised options and warrants will be cancelled, except for certain warrants held by a third party which will be exchanged for warrants to purchase 5.3 million shares at C37 and a half cents for a specified period.

Ecopia's stock (TSE:EIA) closed Thursday at C36 cents, down 13 cents, or 26.5 percent.

In other financing news: Horizon Therapeutics Inc., of Palo Alto, Calif., raised an additional $15 million through a Series B financing to advance its lead product HZT-501, a "GI-friendly" prescription nonsteroidal anti-inflammatory drug, into pivotal Phase III trials in the first half of this year. Scale Venture Partners, formerly known as BA Venture Partners, led the round with Sutter Hill Ventures and Pequot Ventures also participating. The company completed a $6 million Series A round in October 2005 with the same syndicate of investors.

Variation Biotechnologies Inc., of Ottawa, Canada, raised $35.7 million in Series A financing. VBI will use the proceeds to advance the company's Variosite vaccine platform into clinical development, beginning with lead vaccine candidates for influenza.

Led by Clarus Ventures, the financing included the participation of ARCH Venture Partners and 5AM Ventures as well as existing seed investors, and represents the first venture round for VBI.

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