BioWorld International Correspondent

One month after closing a $41 million Series B round, ESBATech AG spun out a new company, Oncalis AG, to take charge of its small-molecule drug discovery program in oncology, allowing it to concentrate on its core business of developing antibody fragments for inflammatory conditions.

Novartis Venture Fund and BioMedinvest AG, both of Basel, Switzerland, and VI Partners, of Zug, Switzerland, all Series A investors in Zurich, Switzerland-based ESBATech, "put the idea on the table", said Oncalis CEO Alcide Barberis. They also invested an undisclosed level of seed funding in the new venture. "It gives us a perspective of activity for about a year and a half to two years," he told BioWorld International.

Oncalis is using a yeast cell-based screening system to identify novel inhibitors of receptor tyrosine kinases, which play important roles in cancer through their involvement in angiogenesis, tumor growth and metastasis.

The underlying platform is essentially the same as that deployed by ESBATech in its search for antibody fragments that bind inflammation-related targets. However, Oncalis has obtained all rights to the platform in its sphere of activity. "We can clearly split the two programs into different patent assets or patent estates," Barberis said. Oncalis has also obtained a series of kinase inhibitors from ESBATech.

Barberis, who is a co-founder of ESBATech and was previously its chief scientific officer, developed the platform while at the Institute of Molecular Biology of the University of Zurich. The high-throughput screening system employs a positive - and proprietary - selection method. It involves the use of yeast cells that are genetically manipulated so that under appropriate selection conditions, they cannot grow when a human tyrosine kinase of interest is expressed. When the enzyme is inhibited, however, growth is de-repressed.

The technique, Barberis said, eliminates nonviable molecules that would provide a positive readout in biochemical screening systems, such as compounds that are toxic to cells or those which are unable to cross cell membranes. Moreover, all lead molecules identified through the screen are stable and active within a cellular environment.

Using a 96-well format, Oncalis can screen up to 9,000 compounds per week, he said. The company has established cellular screens for around 30 of the 58 receptor tyrosine kinases that have been identified in man. It also has gained access to medicinal chemistry expertise via a wide-ranging, shared-cost collaboration it has entered with an unnamed specialist in this field.

Oncalis is at a much earlier stage than ESBATech, which aims to move its lead program into the clinic next year. "It will take two years to an IND filing," Barberis said.

In addition to Barberis, a second ESBATech founder, Chief Financial Officer Adrian Escher, also has transferred into the new venture. The company also has recruited Peter Traxler as vice president of drug development. Traxler, a well known expert in kinase inhibition, had been an adviser to ESBATech and was previously responsible for all early stage research activities in oncology at Basel-based Novartis AG.

ESBATech does not have any equity in the new firm, although both Barberis and Escher, as founders, retain equity in it.