Shareholders of Stressgen Biotechnologies Corp. approved a corporate reorganization that will transfer all its assets to a new entity and bring in a non-dilutive funding investment of up to C$9.25 million (US$8 million).
The transaction, first announced in January, calls for the company to transfer to the new company all of its critical assets, including the development work surrounding HspE7, a CoVal fusion therapeutic vaccine aimed at treating diseases caused by the human papillomavirus (HPV). Under the new company, it will keep the name Stressgen Biotechnologies Corp. and retain its listing on the Toronto Stock Exchange under "SSB."
Basically, it "allows us to leave the old shell company behind and create a new one," said Greg McKee, president and CEO of Victoria, British Columbia-based Stressgen. "And, through that, we’re able to secure C$9.25 million cash from a party that’s interested in acquiring that shell."
An affiliate of Madison Group investment firm is expected to rename the old entity GVIC Publications Ltd., and seek to build a new business around it.
"We’re not sure exactly what that’s going to be at the moment," McKee said, but Stressgen shareholders will hold a voting interest in that business, as well as a 5.1 percent equity interest, in addition to maintaining their same ownership in Stressgen.
"We’re very excited about getting this completed," he told BioWorld Today, adding that the reorganization concludes a busy year that included restructuring, bridge financing and staff changes. "We’ve come a long way to get the company back on its feet."
Last April, Stressgen sold its bioreagents business for $8 million and cut its work force from 77 to 39 employees. Six months later, staff was cut further to 27 permanent employees. All those moves were aimed at preserving cash and realigning resources to focus on its HspE7 work. (See BioWorld Today, April 15, 2005, and April 29, 2005.)
The recent transaction will be "essentially transparent," and won’t affect any of the company’s operations, McKee said. In fact, he added, the only difference will be the non-dilutive cash infusion, "which is what we were after," and the additional stake shareholders will gain in the business that takes over Stressgen’s old shell.
The closing of the deal is expected on or about March 23, pending court and regulatory approvals.
The cash is expected to fund general operations and to support development of HspE7, which has completed a number of Phase II trials. The compound is a recombinant fusion product made of heat-shock protein 65 from Mycobacteria bovis fused to the protein E7, an antigen derived from HPV.
Stressgen is advancing the compound along a dual development pathway, with the first path investigating the compound in its initial form and the second evaluating the potential of an HspE7 compound that’s been reformulated with an adjuvant. Potential indications for HspE7 include HPV-related diseases, such as genital warts, anal and cervical dysplasia, and recurrent respiratory papillomatosis.
HspE7 is partnered with F. Hoffmann-La Roche Ltd., in a deal that provides the Basel, Switzerland-based company an option to a first-generation product.
Stressgen, which expects to report fourth-quarter earnings this week, posted a net loss of C$5.7 million, or C8 cents per share, for the third quarter. As of Sept. 30, the company had cash and investments totaling C$5.8 million, though it raised an additional C$2.7 million in November.
Shares of Stressgen (TSX:SSB) gained C2 cents Friday to close at C65 cents.