By Karen Pihl-Carey
Marine biotech company Aquasearch Inc. secured $10 million in the form of an equity line that can be drawn down at the company's discretion.
Aquasearch, of Kailua-Kona, Hawaii, develops and commercializes natural products from microalgae using the Aquasearch Growth Module. While some of its products are targeted for the nutraceuticals, animal feed and cosmetics markets, other products have shown potential as pharmaceuticals with activity in models of cancer, HIV and degenerative diseases.
The company secured the financing through the Los Angeles office of Alpha Venture Capital Inc., a member of the Alpha Group of Funds, a $750 million private equity fund group.
"What it really allows us to do is not only execute, but accelerate our business plan," said David Watumull, executive vice president of corporate finance and strategic development at Aquasearch.
Aquasearch can draw against the equity line based upon a formula related to the volume of trading and price of the stock. The company's stock (OTC BB:AQSE) closed Monday at 57 cents, up 1 cent.
"It's a formula based on stock price and volume and that can change day to day, week to week or month to month," Watumull told BioWorld Today. "It could be as short as several months [to draw down the $10 million] or as long as a year or two. We also believe this financing can leverage other financings, possibly debt financings."
The company's burn rate, Watumull said, is about $2.5 million a year, but that could increase over the next few years to $3 million or $4 million a year. As of April 30, Aquasearch had cash of about $500,000 and about 97 million shares outstanding.
Aquasearch's business plan over the next year includes the marketing of its dietary supplement The AstaFactor, as well as developing scientific data supporting the use of astaxanthin - the main ingredient in The AstaFactor - through clinical, preclinical and in vitro studies.
The company also wants to construct additional production capacity for astaxanthin and to commercialize its drug discovery platform, as well as to develop strategic relationships for its products. Within a year, it plans to introduce a second nutraceutical.
Astaxanthin is found in salmon, trout, red sea bream, shrimp, lobster and fish eggs, as well as a number of bird species. It is the main carotenoid pigment found in aquatic animals. Studies suggest it can be more than 1,000 times more effective as an antioxidant than vitamin E. In many aquatic animals it protects against oxidation of essential polyunsaturated fatty acids and ultraviolet light effects. It also plays a role in pro-vitamin A activity and vision, immune response, pigmentation and reproduction.
Astaxanthin has demonstrated efficacy in animal or human models of macular degeneration, Alzheimer's and Parkinson's diseases, cholesterol disease, stroke and cancer, the company said.
In its drug discovery activities, Aquasearch found that microalgae contains numerous unusual and bioactive molecules. It has selected and is developing such a molecule that has demonstrated efficacy with minimal toxicity in animal models of neurodegenerative diseases, cancer, reperfusion injury and cholesterol disease. The company is using Combinatorial Biocatalysis to optimize the compound through its strategic alliance with EnzyMed Inc., of Iowa City, Iowa.
"I think that that's going extremely well and that we should have something to report from that in the next several weeks," Watumull said. "What we are doing there is creating a library of compounds using EnzyMed's proprietary Combinatorial Biocatalysis technology, and that program is nearing completion."
Watumull added that the library is derived from astaxanthin.
Aquasearch went public in 1989, but did not raise significant capital until 1997. Since then, it has raised about $12 million, not including the $10 million equity line.