OTTAWA, Ontario - Almost C$38 million (US$26 million) in federal government funding has been awarded to the Canadian biotechnology companies Allelix Biopharmaceuticals Inc., of Mississauga, Ontario and Aeterna Laboratories, of Quebec City.

Allelix will receive C$8.4 million from the Technology Partnerships Canada (TPC) program over a four-year period, and Aeterna will receive C$29.4 million. John Manley, federal minister of Industry, told BioWorld International the investments are repayable but contingent upon commercialization of viable therapeutic products by the two companies, and repayments will be based on royalties calculated on all income generated.

TPC is a special operating agency of Industry Canada responsible for making strategic investments in technological development projects. Created in 1996, TPC makes investments in high technology growth sectors of the Canadian economy, including enabling technologies, environmental technologies and aerospace and defense.

The funding for Aeterna, one of TPC's largest research contributions to date in biotechnology, will be used for the clinical development of the company's angiogenesis inhibitor, AE-941, in oncology, dermatology and ophthalmology.

According to Eric Dupont, chairman, president and CEO of Aeterna Laboratories, the focus will be on developing its angiogenesis inhibitors based on AE-941, a shark cartilage extract. AE941's non-toxicity will allow the drug to be used in conjunction with other therapies. The inhibitors' primary function is to starve growing tumors or psoriasis plaques of their oxygen flow. In the case of macular degeneration, the inhibitors would be used to curtail the development of blood vessels inside the macula of the eye. The cancer and psoriasis projects are entering Phase III clinical trials, which are expected to be completed by 2004. The macular degeneration project will be going through both Phase II and Phase III clinical trials and is expected to be completed by 2006.

Aeterna is supplementing the federal funding with a C$15 million common shares offering which, when added to the company's current cash of C$24 million, will give it access to significant capital to fund development of AE-941, in line with a strategy of early market entry, Dupont added.

The investment for Allelix will be used for the clinical development of ALX-0600, a proprietary analogue of the naturally occurring gastrointestinal peptide glucagon-like peptide 2 (GLP-2), a product with therapeutic potential for a variety of debilitating gastrointestinal disorders.

ALX-0600 has been found to be safe in humans and currently is being tested in patients with short bowel syndrome. Clinical efforts in several other gastrointestinal indications are currently under consideration, with use in chemo- or radiation therapy in the treatment of cancer being the most promising.

Allelix has spent about C$15 million to date on the ALX-0600 project, which is one of the company's most advanced, said Allelix's senior vice president and chief financial officer, Paul Van Damme. With a possible orphan drug designation and accelerated approval status, this program has the potential to be the company's first to reach the market, he added.

The function of GLP-2 was largely unrecognized until 1996, when Daniel Drucker, of the Department of Medicine at the Toronto Hospital and the University of Toronto, and colleagues reported that GLP-2 administration to mice markedly increased small bowel growth in only a few days.

Drucker is collaborating with Allelix and has reported that ALX-0600 significantly enhanced the regeneration of intestinal mucosal cells in mice with chemically induced colitis. The observations suggest that administering ALX-0600 to enhance normal mechanisms that regulate intestinal cell growth may be a useful adjunct for treating the intestine in the presence of active inflammation, Drucker said.

ALX-0600, is currently in a pilot Phase II trial for SBS at sites in the United States.