By Karen Pihl-Carey

StressGen Biotechnologies Corp. and Genzyme Molecular Oncology bought out the primary investor in their joint venture to develop stress gene therapy cancer treatments for $7.9 million.

They now intend to proceed with research at their own pace rather than pushing a product into the clinic prematurely to meet requirements specified by the venture's major investor, Canadian Medical Discoveries Fund (CMDF).

CMDF, of London, Ontario, provided $7.1 million (C$10 million) in financing to the two companies in 1997. The agreement required StressGen, of Victoria, British Columbia, and Genzyme, of Framingham, Mass., to commit certain financial resources to the venture through 2001. Considering the equivocal scientific results of initial research, the companies instead decided to buy out CMDF and focus on their own development priorities.

"The structure put certain obligations on both StressGen and Genzyme to continue funding the joint venture," StressGen chief financial officer David Matthews told BioWorld Today. "And we both looked at the commitment we'd have to make and said we would rather spend that money on our clinical development programs. Although the results from the gene therapy were interesting, we just felt we would get a bigger bang for our buck by pushing the clinical development programs through."

The companies will cancel all outstanding warrants and convertible preferred shares held by CMDF. Each company also will pay CMDF $3.9 million (C$5.8 million) in the form of cash, shares or a combination of each. StressGen plans to pay it in shares, based on a 20-day average prior to a mid-November closing. Genzyme has not yet decided how it will pay.

"We're still evaluating that decision and it will be based on the strength of our stock at the time the buyback will take place," Genzyme Molecular Oncology President Gail Maderis said. "So we're leaving our options open."

Genzyme and StressGen first agreed to form a C$20 million joint venture in early 1997 to develop cancer treatments using cellular stress proteins to trigger the body's immune system. StressGen provided its approach for using stress protein genes, and Genzyme offered its gene therapy vectors to deliver the genes to cancer cells. Half of the funding was to come from CMDF, and the other half was to come from Genzyme and StressGen. (See BioWorld Today, March 27, 1997, p. 1.)

"The research has progressed more slowly than we would have liked," Maderis told BioWorld Today. "The key in this program has always been to look for results that are stronger than any of the other approaches that either company is using independently, and as we have gone through the research, we have not been able to consistently do that with this product. This [buy-back] allows us to continue to explore it, but to do that on our own time frame."

Matthews said the companies found in their research to develop a stress gene therapy cancer treatment that the efficacy was dependent on which animal model or vector was used, whether it was virally delivered or lipid encapsulated, as well as whether the treatment was injected.

"What we saw was interesting results in certain experiments, enough that we said there's something happening here, but there was a daunting amount of work to decipher the results," Matthews said. "We want to continue the experimentation to try and unravel or piece together the different effects we're seeing in the different studies and try to understand the best product and the best means of delivering that product."

StressGen's stock (TSE:SSB) closed Monday at C$1.60, down 9 cents. Genzyme Molecular Oncology stock (NASDAQ:GZMO) closed at $4.50, down 31.25 cents.