By Karen Pihl-Carey

GenSci Regeneration Sciences Inc. spun off into a separate company an arm devoted to the research and development of small molecules for treatment of musculoskeletal and metabolic bone diseases.

By creating Osteopharm Inc., Toronto-based GenSci can garner more financing for the continued research of its two compounds for the treatment of osteoporosis.

"I think, quite simply," said Paul Gilmor, Osteopharm's president and CEO, "GenSci wanted to focus more directly on its core business, orthobiologics, which is a fast-growing field."

GenSci acquired the Osteopharm research and development technologies in 1997. The company has supported the programs for two and a half years, with 12 patents issued and 55 pending, Gilmor said. Gilmor has worked as GenSci's executive vice president and corporate secretary since 1997.

The formation of a new company may ease concerns from investors about whether GenSci would overextend itself trying to fund the R&D facility. "So it made sense to spin out the small molecules, which is really aimed at a systemic treatment of bone disease, rather than a surgical treatment," Gilmor told BioWorld Today.

Some existing investors have shown interest in financing the new company's growth, but Gilmor said Osteopharm also plans to raise private capital. The money should be in place by November at the latest, he said. Until then, GenSci will provide working capital.

"It's also my objective to broaden the base of investor interest by looking not only at the Canadian marketplace, but also at European and American investors," Gilmor said. "The products have such a universal appeal."

GenSci carries Osteopharm's assets at about $15 million on its balance sheet. The company said it will incur a substantial non-cash write-down against the value of the assets, resulting in a reduction in amortization expenses. The write-down, however, does not reflect the value of future returns expected as a result of the investment in the new company, GenSci chairman and CEO James Trotman said.

A major goal of Osteopharm will be to find a pharmaceutical partner to bring the company's products to market. The company is meeting with major pharmaceutical companies and potential partners and will continue doing so over the next several months, Gilmor said.

GenSci intends to retain at least a minority interest in Osteopharm, and it will retain a right to license products related to orthobiologics that are developed by Osteopharm.

Osteopharm has in preclinical stages the OSA and OSB compounds "identified as having efficaciousness for treatment of osteoporosis," Gilmor said. He expects to file an investigational new drug application for OSA sometime in the first quarter of 2000. The IND for OSB will be filed about a year later.

GenSci will transfer its facility in the Toronto suburb of Oakville, and 11 staff members, to Osteopharm. Gilmor expects the staff to grow to about 15, but the new company will continue to outsource much of its work.

Before starting with GenSci in 1997, Gilmor worked with MDS Capital Corp., of Toronto, and served as a director on several life sciences and technologies companies. He said he is excited about the new company and its program. Osteopharm's small-molecule anabolic peptides may treat more than osteoporosis, he said.

"We also believe that they may have use in a variety of other medical indications in which the stimulation of bone growth is desired," he said.