By Mary Welch
GlycoDesign Inc., a firm that develops therapeutics based on glycobiology, acquired Vascular Therapeutics Inc., which specializes in glycotherapeutics for cardiovascular diseases, in a stock swap initially valued at about $10 million (C$15 million).
"There is no cash involved. VTI shareholders will receive shares of GlycoDesign," said Jeremy Carver, president and CEO of GlycoDesign. "That is the initial round. There are potential future pay-outs as we partner their compounds, and we are very close to doing just that with one of them."
The acquisition is part of Toronto-based GlycoDesign's plan to become the largest company in the area of glycotherapeutics, Carver said. Glycobiology is the study of carbohydrate-containing molecules and their role in the body.
"We devised a merger and acquisition strategy over a year ago and rolled out a plan," Carver said. "A lot of little companies attempting to develop glycotherapeutics alone will result in few succeeding. But together, we could have quite a presence. This is the first step."
GlycoDesign is in active discussions with two other similar companies and "a third one if you want to stretch it," he said. "They've put our talks on hold and adopted a wait-and-see attitude. I think this acquisition will show them that we're not just talking."
VTI, too, saw the benefits of a merger. Both companies are privately held.
"In today's world, if you are not thinking about potential mergers in the biotechnology world, then you're not thinking very far ahead," said Jim Allen, president and chief executive officer of VTI. "We had decided some time back to look at potential mergers with companies about our size range. In today's world it's not how much cash you have as much as what you're going to do for the future. It's a hard, cruel world and we felt it was in our best interests to have economies of scale, management and technology. It wasn't a quick decision. We did a thorough search of potential merger candidates."
The two companies have some mutual investors as well as complementary technology. complementary. GlycoDesign is engaged in the discovery and early clinical development of small-molecule, orally active carbohydrate process inhibitors (CPIs) for the treatment of cancer, infectious diseases, inflammation and cardiovascular diseases. VTI focuses on developing glycotherapeutic agents to treat cardiovascular diseases caused by blood clots, such as acute myocardial infarction, angina, stroke, pulmonary embolism and deep vein thrombosis.
"I believe, based on my 35 years in an academic career, that this is a tremendously rich area for new therapeutics and we're putting the pieces together to exploit it," Carver said. "This merger not only gives us experience in cardiovascular but a whole class of molecules that is different from the small-molecule enzyme inhibitors that we've been dealing with here."
VTI has three antithrombotic compounds in its pipeline, with two of them representing a new generation of low-molecular-weight heparins. V20 is an anticoagulant in preclinical development. It acts by preventing the assembly of coagulation factors on the activated platelet surface and is being developed for diseases such as angioplasty and unstable angina.
The second, V21, is an antithrombotic agent that is being developed to treat diseases and conditions in which low-molecular-weight heparin has limited efficacy, such as in preventing deep vein thrombosis. It also is in preclinical studies.
The third is an orally active antithrombotic compound currently at the discovery stage. The company said it hopes the compound will be effective in a number of cardiovascular indications.
VTI's lead compound, Vasoflux, was in Phase II trials for acute myocardial infarction but the company stopped its development.
"We are in advance-stage partnering talks for one of the compounds, which would accelerate its development," Carver said. "We're very close on that, and it would also provide a pay-out to Vascular Therapeutics' shareholders."
GlycoDesign has eight compounds in its pipeline, including GD0039, which is in Phase II trials in Canada as an anticancer agent in renal cell carcinoma and 5-FU-resistant colorectal cancer. It also is conducting U.S. Phase I/II trials with GD0039 as a chemoprotective agent in advanced breast cancer patients receiving combination chemotherapy. Patient recruitment is now under way at the University of Chicago Medical Center.
VTI will close its Mountain View, Calif., facility. "We have a unique structure," Allen said. "We were pretty much a virtual company, contracting out all manufacturing and clinical studies. We have five people actually working here and none will be going to Toronto. I will be involved in the interim but I'll be landing somewhere else. I'm an incurable entrepreneur."
Founded in 1994, GlycoDesign has a staff of 42. Its market cap is C$80 million.
VTI was formed as a result of a collaborative effort between the Hamilton (Ontario) Civic Hospitals Research Centre and Tempus Medical Inc. in Mountain View, a medical technology incubator company. Jack Hirsh leads the research center and worked closely with VTI. He will become vice president of cardiovascular research for GlycoDesign; Jeffrey Weitz, a professor of medicine at McMaster University in Hamilton, will become director, thrombosis research. Both were intricately involved in VTI's work.
"Essentially, they invented the technology and VTI was developing it" Carver said. "They were more like full-time consultants and they will assume that same sort of role with us."
Two previous VTI board members were elected to GlycoDesign's new board of directors. They are Edgar Engleman, general partner of BioAsia Investments LLC, of Palo Alto, Calif., and Anders Wiklund, president of Wiklund International, of Bridgewater, N.J.
Another benefit VTI brings to GlycoDesign is American investors, most notably BioAsia.
"Unless you get to be a $200 million U.S. market cap company you're not going to be big enough to attract the attention of analysts and institutional investors," Carver said. "We're building value through this acquisition and bringing in revenue through partnership deals. It's helping us diversify our investor base. It's difficult breaking into the U.S. investor market, which is important when we decide to pull off a public offering, both on Nasdaq and TSE [Toronto Stock Exchange]."