By Peter Winter

Special To BioWorld Financial Watch

When a short article in the Dec. 7 issue of Business Week laudedBiomira Inc.'s experimental vaccine for metastatic breast cancer -and quoted a bullish analyst's predictions of the product's huge marketpotential -- excited investors sent the Canadian biotechnology firm's stocksoaring. On the Nasdaq, the shares (BIOMF) surged an astounding 650 percent-- from $2.00 to $15.00 on heavy volume before trading was halted Nov.27. The shares also surged on the Toronto Stock Exchange (TSE:BRA), wherethey gained C$2.70 to hit C$6.20 in heavy trading.

The revelation -- that Biomira and its development partner ChironCorp. (NASDAQ:CHIR) were about to initiate Phase III clinical trialsof the carbohydrate-based vaccine Theratope - was, in fact, old news tobiotech aficionados. But when Biomira was thrust center stage, the spotlightalso cast its glow on the rest of the Canadian biotech sector.

In a matter of days, another Canadian biotech company stepped up toclaim investors' attention. On Nov. 30, the Canadian health authoritiesapproved for marketing Heptovir, the first oral antiviral drug for treatinghepatitis B virus infection. The next week, on Dec. 9, the U.S. FDA alsoapproved the product for sale, under the tradename Epivir-HBV. That product,known generically as lamivudine, and already enjoying near-billion-dollarsales as the AIDS drug Epivir (or 3TC), was created by BioChem PharmaInc. (NASDAQ:BCHE; TSE:BCH) of Laval, Quebec and licensed to London-basedGlaxo Wellcome plc (NYSE:GLX).

Then, on Dec. 10, BioChem Pharma also announced that it had finalizedits alliance with SmithKline Beecham plc's (NYSE:SBH) affiliate SmithKlineBeecham Biologicals, of Rixensart, Belgium, to develop and commercializenew technologies for producing influenza vaccines.

These announcements boosted the value of BioChem Pharma shares fromC$28.35 to a 52-week high of C$42.00 on the TSE; the shares have easedback some since then, closing at C$40.00 on Dec. 18 (on Nasdaq, the sharesclosed at US$26.94 that day).

Stocks In Recovery

In the grand scheme of things, 1998 was not a great -- or even a particularlygood -- year for Canadian biotech stocks. Since May, when the bear markethit, the stocks have continued to lose ground. At that time, for instance,the Yorkton Healthcare Index (YHI) had a point value of 3,676. By earlyOctober, just five months later, it had slumped to a value of 2,050. TheYHI, an unweighted average of the healthcare companies trading on the TSEwith a share price above C$1.00, measures the changes in daily closingprices relative to a base price.

The carnage was not bad enough to send investors jumping from the tallestbuildings, but general disenchantment with the sector served to put thebrakes on what was otherwise a very good year for the biotech industry.(See attached charts for a list of the various products that are now inclinical trials, for instance.)

While Ezra Lwowski, the healthcare analyst at Toronto-based YorktonSecurities Inc., believes that the bear market is still with us, therecent news from Biomira and BioChem Pharma has definitely caused an upswingin the YHI, which had rallied to 2,665 points by mid-December. This isa clear sign that the Canadian biotech sector will perform very well in1999 - and Biomira and BioChem Pharma are leading the way.

Biomira's Vaccine Gets A Boost

Biomira specializes in developing innovative therapeutic approachesto cancer management, particularly synthetic vaccines and novel strategiesfor immunotherapy. The company's lead compound, Theratope, is a syntheticvaccine for metastatic breast cancer. Administered in an out-patient setting,the vaccine is designed to stimulate the patient's immune system to controldisease with minimal side effects. In Phase II clinical trials, patientswith metastatic breast cancer appeared to show a survival benefit associatedwith the use of the vaccine.

Many tumor cells express the carbohydrate STn, which has been associatedwith tumor aggression and poor patient prognosis.Theratope consists ofa synthetic antigen that mimics natural STn, coupled with the carrier protein,keyhole limpet hemocyanin (KLH), which functions as a potent immunogen.The Theratope vaccine thus induces both an antibody response and a cellularimmune response to STn - which may have a direct therapeutic effect againstcancer cells.

Biomira and Chiron entered a strategic collaboration in May 1997 tojointly develop Theratope. Under the terms of the alliance, Chiron receivesexclusive marketing and distribution rights to the vaccine in the U.S.,Europe, Japan and Australia. Biomira retains rights in Canada, the MiddleEast, Africa, Latin America and Asia (excluding China). Biomira will receivedevelopment milestone payments from Chiron, plus 45 percent of Theratopevaccine revenues up to US$150 million, and 50 percent of revenues thereafteron sales in the U.S. and Europe.

The news that got investors so excited was Biomira's announcement thatthe multinational Phase III clinical trial of Theratope was under way inEurope and North America. The trial, to be conducted at 70 to 75 sites,will involve at least 900 evaluable patients with metastatic breast cancerfollowing first-line chemotherapy. As such, it is believed to be the largesttrial ever undertaken in metastatic breast cancer patients. In the BusinessWeek article, analyst Karen Boezi, of Coral Ventures (which owns 1million shares of Biomira stock), was quoted as saying that the marketfor this vaccine is huge and that, as results from the trials emerge, Biomirashares should continue to surge. As well, she said that Chiron's stakein the vaccine's development adds validity to the undertaking.

Biomira has the potential to become as familiar a name in North Americaas BioChem Pharma is now.

BioChem Pharma's Flu Vaccine

Although BioChem Pharma has earned its reputation through the stunningsuccess of its AIDS drug Epivir, the Quebec company has also initiateda major program in flu vaccines. Its collaboration with SmithKline Beechamis intended to develop new versions of these vaccines, including a cell-derivedinjectable product (based on BioChem's research) and a nasal delivery method(based on technology that BioChem Pharma licensed from privately ownedBiovector Therapeutics SA, of Toulouse, France, in May 1997).These technologies will complement SmithKline Beecham's existing expertisein the adjuvantation and intranasal delivery of vaccines.

BioChem Pharma is developing a cell culture-based manufacturing processfor the active ingredient in flu vaccines; it is intended to replace theclassical egg-based method and promises to yield an immunologically equivalentor better vaccine profile. In addition, because BioChem Pharma's new cellculture-based technology may allow shorter production lead-times than withegg culture, it may be possible for the manufacturer to increase its vaccineoutput more rapidly in response to an influenza outbreak.

The vaccine field is extremely vibrant at the moment. The explosionof knowledge in molecular biology and genomics -- in particular -- hasblown open the doors for vaccine research. For the first time, it may befeasible to develop safer and more effective vaccines than those alreadyon the market. Also, researchers now have the tools to discover and developtotally new vaccines.

According to statistics, the world market for vaccines should undergophenomenal growth in the coming years. Vaccine sales worldwide are predictedto increase from the US$3.6 billion that they were in 1996 to more than$7 billion by the year 2000. It is interesting to note that vaccines featureprominently in the product portfolios of both Biomira and BioChem Pharma.

The Cancer Vaccine Network

Canada's research in this area is significant, supported in part bythe Cancer Vaccine Network -- Canada's cancer vaccine project. The CancerVaccine Network, headed by Pasteur Merieux Connaught Canada, thecountry's largest vaccine company, is a collaboration among the top scientistsin their fields, drawn from institutions, organizations, hospitals anduniversities. Launched in 1997, with a C$350 million, 10-year funding commitment,the long-term goal of the Network is to find ways of harnessing the immunesystem to treat cancer. In the short term, the goal is to prove by theyear 2000 that therapeutic vaccines can work in humans. The initial targetsof the Network are late-stage melanoma, colorectal cancer and bladder cancer.Other cancers, such as breast and prostate, will be attacked after researchersare satisfied they've proved the vaccine concept.

The initiative is considered extremely important for Canada and itsbiotechnology industry -- so much so that the federal government has pledgedC$60 million in financing over 10 years to the Network through the TechnologyPartnerships Canada (TPC) program.

So far, four major research projects have been funded. The largest grant,worth nearly C$2 million over five years, has gone to Robert Kerbel,David Spaner, Norman Lassam and Corrinne Lobe at theSunnybrook & Women's College Health Sciences Centre in Toronto.

Spaner and Lassam will study factors that are correlated with the efficacyof cancer vaccines and will develop tests for those factors. They willalso study ways of enhancing the body's immune response to cancers, byextending the time in which antigen-specific T cells remain active. TheNetwork financing for their work is C$375,000 annually for three years.

Kerbel, who is well-known for his research in angiogenesis, will determineif "anti-adhesive agents," which work to break up the three-dimensionalstructure of solid tumors, can improve the efficiency of immunotherapy.Lobe will study how well cancer vaccines work against tumors caused bya mutation in the p53 tumor suppressor gene. Kerbel and Lobe will shareC$150,000 a year for three years.

A team led by Dalhousie Medical School associate professor Jean Marshallwill receive C$380,000 over two years to study the chemical signalsgiven off by immune cells in response to certain DNA sequences. Dr. Marshall'sresearch group will focus on short sequences of DNA known as CpG motifs,which are known to enhance immune responses. Her goal is to see how mastcells and peripheral blood monocytes respond to these motifs. In the longrun, Marshall says, the knowledge gained from her research may make itpossible to initiate a cytokine response that would trigger or bolsteran immune system attack on tumor cells by killer T-cells.

Internationally acclaimed scientists Leigh Murphy and PeterWatson, both from the University of Manitoba, have been awarded C$150,800over the next two years for their research. They are hoping to discovergenes that are uniquely involved in each stage of breast cancer progression.

The most recent award of C$308,000 over two years will support the researchof cancer expert Eleftherios Diamandis, head of clinical biochemistry,and his team at the Mount Sinai Hospital in Toronto.

Diamandis and his colleagues have shown that the p53 gene can stimulatethe development of antibodies when it mutates so that it no longer suppressestumors. More than half of all human cancers show a mutation in the p53gene. In those cancers, according to Diamandis, the defective p53 genemay cause mutated proteins to accumulate on the surface of cancerous cells.Those altered proteins may, in turn, cause the immune response that isseen in some cancer patients.

For the Network, Diamandis will study several aspects of the interactionbetween the human immune system and cancer cells to determine if thereare antibodies caused by tumor-associated proteins linked to genes otherthan p53. If he finds such antibodies, he will use them to track down thegenes or proteins that stimulate them, in the hope of finding suitabletargets for vaccines.

Commercial Development

In addition to the targeted research in universities, immunotherapytechnology and the development of vaccines against various infectious diseasesis the commercial focus of several Canadian biotech companies (see attachedcharts).

Researchers at StressGen Biotechnologies Corp. (TSE:SSB) havefound in preclinical studies that a stress protein fusion vaccine can elicita potent immune response against a specific viral protein without the useof additional adjuvants. The fusion protein vaccine used in these studiescombined a stress protein with an influenza virus antigen. This vaccineactivated cytotoxic T cells (CTL), which historically have been difficultto activate using vaccines composed of soluble proteins. "These findingsunderscore the potential utility of our approach to vaccines for infectiousdisease,'' said Richard Glickman, president and CEO of the Victoria,B.C., company. "Within our infectious disease program, we have assembleda collection of vaccine candidates and intend to advance their developmentthrough corporate partnerships."

StressGen's products are based on stress proteins, a natural class ofpowerful immune-stimulating molecules also called heat shock proteins.StressGen is incorporating stress proteins into proprietary fusion proteinproducts for specific cancer immunotherapy and prophylactic vaccines forthe prevention of infectious disease.

Both BioChem Vaccines Inc., a subsidiary of BioChem Pharma, andIntellivax International Inc., a private Montreal-based biopharmaceuticalcompany, are working on nasal delivery of vaccines. Vaccines administerednasally rather than by injection could make a significant contributionto overcoming the barrier that annual injection poses to wide acceptanceof vaccination. In addition, a nasally administered flu vaccine has thepotential to create a local immunological barrier and thus, better protectionagainst infection.

BioChem Vaccines has already reported positive Phase I results for itsinfluenza vaccine candidate designed for nasal administration. This firstof a series of studies was designed to prove the concept that nasal administrationof a trivalent influenza vaccine could be safe and immunogenic. The studyendpoints were achieved as measured by the vaccine's safety profile andby significant increases in systemic IgG and in mucosal IgA.

According to newly appointed CEO of Intellivax, Bill Milligan,that company's vaccine for shigellosis (bacterial dysentery), administeredby nasal spray, also performed successfully in a Phase I trial.

Tested by Intellivax, Inc., the company's Baltimore-based subsidiary,the new vaccine for Shigella flexneri demonstrated a favorable safety profileand induced significant systemic and mucosal immune responses in humanvolunteers. This was the second product to demonstrate the safety and immunogenicityof Intellivax's mucosal vaccine technology.

In this one technological area, Canada has a critical mass that willstand it in good stead in the years to come. Expect to see some commercialactivity from the Cancer Vaccine Network once the short term goals havebeen met. *