LONDON - Cortecs plc has spun out Oratol Ltd., a new and independently funded company, to develop treatments for allergies and autoimmune diseases.

Oratol has raised £5 million of venture capital, sufficient funding for three years, from Atlas Venture, JAFCO, Kokusai Finance Co. Ltd. and Saito, Ito and Partners Co. Ltd.

This values Oratol at £20 million. It will be 75 percent owned by London-based Cortecs, which has not put in any money, but has granted exclusive licenses for use of its technologies for the oral delivery of antigens to treat allergies and autoimmune diseases.

David McAuliffe, executive director of Oratol, told BioWorld International the decision to set up a separate company was made because Oratol's focus is beyond the stated scope of Cortecs.

“Cortecs' focus is on the oral delivery of peptide and protein drugs that are currently delivered by injections,“ McAuliffe said. “The company does not like to work with new chemical entities. We [Cortecs] have raised money on the basis that this is our interest, and we can't say to the shareholders now, 'Actually we are going to spend the money on other areas.'“

Technology Down-Regulates Immune Response

Oratol's approach to allergies and autoimmune diseases will be through the process of tolerisation, by which it plans to down-regulate the immune system's response to antigens.

“The aim is to switch the immune response that usually occurs against an allergen into a down-regulating response, which suppresses the specific immune or inflammatory response which causes the disease,“ said McAuliffe.

Apart from access to the parent company's oral delivery technologies, Oratol has assembled a portfolio of technologies through relationships with Bristol and Cambridge Universities, in the U.K., and McMaster University, in Ontario.

It has signed an exclusive collaboration agreement with Bristol to work on the development of a novel immune modulating technology. Researchers there have been working on a molecule excreted by Escherichia coli called EtxB.

EtxB binds to specific receptors on the surface of mammalian cells, and this binding has differential effects on B and T cells of the immune system. In preclinical studies EtxB has been shown to modulate specific immune responses.

“If animals with rheumatoid arthritis are given collagen there is a significant reduction of the disease. If they are given collagen plus the EtxB enterotoxin, the response is even better,“ said McAuliffe.

The collaboration with Cambridge University involves use of the bacteria, Lactococcus lactis, for production and delivery of antigens, while McMaster University will contribute expertise in mucosal immunity and conduct trials.

The company will work on the oral delivery of pharmaceutical-grade antigens that can be bought off the shelf. McAuliffe believes oral tolerance offers a number of important clinical and commercial advantages: improved specificity for disease through the oral delivery of appropriate antigens; oral delivery of expensive antigens in commercially viable doses; reduced risk of adverse reaction; and broad applicability to a wide range of allergies and autoimmune disease.

Preclinical Studies Under Way

All programs are at the preclinical stage. McAuliffe said that by the time the first tranche of money is spent there should be a couple of products in Phase II.

Further money could then come from another private finance round or from pharmaceutical deals. “Depending on success, we will have to look and decide at the time,“ he added.

Oratol will operate from the same premises as Cortecs, though McAuliffe noted Oratol has a distinct identity within the building. At present he is the sole employee, though a project manager is expected to be hired.

The research will be carried out by the academic partners with input from Cortecs, and clinical development will be outsourced.

The formation of Oratol coincides with the resignation of the chairman and chief executive of Cortecs, Glen Travers. Travers, who founded the company 15 years ago in Australia, orchestrated the company's transition from Australia to a full listing on the London Stock Exchange at the end of 1997.

A spokesman for the company told BioWorld International this move to full U.K. company status has raised issues of corporate governance. “It was clear that the management structure of the company had to change.“ It appears that some of the larger shareholders were unhappy with Travers combining the role of chairman and chief executive, and he decided to resign rather than step down to a lesser role.

He is replaced as non-executive chairman by John Patten, a former minister for education. Patten joined Cortecs earlier this year as a nonexecutive director. Michael Flynn, scientific director, will be acting CEO until a new one is found. *