PharmaGap fka GAP

[Tackler]

GENERAL DEVELOPMENT OF THE BUSINESS
Three Year History
Commencing in December 2004, to the present, executive management of the Company,
including the full-time services of the President and Chief Executive Officer has been provided
under the auspices of a Strategic Advisory Contract with SC Stormont Inc. (“Stormont”, a
company controlled by Roderick M. Bryden, Chairman of PharmaGap), providers of executive
and operational management as well as financial structuring and management expertise.
Research
In January 2005 the Company made the decision to focus 100% of its resources on its drug
development program to develop selective inhibitors and/or activators of the protein kinase C
(“PKC”) family of isoforms, of which there are 12. These PKC isoforms are known to be
associated with many human disease conditions, including cancer, diabetes, Alzheimer’s disease
and cardiac disease, among others. To date, the Company’s focus has been on the development
of a selective (meaning that it acts primarily on one PKC family member to the exclusion of
others) inhibitor of PKC alpha for application in cancer therapy, either alone or in combination
with known chemotherapeutic agents already in use. The Company had previously been focussed
on developing the drug compound for use as a therapeutic in neuroblastoma, a type of children’s
cancer, but in 2005 expanded that focus to include large-population cancers. Also at that time,
the business model was changed to position the Company as a provider of pipeline drugs,
through out-licensing, to larger pharmaceutical companies at the preclinical stage, rather than as
previously established which envisioned the Company taking each drug compound through all
stages of research, preclinical development and testing, clinical testing, full scale drug
production for human use, regulatory approvals, and eventual marketing and sales. This business
model is consistent with that adopted by other companies of PharmaGap’s size and stage of
development, and is also consistent with the change in business model by pharmaceutical
companies looking to early stage biotech entities such as PharmaGap as the source for their drug
development activities.
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Also at that time, the Company discontinued research and development activities in its cell-based
assay programs and its non-invasive animal immuno-assay programs.
Since that time, the Company has focussed its efforts in development and testing of its lead drug
compound candidate, PhGα1 (“PhGα1”; pronounced as “P” “H” “G” “alpha” “one”) in animals,
to the legal protection of its intellectual property rights by filing provisional patent applications
for its lead drug and pipeline program, to expanding its outreach program to the pharmaceutical
industry in order to develop out-licensing opportunities, to continued development of software
based models and compound design tools, and to the design and initial testing of its pipeline of
potential future drug compounds, all of which are inhibitors and/or activators of one or more
members of the PKC family.
In the past three years, in light of the shift from the research phase to the drug development and
testing phase and combined with the decision to discontinue the peripheral product activities
mentioned above, the Company has reduced its number of full time scientific staff from 12 to 3,
which is augmented by external advisors and experts as required. The Company will continue to
maximize the use of third party service providers (e.g. contract research organizations (“CRO”),
academic collaborators), experts and advisors to deliver its drug program, a strategy that is well
established in the biotech industry. Direction of the Company’s drug development program will
be provided by advisors to the Company expert in the drug development process, in consultation
with the Company’s Chief Scientific Officer.
During this period, the Company has carried out its testing of PhGα1 in its own laboratories, at
the NRC’s Animal Research Facility in Ottawa, at Memorial Sloan-Kettering Cancer Center in
New York City, and at Queen’s University in Kingston, Ontario. Its computer-based drug
pipeline design program has been carried out at the University of Lyon, France.
Financing
On August 26, 2005, the Company issued a Series 2 Convertible Debenture (the “Series 2
Debenture”) to SC Stormont Holdings Inc. (“Stormont Holdings”, a company controlled by
Roderick M. Bryden, Chairman of PharmaGap) in the principal amount of $1,500,000. The
Series 2 Debenture is interest bearing at 10% per annum, compounding monthly, due and
payable on demand, with an original maturity date of August 26, 2007.
Between December 19, 2005 and September 12, 2006, PharmaGap issued six tranches of Series
3 Secured Convertible Debentures (the “Series 3 Debentures”) to accredited investors by way of
private placements in the aggregate principal amount of $1,287,120 (of which $970,000 was
issued to Stormont Holdings). The Series 3 Debentures matured on August 26, 2007 and
accrued interest at 10% per annum. The Series 3 Debentures were convertible any time by the
holder into equity units of the Company (the “Equity Units”) at a price of $0.30 or $0.325 for
each Equity Unit (each Equity Unit consisted of one common share and one warrant with a two
year term to acquire one common share at an exercise price of $0.45 or $0.4875 per common
share). The Series 3 Debentures were also callable by the Company under certain circumstances.
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On May 3, 2007 the Company completed the issuance of 2,000,000 common equity units
(“Units”) to Dundee Securities Corporation (“Dundee”) for aggregate gross proceeds of
$250,000. The Units were issued at $0.125 per Unit and consist of one common share and one
warrant to purchase one common share at $0.165 for a two-year period.
Also on May 3, 2007 the Company completed the issuance of 2,400,000 Series I First Preferred
Shares (“Series I Shares”) to Dundee, as part of the same offering, for aggregate gross proceeds
of $300,000. The Series I Shares were priced at $0.125 per Series I Share and were convertible
at the request of the holder into Units on a one for one basis at no further cost. Each Unit
consists of one common share and one warrant to acquire one common share for a two-year
period at an exercise price of $0.165 per common share. The Series I Shares carry no fixed
dividend and have no priority on liquidation. Series I Shares are eligible to vote in all votes of
common shareholders to the extent of one vote for every one hundred Series I Shares held, and
are subject to a voting agreement that directs Series I Share votes to be cast in favour of the
majority of the common shares voted. On April 28, 2008, all outstanding Series I Shares were
converted into Units and subsequently all warrants were exercised.
On June 14, 2007, the Company completed the issuance of 3,603,600 Units to accredited
investors in Canada for aggregate gross proceeds of $450,450. The Units were issued at $0.125
per Unit and consist of one common share and one warrant to purchase one common share at
$0.165 for a two-year period.
In connection with the May 3 and June 14 issuances of Units and Series I Shares, commissions
and finders fees of $102,587 were paid in cash and 414,800 broker warrants were issued. Each
broker warrant consists of one common share at an exercise price of $0.165 per common share
and has a two-year term. In April 2008 all broker warrants were exercised.
On August 31, 2007, the Company signed an agreement with holders of its Tranche 1 and 2
Series 3 Debentures in the principal amount of $317,120 to extend the maturity date of the
Tranche 1 and 2 Series 3 Debentures by 18 months to February 26, 2009. The extended Tranche
1 and 2 Series 3 Debentures are convertible into equity units of PharmaGap consisting of one
common share and one common share purchase warrant. In return for the granting of the
extension of the maturity date, the conversion price of the Tranche 1 and 2 Series 3 Debentures
was reduced from $0.30 to $0.175, and the warrant exercise price of the Tranche 1 and 2 Series 3
Debentures was reduced from $0.45 to $0.2625.
On October 15, 2007, PharmaGap signed an agreement with Stormont Holdings, holders of the
Series 2 convertible secured debentures in the principal amount of $1,500,000 and Tranche 3, 4,
5 and 6 Series 3 Debentures in the aggregate principal amount of $970,000 to extend the
maturity date of the debentures by 18 months to February 26, 2009. In return for the granting of
the extension of the maturity date, the terms of conversion were changed, reducing the
conversion price to $0.13 and eliminating the common share purchase warrant previously
provided on conversion. Original terms provided for conversion into equity units consisting of
one common share and one warrant, with a conversion price of $0.30 or $0.325 and warrant
exercise price of $0.45 or $0.4875.
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On October 19, 2007, the Company announced the approval of up to $500,000 of secured
convertible debentures (“Series 4 Notes”), and the issuance of $265,200 of these Series 4 Notes
to Stormont Holdings by way of a private placement. The Series 4 Notes are due on the earliest
to occur of: (i) demand; or (ii) February 26, 2009 and accrue interest at 10% per annum. The
Series 4 Notes are convertible at any time by the holder into equity units of the Company (the
“Series 4 Equity Units”) at a price of $0.13 for each Series 4 Equity Unit (each Series 4 Equity
Unit consists of one common share and one warrant with a two year term to acquire one common
share at an exercise price of $0.195 per common share). The Series 4 Notes are also callable by
the Company under certain circumstances. On April 4, 2008, the Company issued additional
Series 4 Notes to Stormont Holdings in the amount of $234,800, bringing the total principal
amount of outstanding Series 4 Notes to $500,000.
On April 4, 2008, PharmaGap issued a seventh tranche of the Series 3 secured convertible
debentures (“Tranche 7 Series 3 Notes”) to Stormont Holdings by way of a private placement in
the amount of $112,880. The Tranche 7 Series 3 Notes mature February 26, 2009 and accrue
interest at 10% per annum.
The Tranche 7 Series 3 Notes are convertible at any time by the holder into equity units of the
Company (the “Tranche 7 Series 3 Equity Units”) at a price of $0.175 for each Tranche 7
Series 3 Equity Unit (each Tranche 7 Series 3 Equity Unit consists of one common share and one
warrant with a two year term to acquire one common share at an exercise price of $0.2625 per
common share). The Tranche 7 Series 3 Notes are also callable by the Company under certain
circumstances.
Following the issuance of the Tranche 7 Series 3 Notes, the aggregate principal amount of
outstanding Series 3 Debentures issued was $1,400,000. Up to May 28, 2008 , Series 3
Debentures held by parties other than Stormont Holdings in the principal amount of $251,778
and accrued interest in the amount of $66,635 for a total of $318,413 were converted into
1,819,502 common shares and 1,819,502 warrants to purchase common shares. Following this
conversion, the aggregate principal amount of Series 3 Debentures outstanding is $1,148,222.
DESCRIPTION OF THE BUSINESS
Business Overview
PharmaGap is developing novel drug compounds for therapeutic use in potentially a wide range
of human diseases. The Company’s farthest advanced (or lead) drug compound, PhGα1, is
designed to treat certain cancers, including breast and colon cancer. These are two of the leading
causes of cancer-related deaths in North America and despite significant advances in treatment
options for these types of cancer over the past few decades there remains a large unmet need for
the development of novel and more efficacious therapies. PhGα1 is currently at the preclinical
stage of development and has been successfully tested in animal models of human cancer disease
at this point. The Company anticipates filing a regulatory approval application to conduct
human trials of the lead drug compound in 2010.
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Drug Development Platform
PharmaGap’s drug development platform focuses on a specific family of protein kinase targets
called PKC. Protein kinases are a large group of enzymatic proteins that are rapidly emerging in
importance within the pharmaceutical industry as therapeutic targets in drug development due to
their involvement in cell signalling pathways affecting gene transcription and protein translation.
Over 500 protein kinase families have been identified to date, including the PKC family. The
PKC family comprises 12 closely related members or “isoforms.” PKC are ubiquitous
intracellular isoenzymes found in almost all tissue and body organs and when expressed within
cells at normal levels, are essential for modulating important cell signalling pathways and the
resulting cellular physiological processes controlled by these signalling pathways. In many
disease conditions however, such as cancer, cellular levels of certain PKC isoforms are
abnormally over or under-expressed and as a result, the signalling processes in these afflicted
cells goes awry.
PKC & Cancer
The Company’s lead drug compound targets one isoform of PKC known as alpha. PKC alpha is
well characterized as a novel target for potential cancer therapy as its been clearly demonstrated
in research over the past 30 years that aberrant levels of PKC alpha are associated with cancer
tumorigenesis, including tumour growth, invasiveness and cancer’s ability in many cases to
become resistant to continued treatment with cytotoxic chemotherapy.
By inhibiting or modulating the enzymatic activity of PKC alpha in cancer cells, PharmaGap’s
lead drug aims to decrease tumour cell growth and proliferation and enhance cancer cell death.
PhGα1 is anticipated to be used as adjunct combination therapy with standard chemotherapy.
Administration of PhGα1 may potentiate the cytotoxic effect of chemotherapy against cancer
cells, thereby reducing the amount and/or duration of chemotherapy and therefore potentially
lowering unpleasant patient side effects resulting from chemotherapeutic treatment.
Peptide Drug Design & Synthesis
PharmaGap’s drug platform is focused on the development of modified peptide drug compounds,
including the lead drug PhGα1. Peptides are short sequences of amino acids; natural molecules
that are the “building blocks” of all proteins found in the human body. Peptide drugs composed
of amino acids potentially offer the benefit of drug compounds that exhibit very low toxicity
outside of their intended therapeutic use. Peptide drug development is a relatively new
phenomenon in the pharmaceutical industry. Hitherto most drugs approved for use were
synthetic or naturally sourced small organic molecules. The emergence of the biotechnology
industry has now resulted in protein-based therapeutics (often referred to as biologics) becoming
more common, including antibodies, recombinant proteins and now increasingly, peptides.
Recent advances in peptide stabilization and delivery technologies have also accelerated peptide
drug development.
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PharmaGap’s peptide compounds are developed by way of sophisticated computer modeling
techniques and a drug development approach known as rational drug design. PharmaGap has
developed proprietary computer models of selected PKC isoforms, including PKC alpha, that
allow development of peptide drug designs in silico, or on the computer. Rational drug design is
a methodology that builds from first principles. In other words, with a selected target strongly
implicated in tumour processes identified (PKC alpha), computer modeling is then used to
develop an iterative series of possible peptide drug designs that preferentially target and inhibit
the activity of PKC alpha. The series of pro-drug candidates are then screened by software for
utility and potential efficacy. Synthesis of identified drug candidates then occurs and these are
tested in the laboratory and the data used to optimize the next generation of computer designs.
This iterative process occurs until molecular candidates are designed with maximum potency.
PharmaGap’s peptide drug compounds are synthesized in-house and undergo a proprietary
modification procedure post-synthesis.
Rational drug design contrasts with a drug candidate identification process known as highthroughput
screening (“HTS”) which is more commonly used in the pharmaceutical industry,
especially for small molecule drug development. HTS involves screening thousands, and in
some cases millions, of chemical compounds found in “compound libraries”, looking for some
activity against a chosen molecular or physiological target. By deploying computer aided design
techniques instead, PharmaGap believes it can develop drugs quicker and with less cost than
HTS methods.
Corporate Objectives & Strategy
PharmaGap’s core competence is the development of peptide drug compounds able to
preferentially target PKC. The Company is developing a portfolio of novel drug compounds
using proprietary expertise and has filed patent protection to protect this value. The first drug
compound PhGα1 is being developed to treat cancer, but it is anticipated that other compounds
in the development pipeline may have therapeutic use in other diseases, such as for example, in
diabetes. The business strategy to maximize value for shareholders is to eventually partner and
license these compounds to larger pharmaceutical and biotechnology companies at the
preclinical or early to mid-human clinical trial stage of development.
Partnering early stage compounds is a business development strategy pursued by many early
stage biotechnology companies in North America. Generally a smaller biotechnology company
will form a development alliance, or enter into an outright licensing transaction, with a larger
pharmaceutical or biotechnology company partner. The larger partner provides drug
development expertise and access to capital and other resources often unavailable to the smaller
biotechnology company. In addition, sharing the development reduces risks to both parties.
PharmaGap’s specific aim for its lead cancer drug is to partner PhGα1 at the preclinical stage;
the drug development stage immediately prior to testing the compound in humans. Management
believes that partnering the lead compound at the preclinical stage of development with a larger,
experienced drug development organization reduces financial and product risk to the Company
and will provide access to capital and resources currently unavailable to the Company, while
better ensuring the drug’s success in later stage human clinical trials.
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Currently the pharmaceutical industry is actively pursuing and announcing alliances and
licensing partnerships with biotechnology companies developing preclinical and early stage
clinical trial compounds. With their strong balance sheets they have ample resources to fund
their partnership activities. While pharmaceutical companies historically preferred to partner or
license compounds developed by biotechnology companies at the human clinical trials stage,
over the past approximately three to five years the industry has seen a dramatic shift in
compound partnering dynamics in the industry and there is a growing trend towards earlier stage
partnering, especially at the discovery and preclinical stage. Many pharmaceutical companies
are pursuing a portfolio approach to managing their drug development pipelines and believe that
having third party-developed compounds at the discovery and preclinical stages in their pipeline
reduces their own risk and gives them access to novel technologies otherwise unavailable to
them internally. They in effect view the many smaller companies in the biotechnology industry
as a “virtual laboratory” that they can access to augment and leverage their own internal research
and development initiatives.
Also driving pharmaceutical company interest to partner and license at the early stage is their
need to augment their drug development pipelines earlier in order to offset the commercial
pressures many are facing from looming patent expiration, generic drug competition and the rise
of a low cost and efficient pharmaceutical industry, especially in India and China. As well, the
rise of fully integrated large biotechnology companies has raised the level of competition in the
pharmaceutical industry since the former have developed large sales forces that compete
aggressively with the traditional pharmaceutical companies.
A partnering transaction at the preclinical stage may take many forms. Companies may enter
into research alliances to further optimize one or more potential drug compounds or they may codevelop
an already identified compound in order to share development of the data required for
future regulatory approval to test the compound in humans. The partners may also enter into a
licensing arrangement with the company that owns the compound (the licensor) entering into an
economic and legal marketing agreement with a partner (the licensee), which typically takes full
control of future development. Research alliances and co-development arrangements typically
involve an upfront payment, shared development expenditures and often milestone payments.
Often a research alliance or co-development arrangement is a prelude stage to an eventual
licensing transaction. A licensing transaction also involves an initial up-front cash payment,
additional development funding payments and/or payments upon achievement of development
milestones, followed by royalty payments to the licensor based on sales of the eventual product
by the licensee.
PharmaGap will not necessarily pursue an early stage partnering strategy for other drugs now in
its development pipeline. Management will assess a partnering transaction for these drug
compounds on a case-by-case basis, depending upon their potential therapeutic indication, patent
position, strategic value to a partner, as well as the internal resources available to the Company at
that time. PharmaGap’s business model is to progress each drug as far as possible toward
commencement of clinical trials, given the level of resources available to it, prior to
relinquishing share of future value to development partners or completing an out-licensing
arrangement. However, this is balanced by the reduction of risk and time to reach clinical trials
that may result from earlier development collaborations, partnerships or licensing.
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Medical Rationale for the Lead Drug Program
Almost 1.5 million new cases of cancer will be diagnosed in the United States alone during 2008
(American Cancer Society). Despite significant advances in cancer treatment over the past few
decades, cancer still remains the second leading cause of death in adults and almost 600,000 will
die from cancer this year in the United States. Clearly a large need exists for new treatment
paradigms.
Cancer is a catchall term used by the medical community to describe a variety of diseases
generally characterized by uncontrolled growth of abnormally aggressive cells and impaired cell
death. In normal tissue cell division and cell death are tightly regulated by a variety of genecontrolled
cell signalling molecules (including PKC). However, for a variety of reasons (genetic,
environmental, hormonal or immune system driven), cellular defects can lead to uncontrolled
cell proliferation or to a decrease in normal, programmed cell death (apoptosis). The result of
the imbalance between cell growth and death leads to formation of benign or malignant tumours.
During tumour development somatic mutations may accumulate leading to increased
malignancy. Malignant tumours can invade adjacent tissues and spread (or metastasize)
throughout the body, resulting in severe illness and without treatment, death.
Current cancer treatments generally involve one or a combination of surgery, radiation therapy,
chemotherapy, hormone suppression and immunotherapy drugs. Most chemotherapeutic agents
are cytotoxic chemicals that interfere with the synthesis of deoxyribonucleic acid (known as
DNA) or cell cycle division. They target cellular processes essential for both cancerous and
normal cells, and as a result they produce patient side effects that are often extremely unpleasant
and limit the dose of the therapeutic agent. In addition, many cancers may develop resistance to
chemotherapeutics. Oncologists generally employ a combination of these therapies since no one
type of treatment is typically sufficient to eradicate the cancer. No one “magic bullet” compound
is anticipated to be developed in that cancer is not one disease, but rather results a series of
approximately one hundred different aberrant processes.
The past five years approximately have seen the emergence of what is commonly referred to as
“targeted” cancer treatment; the use of drugs that directly act on a identified genetic or protein
defect within a cancer cell. Targeted therapy against selected protein kinase defects in cancer
cells have shown efficacy. Targeted treatments hold the promise of a focused and
“personalized” therapy that targets only the cancerous tissue defect within the patient’s specific
type of cancer and when used in combination with chemotherapy or radiation therapy may result
in lower doses of these conventional treatments, hence less patient side effects. PharmaGap’s
PhGα1 is a targeted protein kinase therapeutic. Targeted therapeutic drugs now marketed
include Novartis’ Gleevec, Genentech’s Herceptin and ImClone’s Erbitux. Each has been
approved as treatment for specific cancers and has shown remarkable success treating specific
cancers in certain instances.
PharmaGap’s Drug Platform Target - PKC
PKC was first associated with cancer induction in the 1980s when this enzyme was identified by
researchers in Japan and the United States as a receptor for natural cancer causing substances
known as phorbol esters. PKC has since attracted extensive research interest from around the
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world and is widely confirmed as an important molecule involved in cancer and many other
types of disease.
PKC is characterized as an intracellular serine/threonine protein kinase that when activated by
way of certain signalling molecules (e.g. hormones, growth factors and neurotransmitters), is
involved in numerous intracellular signal transduction events. PKC regulates the behaviour of
numerous “downstream” proteins and molecular pathways within a cell and as a result, PKC is
associated with numerous essential cellular processes. PKC is found in almost all tissues and
organ systems. In healthy cells normal constitutive levels of PKC are important for regulating
cell cycle division and differentiation and the essential stage of pre-programmed cell death (or
apoptosis). Conversely, in diseased tissue such as cancer, abnormally activated and/or depressed
levels of PKC are, in part, implicated in malignant transformation of these processes, resulting in
tumour development.
PKC proteins exist as a family of 12 closely related isoforms (called alpha, beta, and so on,
ending at zeta) that are products of distinct genes. A high degree of polypeptide amino acid
sequence structure is shared between isoforms. As such, PKC isoforms are highly conserved.
Despite their similar structural homology PKC isoforms do differ from one another in their
biochemical properties, tissue-specific expression and intracellular localization. Moreover,
individual isoforms have been implicated in distinct disease conditions (and even in different
disorders within one type of disease). For example, the alpha isoform of PKC is strongly
implicated in certain cancers and cardiac disease. PKC beta is identified as important for certain
types of diabetes and related complications while PKC theta has been closely associated with
numerous inflammatory and neurological disorders. PKC epsilon and delta are also closely
associated with certain cancers, but also with other metabolic diseases. Moreover, within cancer
the alpha and epsilon isoforms are oncogenic and linked to different types of cancer and stages of
progression, while in general, the delta isoform triggers apoptosis of the tumour cells.
As a result, modulation of PKC as a therapeutic strategy to treat a certain disease, or stage of
disease, ideally requires the ability to target a specific isoform(s) of PKC. However, the
conserved sequence structure across the 12 PKC isoforms has made targeting a specific isoform
a significant challenge in PKC drug development. Many small molecule drugs in development
to date targeting PKC isoforms are unable to differentiate between isoforms with precision.
Compounding this problem, researchers have not yet been able to fully elucidate the complete
three dimensional structure of individual PKC isoforms, making drug design all the more
difficult.
Abnormally elevated levels of PKC alpha are found in tumours and cells of certain types of
cancer, such as certain types of breast, colon and lung cancer. Numerous independent studies
using cancer cell lines have demonstrated that over-expression and subsequent activation of PKC
alpha is linked to malignant transformation of healthy tissue due to cell cycle defects, with
resulting tumour proliferation, invasiveness and faulty apoptosis (i.e. cancer cells do not die).
PKC alpha also has been strongly associated with increasing the ability of cancer cell lines to
resist treatment by chemotherapy, a phenomenon known as multi-drug resistance. Every year in
the United States hundreds of thousands of cancer patients die as a result of tumours that have
become resistant to additional chemotherapeutic treatment.
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As a result of these observations it was postulated by researchers that interference with
abnormally expressed and activated PKC alpha in certain types of cancer may be an attractive
strategy for potentially arresting tumour cell growth by enhancing apoptosis, locking invasion
and metastasis and overcoming cancer cell resistance to chemotherapy.
PhGα1 Preclinical Development Pathway
PhGα1 is currently at the mid-preclinical stage of development. The compound has progressed
through successive preclinical development stages, generating data needed for making critical
decisions and for implementing value-creating activities in subsequent steps of the process.
The Company has developed a preclinical development plan for PhGα1. Some of the steps along
this development pathway have been performed in-house while others have been undertaken by
our collaborators, including the Animal Testing Facility at the NRC in Ottawa. In future, we
anticipate that further studies will be contracted out to CROs and/or with a corporate
development partner, especially for human clinical trial enabling studies needed in preparation to
apply for regulatory approval to test PhGα1 in humans.
A summary of preclinical development steps completed and planned for PhGα1 includes, but is
not limited to:
1. Biological and empirical characterization of PKC alpha in selected cancer cell lines;
2. Demonstration that selectively inhibiting enzymatic activity of PKC alpha in cancer cells
retards the growth, or in some instances, kills cancer cells;
3. Use of sophisticated computer modeling to generate novel selective peptide inhibitors of
PKC alpha activity and eventual selection of lead peptide compound PhGα1;
4. Testing of PhGα1 in numerous cancer cell lines;
5. Toxicity studies in animal and efficacy testing in animal models of cancer;
6. Characterization of the compound’s bioavailability;
7. Characterization of the compound’s pharmacological effects on organ systems;
8. Drug and PKC alpha detection assays;
9. Formulation and delivery methods;
10. Human clinical trial enabling studies; and
11. Application to conduct human clinical trials: a Clinical Trial Application (“CTA”) in
Canada and an Investigational New Drug application (“IND”) in the United States.
Similar applications exist in the European Union.
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In order to accelerate development and reach go/no go decisions rapidly, several of these steps
can be ongoing simultaneously.
Similar drug product development plans will be required for the Company’s pipeline compounds
targeting additional PKC isoforms for cancer and other therapeutic indications.
Lead Drug Compound – PhGα1
In vitro (cell line) testing has demonstrated the compound’s potent effect to control the growth
and kill cancer cells, including breast, colon, sarcomas and non-small cell lung cancers and
neuroblastoma (children’s neurological cancer).
Testing of the drug in animal models of human breast and colon cancer has demonstrated a
statistically significant reduction in tumour growth and proliferation versus untreated controls,
especially when administered in combination with standard chemotherapy. Significant
reductions in two clinical biomarkers of tumour malignancy were also observed.
Studies in animals also have demonstrated the relatively low toxicity of the compound when
delivered at dosages much higher than required for therapeutic treatment, a very important factor
for future regulatory approval to test the compound in humans.
Details of these test results can be found in press releases on the Company’s website at
www.pharmagap.com or on SEDAR (www.sedar.com).
The Company is now undertaking additional studies required to fully characterize the lead drug’s
efficacy and safety (regulatory approval enabling studies) and anticipates filing for regulatory
approval to test PhGα1 in cancer patients in 2010.
Competitive Advantage
PharmaGap researchers believe the use of peptides to target and inhibit the activity of PKC alpha
in cancer cells offers significant advantages over small molecules now in clinical development.
Using the Company’s proprietary computer modeling methodologies, novel peptide drugs are
being developed that preferentially target individual PKC isoforms. Despite the highly
conserved amino acid sequence structure found between PKC isoforms, the use of PharmaGap’s
peptide drug strategy allows for differentiation between isoforms, an approach not feasible with
the small molecule drugs now in clinical development.
Rather than affecting an array of PKC isoforms, and even other protein kinase targets, as do
small molecule pan-inhibitors, peptide drugs can be targeted with much greater precision and as
a result, the potential for lower toxicity and patient side effects is enhanced. The Company’s
peptidic lead drug compound for use in cancer preferentially targets PKC alpha.
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The Company’s Drug Pipeline
PharmaGap’s drug designs are based on proprietary computer models it has developed for
protein kinase C (PKC) isoforms. There are 12 known PKC isoforms – PharmaGap has models
for 9. Designing compounds in silico, rather than pursuing traditional drug compound screening
strategies, translates typically into a less capital-intensive drug discovery process.
PharmaGap’s lead drug compound PhGα1 is designed to treat cancer and preferentially targets
PKC alpha. The Company’s ability to design additional inhibitors and activators of PKC give it
the ability to develop a series of novel peptide drugs targeting other high incidence disease
conditions, where aberrant levels of PKC are known to be implicated. The “architecture” of the
lead drug for cancer can be effectively repeated in the design of these new compounds, making
for efficient and rapid rational drug design.
PKC Isoform Implicated in:
PKC alpha cancer, cardiac, renal diseases
PKC beta I diabetes
PKC beta II diabetes
PKC delta cancer, cardiac disease
PKC gamma neurological diseases
PKC epsilon cancer, diabetes, neurological
diseases, Alzheimer’s
PKC iota Alzheimer’s, ovarian cancer
PKC theta inflammatory disorders, cancer
PKC zeta cancer
The focus of our lead generation program has been the development of peptide inhibitors PKC
alpha, theta and epsilon. Recently the Company announced promising early developments
concerning the PKC theta inhibitor peptide drug for cancer sarcomas and certain types of
leukemia.
Designs for peptidic activators of selected PKC isoforms are also ongoing. In some disease
indications, including certain cancers, activation of isoforms may provide therapeutic benefit.
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Development Collaborations
In addition to the ongoing relationship with the NRC’s Animal Testing Facility in Ottawa,
PharmaGap has established collaborations with:
University of Lyon, France
Dr. Raphael Terreux, Assistant Professor, Institute of the Biology & Chemistry of
Proteins, for computer modeling and design expertise for the lead and pipeline drug
programs.
Memorial Sloan-Kettering Cancer Center, USA
Dr. Gary Schwartz, Chief, Melanoma and Sarcoma Service, for studies with the objective
of demonstrating the mechanism of action of PhGα1 in cancer cells.
Queen’s University, Canada
Dr. Michael Adams, Professor, Department of Toxicology and Pharmacology to assess
the pharmacodynamic properties of PhGα1 and showing its potency in modulating
physiological processes strongly associated with PKC alpha.
Competitive Conditions
Modulation of PKC alpha as a potential novel therapeutic strategy for cancer treatment has
received intense interest from the pharmaceutical and biotechnology industry. Human clinical
trial assessment of small molecule inhibitors of PKC alpha in combination with conventional
chemotherapy has occurred, as has testing of an experimental drug technology called anti-sense,
also in combination with chemotherapy. The small molecules were developed as general PKC
isoform inhibitors (or pan-inhibitors), with some showing modest affinity for PKC alpha.
However, none are preferentially specifically targeted towards PKC alpha. None of the small
molecules have shown compelling synergistic efficacy against solid tumours versus standard
treatment and in general exhibited unwanted toxicity and patient side effects in trials. The antisense
compound, designed to reduce the cellular levels or expression, but not the enzymatic
activity, of PKC alpha in cancer cells, did not show additive clinical efficacy in a pivotal human
trial and this program has been terminated by its developers.
The small molecules now undergoing testing are a class of anti-PKC molecule known as “ATP
competitive inhibitors”. As such, they are not designed to be specific inhibitors of PKC alpha;
rather they attempt to disrupt the enzymatic activity of PKC by interfering with PKC’s catalytic
activity. However, since many protein kinases have very similar molecular conformation around
their catalytic sites, the small molecules tested also show reactivity with numerous other protein
kinases and not just PKC alpha.
PharmaGap believes its competitive advantage is that its peptide cancer drug PhGα1 is designed
to be a preferential inhibitor of PKC alpha and as a result, may result in better targeted treatment
against cancers expressing aberrant levels of PKC alpha. Peptide drugs offer certain advantages
in drug development over small molecules; they are relatively inexpensive to manufacture and
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typically exhibit lower toxicity in humans. Conversely, peptide drugs can be unstable and can
require significant modification to make them suitable for effective human use.
Other sources of competition to PharmaGap’s drug program for cancer stems from other types of
therapies now in development by other pharmaceutical and biotech companies, as well as
academia. These include anti-cancer antibodies, immunotherapy (anti-cancer vaccines),
hormone treatment drugs, gene therapy, novel drugs targeting additional protein kinases besides
PKC alpha (including small molecules, peptides or anti-sense oligonucleotides and silencing or
interference ribonucleic acids, also known as RNAi) and new types of chemotherapy. This
summary is not necessarily an exhaustive list of all such competing therapeutic treatments. As
well, many competitor companies developing these potential therapies are much larger and better
funded than PharmaGap.
Intangible Properties
Patent applications have been filed to protect proprietary inventions and technologies that
management has determined are important for the Company’s lead drug development program
(PhGα1). Additional patent applications are planned for both the lead drug and pipeline drug
programs. The Company also depends upon trade secrets to enhance its drug development
abilities, primarily with regards to the use of computer modeling to design its novel drug
compounds.
The Company has filed three International (PCT) patent applications relating to the Company’s
lead drug program. National phase applications based on the PCT applications have been filed
into the United States, the European Union, Japan and Canada. In each of these jurisdictions, an
issued patent provides twenty years of protection to its owner, calculated from the date of filing.
The currently pending National Phase patent applications represent an integrated and strategic
approach taken by the Company to provide broad coverage for compositions, methods and uses
relating to the Company’s lead cancer drug program. Copies of each of the three PCT patent
applications are available at the World Intellectual Property Organization website
(www.wipo.int) under the Patent Cooperation Treaty filings heading.
• WO 2006/108270: Inhibitors of Protein Kinases and Uses Thereof
The claims in this patent application encompass claims directed to a key aspect of the PhGα1
molecule and its use to inhibit protein kinase C - PhGα1’s intended target in cancer cells.
• WO 2007/016763: Peptides Targeted to Protein Kinase C Isoforms and Uses Thereof
The claims in this patent application encompass claims directed to the aspect of PhGα1 that
provides the compound’s novel ability to select its target molecule.
• WO 2007/016777: Targeted Protein Kinase C Inhibitors and Uses Thereof
The claims in this application encompass claims directed to the entire drug compound and
methods and uses to employ PhGα1 against cancer and other human diseases.
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In June 2000 the Company executed a licensing agreement with the NRC for intellectual
property pertaining to novel 3-dimensional cell models, tests related to a children’s cancer called
neuroblastoma and other technologies related to a physiological phenomenon known as
intercellular gap junction communication.
In addition, the Company exclusively owns and has sole commercial rights to all intellectual
property developed by any of its third-party consultants.
Regulatory Requirements for Commercialization of PhGα1
Development and commercialization of PharmaGap’s drug product candidates is subject to
government regulation for safety and efficacy. In Canada the regulatory activities fall under the
Food and Drug Act, which is enforced, by the Health Products and Food (“HPFB”) division of
Health Canada. In the United States drugs and biological products are subject to various
regulations and rules enforced by the Food and Drug Administration (“FDA”). In general, these
regulations require carefully controlled research, testing, proper manufacturing and government
review and approval of data and results prior to receiving approval to conduct human clinical
trials and commercialization.
The principal activities to be completed before obtaining approval for commercialization of any
new drug product in Canada and the United States are in general as follows:
1. Preclinical Studies: studies conducted both in vitro (cell lines) and in vivo (animals) to
test for drug safety, efficacy and pharmacology and to carry out drug formulation work
based upon these results;
2. Product Development: manufacturing research and small scale synthesis to develop a
drug supply suitable for administration in humans, as well as to assess commercially
viable processes and formulations;
3. Application to test in humans: submission of a CTA and IND (which is updated
continually as the testing progresses through human clinical trials);
4. Phase I Clinical Trials: testing of the drug product in a relatively small number of
humans to characterize potential toxicity, dose tolerance, pharmacokinetic and
pharmacodynamic properties;
5. Phase II Clinical Trials: usually involves a larger patient population than Phase I testing
and is conducted to assess the efficacy of the drug in patients having the disease or
condition for which the drug is indicated. Also serves to identify possible common shortterm
side effects and risks in a larger group of patients. In cancer development Phase I
and II studies may be combined in some instances;
6. Phase III Clinical Trials: involves conducting tests in an expanded patient population
and geographically dispersed sites to establish clinical safety and effectiveness, especially
versus treatment regimens already in use. These trials generate information from which
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the overall risk-benefit relationship can be determined and provides the basis for
commercial drug labelling (i.e. regulatory approved usage for specified indications).
In the course of conducting human clinical trials more than one trial of a particular phase may be
undertaken so as to evaluate the drug against a variety of disease indications, patient populations
and treatment regimens. In addition, protocols are implemented so that outcomes and data
cannot be influenced by any party. Moreover, information of drug manufacturing methods and
stability must be presented so as to ensure that the product eventually commercialized has the
same composition as that determined to be safe and effective in the clinical trials.
Upon completion of clinical trials, study results and a plan for proper manufacturing are
submitted to the HPFB as part of a new drug submission or to the FDA as part of biologics
license application or new drug application, as the case may be, to obtain approval to commence
marketing of the drug. Approval may take anywhere from 12 to 36 months typically. However,
in order to approve drugs quicker for serious indications such as cancer, the FDA has adopted a
statutory program to accelerate or “fast track” the approval of these sorts of products.
The Company’s, or any future co-development partner or licensor’s, success in obtaining
marketing approval for PhGα1 or other products in development will depend on the ability of the
parties to comply with these regulations on a multi-jurisdictional basis.
Business Cycles
Development of novel drug compounds is a non-cyclical business. Patient and clinician demand
for novel, efficacious drug compounds to control and treat cancer is not affected by economic
conditions, seasons or political events. New cancer drugs, especially the targeted cancer
therapies discussed above, typically command superior pricing. In the world’s largest cancer
drug market, the United States, insurance company pricing reimbursement policies have been
consistently attractive for these types of therapies.
Future Developments
PharmaGap will continue to undertake early stage design, synthesis, and testing of pipeline drug
products, all of which are selective inhibitors and/or activators of one or more PKC family
members, for therapeutic use against a range of disease conditions. It is anticipated that these
compounds will be made available for out-licensing to larger biotech or pharmaceutical firms in
order to complete human clinical trials, regulatory approval and commercialization.
The Company also intends to make increasing use of CROs to carry out future testing for its drug
compounds and compile the data needed for regulatory approval to move the compounds into
human testing. CROs offer out-sourced drug development services as their primary business
focus and as a result, can run preclinical and clinical trials usually more efficiently than
independent biotechnology companies. The use of CROs has increased significantly over the
past five years in the biotechnology industry and in general allows firms to direct their
development spending more efficiently, lower internal overheads and generate data in a
standardized and often more timely manner. CRO activities will be closely overseen by
PharmaGap’s internal scientific team and selected third party advisors.