HSCI entertains fundraising as part of its 2016 plan; SynBio could be eventual spin-off – executive

The Human Stem Cells Institute (HSCI) (MICEX: ISKJ), a Russian research and pharmaceutical development company, could consider a variety of fundraising options in the mid-term as part of its business plan to 2016, according to general director Artur Isaev, who is also a controlling shareholder.

These options could include a secondary public offering on the Russian MICEX exchange - where it has been listed since 2009 - debt financing from various banks, or a stake sale to a private equity firm. The decision will depend on what the market conditions are at that time, he said.

The maximum number of shares that could be sold is 30 million, he said. At the time of publishing, the company is trading at RUB 10.16.

The exact details will be decided at the company's general meeting in September, and the advisor tender may be launched soon thereafter, he said.

Investment company Alor-Invest advised the company on its IPO, and M-Communications is its current PR firm. The company is happy to engage the consultants who advised it on its IPO, but should the strategy involve a stake sale to a PE firm, the company may evaluate the additional need for consultants, he said.

Development pipeline

On 15 July HSCI submitted a dossier for approval in Russia for its lead candidate Neovasculgen, Isaev said. It is the first Russian gene therapy with the vascular endothelial growth factor 165 gene to treat chronic ischemia of the lower extremities, including critical ischemia, he noted.

The company expects to obtain approval from the Russian authorities in 2012 and will thereafter seek approval in neighbouring regions in the CIS starting from the Ukraine. At a later stage, the company will also submit for approval with the US FDA and European authorities (EMA), he added.

Its second pipeline candidate, Gemacell, is in preclinical stage of development and is expected to enter the clinic at the end of the year, he said. The company is waiting for approval from the Russian authorities to start Phase I studies to treat patients with myocardial infarction and liver cirrhosis as part of combined therapy.

HSCI recently signed an investment agreement with SynBio, an affiliated company which will be managing the liver cirrhosis trials, Isaev said. SynBio will also focus on the production of biobetters, including recombinant human insulin currently in Phase I development and human erythropoietin currently in Phase IIb studies.

HSCI is in negotiations with a global CRO that he declined to name to carry out its clinical trials. It also has several contracts with CMOs in UK and Germany, which again he declined to name. However, as Synbio will require new production facilities, and as the company has not yet found suitable targets to buy, Isaev said it may develop such manufacturing facilities through greenfield investments. The plants will be based in and around Moscow and St. Petersburg.

SynBio

The company focuses on the development of medicines based on stem cell technologies for the treatment of liver cirrhosis using the Gemacell Platform. It is also developing therapies based on recombinant human histone H1 for application in oncology using its Histone Platform. It is also researching the development of drugs with sustained action containing polysialic acid for the treatment and/or prevention of diabetes mellitus, Alzheimer's disease, and chronic renal insufficiency using its PolyXEN Platform.

Currenly HSCI holds 28% in SynBio and acts as its initiator for R&D projects, while a 41.4% stake is owned by Russian state investment company Rusnano. FDS Pharma holds 11.6%, businessman Dmitry Genkin an 11.5% stake, Cryonix 5.5% and Pharsyntez a 1.9% stake.

HSCI and other strategic shareholders plan to merge their shares and hold a controlling stake in SynBio, while Rusnano will continue to hold 42%, Isaev said. Synbio will be managed by the board of directors and Isaev will be a board member.

Synbio could be spun off and listed in about four years' time once the company gains capitalization and if Rusnano seeks to exit its investment.

Synbio expects to post sales of RUB 700m by 2015 of approved drugs, according to its company statement. Isaev added that the total investment into Synbio should amount to RUB 3.244bn (USD 111m).

Synbio already develops Onkohist (on the histone platform) which has completed Phase IIa clinical trials in Germany. It has received orphan drug designation in Europe and the US.

SynBio announced on 4 August that it has invested money into UK biologic drugs company Lipoxen for GBP 12.19m and the deal is expected to be completed by year end. Through this agreement, Lipoxen will license into Russia six product candidates to exploit its technologies and establish human proof of concept studies before initiating EMA and US FDA clinical trials.

Meanwhile SynBio can also draw from Lipoxen's acquisition of German biologics player SymbioTec which it acquired for GBP 8.8m.

White & Case and Grant Thornton advised on the Synbio-Lipoxen deal.

HSCI has laboratories and offices in Moscow and St Petersburg within Russia, as well as in Ukraine and Germany. The company specializes in stem cell derivation and personalized storage market, but also carries out scientific research and development of drugs using bioengineering techniques.

by Maria Petrova in Moscow and Mintoi Chessa-Florea in London