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Cyntellect's LEAP Wins CE Mark; Firm Ships First Product to Unnamed European Pharma

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Cyntellect said last week that it can now begin selling its flagship Laser-Enabled Analysis and Processing system in Europe after receiving CE marking.
 
In addition, Cyntellect said that it has shipped a LEAP system to an undisclosed “major pharmaceutical company” in Europe, which will use the product for basic drug-discovery research and cell cloning applications, Jim Linton, chief business officer of Cyntellect, told CBA News this week.
 
Although the two news items are not necessarily related, they nonetheless represent important steps for San Diego-based Cyntellect as it attempts to penetrate the European market and eyes clinical applications for the technology such as processing cells for therapeutic transplantation.
 
The LEAP platform, which uses a combination of laser imaging and ablation techniques, has application in a variety of markets, including basic cell research, cell-based screening for drug discovery, cellular therapy, and bioproduction.
 
According to Linton, Cyntellect’s European pharmaceutical customer will be using LEAP for applications such as drug discovery and cell cloning related to biopharmaceutical manufacture.
 
Biotechnology sold in the European market typically requires CE marking if it will be used as a medical device or in vitro diagnostic, two of the 22 groups of products that require CE marking. It would seem, then, that Cyntellect needed to obtain the CE mark so that LEAP could be used for cellular therapy applications; however, according to Linton, this is not necessarily the case. He said that most products of any kind sold into the European Union require CE marking.
 
Still, the regulatory seal of approval will certainly be useful to Cyntellect should it decide to pursue clinical applications for LEAP more heavily. According to Linton, although the company has sold the majority of LEAP platforms for non-clinical applications, “we continue to believe that the technology will have application in areas such as cellular therapy and stem cell research.”
 
The company has made relatively little noise in these areas as compared with the other markets, however. For instance, in March Cyntellect said that it was awarded $338,000 from the National Institute of General Medicine to use LEAP in a collaboration with researchers from the University of Texas Medical Branch in Galveston to screen combinatorial siRNA libraries.
 
And in April last year, the company announced two large deals: a worldwide licensing agreement that allowed Sigma-Aldrich to commercialize Cyntellect’s LEAP-based CellXpress service for purifying super-secreting cell lines in biomanufacturing; and a research agreement with Japanese drug maker Daiichi to use LEAP in cell-based drug discovery.
 
Cyntellect does have significant experience in the clinical arena, however. The company was spun out of biotech Oncosis in 2002 as an R&D arm committed to commercializing LEAP for research applications.
 
At the time, Oncosis said it would continue to focus on developing a platform based on the LEAP technology for therapeutic applications such as the elimination of tumor cells from autologous stem cell transplants in non-Hodgkin’s lymphoma patients. In February of last year, however, Cyntellect and Oncosis merged and consolidated all assets into the current company, and since that time, it has played primarily in non-clinical markets.
 
Regardless, further expansion of the European market is also welcome news for San Diego-based Cyntellect as it looks to establish a foothold for LEAP in any market. The strategy could also help the company prime the market for next year’s release of a benchtop opto-injection platform called the High-Throughput Optoinjector, or HOP, based on the same core technology.
 

LEAP sales are expected to increase about five-fold in the company’s fiscal year 2007, which would make the instrument the company’s top money-maker, usurping government grants as its biggest revenue engine.

In May, Cyntellect toyed with the idea of going public by selling shares of its stock on a new market called iSEX, a division of the Icelandic Stock Exchange that would cater to mid- and small-cap companies. Investment firm Nordvest Securities was to lead the private placement of approximately $11 million, according to an admission document prepared by Nordvest.
 
This plan, however, has been put on temporary or possibly permanent hiatus after the company found it has been able to garner significant revenues in the form of government grants and the aforementioned deals, and may also have a strong market for LEAP instrument sales.
 
According to a valuation study commissioned by Nordvest and published in June by New York-based financial advisory group TSG partners, shows that Cyntellect receives an approximately 11-percent royalty payment from Sigma-Aldrich for business related to the CellXpress service.
 
More importantly, Cyntellect is starting to see revenues from initial sales of some LEAP instruments. According to the Nordvest admission document, Cyntellect shipped its first LEAP to an undisclosed customer in March.
 
In addition, according to the TSG report Cyntellect sold three LEAP units in its fiscal year 2006, which ended June 30, and has backorders for three more units to be delivered in the current fiscal year.
 
Government grants, though, are far and away the company’s biggest current revenue source. The TSG report said that the company took in approximately $1.3 million in grant money in FY 2006 as compared to about $740,000 from LEAP sales and $83,000 from CellXpress royalties.
 
TSG also said, however, that LEAP sales are expected to increase about five-fold in the company’s fiscal year 2007, which would usurp government grants as the company’s top money-maker.
 
TSG also painted a rosy picture for Cyntellect’s future in all potential markets, as it said cell-based screening for drug discovery, bioproduction, and cell therapy all have 12 percent to 30 percent annual growth rates.

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