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Znomics Will Use $4.9M from Merger to Grow Staff and Zebrafish Strain Library

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Znomics, a zebrafish platform-based drug-discovery company, this week said it has secured $4.9 million as part of a reverse merger with publicly traded shell company Pacific Syndicated Resources.
 
The transaction turns Znomics into a public company and gives it the ability to add to its market capitalization which may help it get noticed by bigger investment banks and gain additional capital, all without the practical constraints associated with private-equity financing.
 
The combined company, which will be called Znomics and remain in Portland, Ore., will use the money to hire more employees and move to larger quarters so that it can add to its library of zebrafish strains, Kerry Rea, the company’s CFO, told CBA News this week.
 
“At this time, we are not sure how many people we want to hire or in what areas of the company we want to hire employees,” he said.
 
The company’s stock is currently trading under Pacific Syndicated Resources ticker symbol, PSRI, on the Nasdaq over-the-counter bulletin board. However, Znomics has applied to Nasdaq for a new ticker symbol that better reflects the Znomics name. Officials said the firm expects to receive approval for a new symbol in the near future.
 
Znomics is known for its ZeneMark library of more than 11,000 strains of zebrafish, which it created through retroviral insertional mutagenesis, or RIM, an internally developed gene-modification technology.
 
The library, which is stored in the form of sperm aliquots, represents roughly half of all known zebrafish genes, and the company plans to add enough additional strains to represent 80 percent to 90 percent of the zebrafish genome.
 
Znomics has also created two subsets of the ZeneMark library: the Living library and the Human Disease library. The Living library is a collection of zebrafish strains maintained as living lines that contain defined retroviral insertional mutations, while the Human Disease library is maintained as living lines or frozen sperm and contains retroviral insertions in genes homologous to known human disease genes.  
 
Earning Its Stripes
 
“I knew of … zebrafish technology, but I did not know of any company that combined that with the genomics technology,” said Chrystyna Bedrij, director of research for Griffin Securities, which acted as a placement agent for the deal, which closed on Nov. 5.
 
She said she believes that Znomics’ combination of genomics and zebrafish technology offers a unique advantage for the study of large-scale vertebrate genetics and offers exceptional visualization of cell populations and physiological processes.
 
“Ultimately, I expect [Znomics’] technology to improve the speed and efficiency of finding new lead compounds for complex human diseases, such as obesity, diabetes, cancer, and neurodegeneration,” Bedrij said.
 
Griffin Securities CEO Adrian Stecyk said that companies choose the reverse merger route to go public because it gives them better access to capital that does not control the firm in any way, giving management greater flexibility than venture capital or angel funding.
 
“It’s a business model that has worked well, particularly when you have experienced management that does not want a VC hanging over them and dictating everything that they do,” Stecyk said.
 
Griffin focuses on helping companies go from having less than $20 million in market cap to corporations with more than $200 million in market cap, said Stecyk. Currently, Znomics’ market cap is around $21.1 million.
 

“I knew of the zebrafish fish technology, but I did not know of any company that combined that with the genomics technology ... I really think that it’s a new paradigm in drug discovery.”

“So we clearly see this as a company whose stock price can increase five to 10 times in the next two to three years,” Stecyk said.
 
Znomics was founded in 2001 by scientists at the Oregon Health and Science University and began laboratory operations in 2002, said Rea. The company currently employs 19 people and is housed in an approximately 5,000-square-foot facility.
 
For the year ended Sept. 30, Znomics reported cash assets of $21,515, total revenues of $179,853, and a net loss of $575,805.
 
Znomics CEO Richard Sessions declined to comment on Znomics’ share of the zebrafish screening market. Bedrij did point out, however, that the zebrafish market is hard to quantify because it is still in the development stage. She also mentioned that thousands of companies could use Znomics’ technology to accelerate drug development, leading her to believe that the market is potentially very large.  
 
Over the next several years, Znomics plans to enter into automated compound screening with medicinal chemistry to find lead compounds for significant diseases, according to Ransom.
 
Other zebrafish screening companies feel positively about the market for their offerings. For example, Zygogen, a company that markets its proprietary Z-Tag technology, is seeing increased interest from the academic marketplace, Zygogen co-founder and CEO Nina Sawczuk told CBA News this week.
 
As evidence, she cited an increase in zebrafish research labs, the continued building out of aquarium facilities at many university sites, and an increase in vendors to support the market requirements for zebrafish research.
 
“In addition, academics who are not completely focused on zebrafish are now adopting the technology,” she said.
 
The pharmaceutical and biotech spaces have also expressed an increased interest in zebrafish use, which always lags behind academic use a bit, said Sawczuk. “Zygogen actually works with several large pharmaceutical companies and sells them zebrafish embryos that they use as a reagent for up to seven days,” she said, adding that the company launched that “productization” service in August.
 
Znomics’ ZeneMark library is an important resource that is going to continue to be very helpful in the zebrafish community, Sawczuk said. “I am sure Znomics will have some competition over the next two to three years, particularly from overseas, but at this point the ZeneMark library is well-positioned in the zebrafish market,” she said.   
 
Sawczuk also mentioned that Znomics is doing is its own drug discovery.
 
“I think that we will see a lot of changes in the zebrafish market over the next several years, because we are reaching a critical mass of [users],” said Sawczuk. She added that she feels the market will definitely grow quickly as the tools become more available and more acceptable and researchers become a little more familiar with the model.
 

“I also think that there are opportunities in the reagent “productization” of zebrafish [that is, the sale of zebrafish embryos as reagents] and, over the long term, the automation of screening services,” Sawczuk said. 

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