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Canada's Med BioGene Files for IPO in US, Plans Expansion

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By Justin Petrone

Med BioGene has filed for an initial public offering in the US, the Vancouver, BC-based firm said in a filing with the US Securities and Exchanges Commission last week.

Med BioGene currently trades on the TSX Venture Exchange in Canada. By filing the IPO, the firm hopes to trade on the Nasdaq Capital Market and graduate its listing from the TSX Venture Exchange to the Toronto Stock Exchange, according to the filing.

The firm said in the preliminary prospectus that it hopes to raise up to $23 million, but noted that it arrived at this number solely to calculate the registration fee. The preliminary prospectus did not provide the price for the common shares being offered in the US, though the firm noted that its shares closed Dec. 24 on the TSX at C$6 (US$5.66) — after giving effect to an assumed 1-for-50 reverse stock split of its outstanding common shares that it expects to effect prior to or upon the date of the offering.

Med BioGene signaled its intent to go public in the US last month. At that time, the firm also filed an interim non-brokered private placement of a maximum of C$2.5 million worth of shares. The company has not reported any revenues this year. For the first nine months of 2009 it had a net loss of US$1.6 million, and as of Sept. 30, it held US$1 million in cash and cash equivalents.

Med BioGene's flagship offering is LungExpress Dx, a 15-gene-signature test for use in identifying those patients with early-stage non-small-cell lung cancer who are at a higher or lower risk of mortality following surgical removal of their tumor. While the company developed LungExpress Dx's signature on the Affymetrix GeneChip platform, it elected to migrate the assay to an RT-PCR-based format (see BAN 3/24/2009). The firm expects to launch the test in the US during 2010.

According to Med BioGene, following completion of the US offering it intends to use the funds to complete validation of the commercial LungExpress Dx assay; establish a CLIA lab in the US, where it will perform the test; launch LungExpress in the US as a service through the CLIA lab; build a sales, marketing, and reimbursement team, either on its own or through partnerships; commercialize LungExpress in Asia and Europe through distribution deals; and seek pharma partners to use LungExpress as a companion diagnostic.

CEO Erinn Broshko declined to further discuss his firm's plans with BioArray News until Med BioGene's prospectus is filed in coming weeks.
LungExpress Dx has been developed via a collaboration with the University Health Network in Toronto. UHN provided data at the 2008 meeting of the American Society of Clinical Oncology that it claimed shows that by better selecting patients for adjuvant chemotherapy, the test has the potential to increase the five-year survival rate by up to 33 percent while decreasing healthcare costs.

"We believe that the results of these studies demonstrate that LungExpress Dx quantifies the risk of mortality and may also correlate with the likelihood of chemotherapy benefit in early-stage NSCLC patients," Med BioGene said in the filing.

According to the filing, Med BioGene intends to complete the validation of its assay and launch LungExpress Dx as a clinical service in the US this year. The company "anticipates using a portion of the net proceeds from its offering" to establish a CLIA-certified central laboratory where it will perform its services and build, either alone or through partnerships, a focused domestic sales, marketing, and reimbursement team.

"We believe that the most effective way to maximize the adoption of LungExpress Dx will be to have our team interact directly with oncologists, pathologists, patient advocacy groups, and third-party payors to convey the clinical and health economic benefits of our test," the company said.

Med BioGene also plans to sell LungExpress Dx in Asia and Europe "through distribution agreements with established companies with relevant local sales, marketing, reimbursement and regulatory compliance experience." The company said in the filing that it has been involved in "discussions with numerous groups to facilitate the distribution of our test in select countries."

The company will also market Lung Express Dx to pharmaceutical companies to use the assay as a companion diagnostic to "identify those patients who are more likely to respond to their FDA-approved or development-stage targeted therapies to assist in moving away from a 'one-size-fits-all' approach to patient management," the company said.

Med BioGene added that it might use the proceeds to develop future tests. In July 2009, for instance, the company and researchers from the University of Ottawa Heart Institute published the results of a study that identified potential biomarkers for coronary artery disease. The company has also participated in biomarker-development programs for leukemia, lymphoma, and colorectal cancer.

Founded in 2002, Med BioGene began trading on the TSX Venture Exchange following its acquisition of Dragon-Tex, a Vancouver-based textile import and export firm. The company has retained DTX Acquisition Company as part of that deal, though DTX has no active business and holds no assets, according to the SEC filing.

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