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One Year After Acquisition, Caprion Still Eyes Sale to Rx — But No Rush

A year after saying Caprion Proteomics’ purchase by a hedge fund was positioning it for a bigger payout, the company’s chief executive told ProteoMonitor this week that the firm’s plan to be bought by a drug maker remains on course, but because of strength in its biomarker-discovery and -validation service business the firm will take its time finding a suitor.
A year ago, Great Point Partners paid CA$30 million ($29.3 million) for a majority stake in Montreal-based Caprion Proteomics after it was spun out by Caprion Pharmaceuticals. At the time, CEO Martin LeBlanc said that the goal was to build up the company’s finances and position itself to be acquired by a large pharmaceutical or biotechnology company.
This week, LeBlanc said that Caprion Proteomics is on track to post a profit for the third year in a row and has added new services and new clients, and “we’re on the course that we set for ourselves to succeed.”
When it was part of Caprion Pharmaceuticals, the proteomics business was focused on developing its CellCarta platform for protein content analysis. Today, Caprion Proteomics primarily provides biomarker discovery services to pharma and has added biomarker validation services using a multiple-reaction monitoring workflow that uses a triple-quadrupole mass spectrometer made by Applied Biosystems.
New customers it has signed on in the past year for its discovery business include Mitsubishi and Merck Serono, LeBlanc said. He declined to identify the customers for its validation business, citing confidentiality agreements.
In addition, Caprion Proteomics is in the incipient stages of its own biomarker-discovery work and has identified candidate markers for cancer, infectious diseases, and Alzheimer’s disease, he added, though the company has not yet validated them due to a shortage of resources.
While it has no set deadline for its goal of being acquired, the original goal was to be sold within four years, but as long as the company remains profitable there is no hurry to put up the For Sale sign, according to LeBlanc.
“I do expect that it would be sold,” he said. “I don’t think we’ll do an IPO. I don’t think this is a public market play. I think this company ultimately belongs inside a contract research organization or a pharma.” For the next few years, however, “our focus is really [on] making sure that we are profitable and we are growing our service business.”
Still Standing
That Caprion Proteomics is even still standing bucks the odds. When Caprion Pharmaceuticals merged with Ecopia BioSciences in early 2007 to form Thallion Pharmaceuticals — a company specializing in oncology and infectious diseases — Caprion Proteomics was spun out. The intention was to sell it within a year.
Six months later, Great Point, a hedge fund based in Greenwich, Conn., purchased an 80-percent stake in Caprion Proteomics while Thallion retained the remaining 20 percent [See PM 07/05/07].
The carve-out of the proteomics business by Caprion Pharmaceuticals came amid a shake-out in the proteomics market, a process that continues today. Faced with escalating research-and-development costs and lengthy commercialization timeframes, several companies that once banked on internally developed proteomics technologies have recently fled the space.

“I do expect that it would be sold. I don’t think we’ll do an IPO. I don’t think this is a public market play. I think this company ultimately belongs inside a contract research organization or a pharma.”

A few months before the Caprion Proteomics spinout, Ciphergen Biosystems, now called Vermillion, sold its SELDI platform to Bio-Rad Laboratories in order to concentrate on the diagnostics market [See PM 08/17/06]. And since the spring, two firms, Lumera and Miraculins, have turned their backs on proteomics as well [See PM 04/03/08 and 06/26/08].
Despite the relatively poor record of proteomics services and technology firms, Adam Dolder, managing partner in Great Point and member of Caprion Proteomics’ board, told ProteoMonitor that leading up to its purchase of the proteomics firm, the hedge fund saw potential in its existing management and business model.
Caprion Proteomics “was an orphaned business inside a company that had a different focus. It didn’t want to drive a service-model business, where we saw value as a stand-alone service provider,” Dolder said. “We just took a different lens than the previous owners.”
On its own, Caprion Proteomics would be exposed to greater risk, but because the proteomics business had just turned profitable in 2006, it was seen as being sustainable on its own.
Since gaining its independence, Caprion Proteomics has been able to focus completely on its core business without having to defer to other interests as it did when the proteomics operations was just one part of Caprion Pharmaceuticals. The freedom, LeBlanc said, has been “liberating.”
In addition to its proteomics business, Caprion Pharmaceuticals did therapeutics discovery and had several clinical programs running, which demanded “millions and millions of dollars of funding,” LeBlanc said. “You don’t control your destiny when you’re the discovery asset inside of a play that requires an awful lot of financing. …If you’ve got a clinical program going on, all the energies go toward that clinical program because that’s what the investors want to see.”
The separation, he added, has allowed Caprion Proteomics to do what its managers have seen fit without having to “ride the waves of what happens to the rest of the business.” 
LeBlanc declined to elaborate on the company’s profits but said that business has been growing by double digits for the last three years.
Government initiatives such as the US Food and Drug Administration’s Critical Path Initiative should benefit the company, Dolder said, and “other things such as personalized medicine are further drivers which really fit squarely with what Caprion could provide.”
So far, the company has spent most of its energies on building out its biomarker services using CellCarta, which uses proprietary expertise in cell fractionation, protein purification, mass spectrometry, and bioinformatics data analysis to track more than 25,000 peptides in a single sample. Doing so can enable researchers to identify changes in protein levels that correspond to disease state or drug response.
The biomarker service market remains volatile and many service companies have struggled in recent years, but LeBlanc said demand for Caprion Proteomics’ offerings during the past year has been strong due to outsourcing by the pharmaceutical and biotech industries. That trend should continue, he added.
Biomarker work “has gone from something you would do if you were desperate with your clinical program to something that you are doing systematically as an insurance policy and a way to better deliver trial results,” he said. Indeed, with demand for its biomarker services on the incline, plans to license out the CellCarta platform, which had been part of the company’s business model a year ago, have been put on the backburner.
“Pharma, which would be a natural place [for CellCarta], has been outsourcing a lot more, so they’re not as interested in setting up their own proteomics facilities [in house],” LeBlanc.
Since the start of the year, Caprion Proteomics has also been offering biomarker validation services. While that business has only a few customers currently, LeBlanc said it grew out of demand by customers who otherwise would be forced to develop their own ELISAs for validation purposes. In cases where an antibody for a candidate protein doesn’t exist, such ELISAs would not even be possible.  
In addition to services, Caprion Proteomics is conducting its own biomarker-discovery work with the goal to eventually license out promising diagnostic biomarkers to other parties for commercialization. While it has plumbed some candidate biomarkers, that remains a small part of the company’s business. To fully develop its potential, the company would need more cash and greater access to patient samples, particularly to carry out validation work, LeBlanc said.
“If eventually down the road we find that we … want to become a diagnostic company, we might do it, but right now we’re still very early-days,” LeBlanc said. What he and his board do not foresee is the company becoming a full-scale therapeutics firm. “We do not see ourselves ever becoming a fully integrated pharmaceutical company or to take our assets into the clinic,” he said.

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