Living Cell thrives on headquarters transplant

By Shoeshine

Friday 18th June 2004

Shoeshine was interrupted this week from a somnolent post-lunch contemplation of the latest stack of prospectuses by a call from his old mate David Collinson, one of the founders of a biotech outfit formerly known as Diatranz.

Not a lot has been heard on this side of the Tasman about Living Cell Technologies (LCT), as it's now known, since it shifted head office to Adelaide last year, a victim of our health minister's inability to decide whether having a biotech research industry was a good thing or not.

The company, Collinson explained, was holding a rights issue and capital raising to fund its ongoing research into treatments for diabetes, neurodegenerative diseases such as Huntingdon's, and liver disorders.

"What?" yelled Shoeshine, coming bolt upright and overturning a balloonful of Courvoisier.

"A treatment for cirrhosis? Has anyone told the French?"

Sadly, no LCT is actually working on a treatment for haemophilia, a non-self-inflicted illness.

LCT has been around since 1987 and its line of research, while not new, has been gathering steam recently.

The science in short involves transplanting living cells, sourced from either from humans or pigs, into patients to restore the bodily functions lost to the diseases LCT has targeted.

The "new" angle is to give the cells a coating that will protect the cells from rejection by the body's immune system.

This has long been a problem with wholesale tissue transplants such as hearts or lungs. The answer has been to treat patients with powerful immunosuppressant drugs but these are costly and have, in some cases, severe side-effects.

Even with prosthetic (manmade) implants such as hip-joint replacements, rejection is a constant risk.

In the case of type 1 diabetes, the most serious form, trials so far of the technology LCT is researching have had some success in prolonging the life of implanted, live, insulin-producing cells before they succumb to attacks from the body's immune system.

LCT aims to have its DiabeCell product on the Australian market by 2008-09 but it will first have to get approval from the world's toughest regulator, the US Food and Drug Administration (FDA).

This is where, according to biotech analysts, it has an advantage over competitors working in the same field.

The company has three geographical arms a research laboratory at Auckland's Otahuhu, corporate and commercial headquarters in Adelaide and LCT BioPharma based in Rhode Island in the US, which is charged with pre-clinical studies and clinical trials and managing the company's relationship with the FDA.

The importance of the FDA is that, according to LCT's prospectus, the administration provides the template for regulatory agencies worldwide.

The key regulatory windshift as far as LCT is concerned is an apparent change in attitude towards xeno-transplantation transplanting animal cells into humans.

This had previously been a big worry because of the risk viruses that previously flourished only in animals would be transmitted to humans.

According to some biotech analysts, the incident-free track record of tightly controlled programmes, such as organ, heart valve and vascular grafts, has given regulators some comfort space, accelerating interest in research on cell implant therapy.

LCT has a second cell implant product, NeurotrophinCell, in the pipeline as a treatment for neurodegenerative disorders such as Huntingdon's disease and strokes.

In essence, the treatment involves implanting cells that replace those that are killed off when such disorders strike. According to the prospectus, pre-clinical trials have shown the transplants "significantly decreased the behavioural defects caused by stroke and also reduced the volume of stroke damage to the brain by 35-40%."

The third weapon in LCT's armoury doesn't involve xeno-transplantation. Because of the lower regulatory hurdles, the company hopes to have it on the market in two years' time.

Fac8Cell (boffins grab all the sexy brand names, you'll have noticed) is a treatment for haemophilia, a hereditary disease where the blood fails to clot, for which the only existing treatment is mind-bogglingly expensive according to LCT's prospectus, more than $A100,000 a year on average.

Haemophilia is mercifully not as common as diabetes or strokes, so Fac8Cell can use cells taken from human livers, where the coagulants haemophiliacs lack are produced, and doesn't have to rely on our porcine relatives.

Supplies for the DiabeCell and NeurotrophinCell products have been a bigger bone of contention. LCT reckons it has a competitive advantage in its access to a disease-free New Zealand pig herd but it discloses a risk that the herd may not always remain so hygienic.

And so on to the financials.

LCT aims to raise $A6.8 million ($7.5 million) from its current capital raising $A2 million in an offer of new shares and $A4.8 million in a rights issue to its 450 shareholders, of whom 160, including major holder Stephen Tindall, are New Zealanders.

That would provide it with pro-forma, post capital raising funds of $A5.7 million.

At a monthly cash burn rate of $A350,000, according to AAP, this will see it through until late next year, when it will need to go to the markets again.

Brandy balloon recharged after his rude shock, Shoeshine is in mourning for the loss of LCT and, potentially, every other biotech firm to our friends across the Tasman.

The board and investment committee of the gargantuan Shoeshine Fund still harbour hope LCT will come up with a cure for boozing too much.

The potential is there. The fund has doubled its already long positions in port and brandy producers.

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