We last covered Vistagen Therapeutics back in September, focusing primarily on its flagship AV-101 for treatment-resistant depression (TRD). A modified version of ketamine, Vistagen believes AV-101 can be an effective adjunctive therapy for patients suffering from TRD, and we will have a much better idea if this is the case next quarter when Phase IIa topline data are due.
In the meantime, the firm has announced that it is partnering with BlueRock Therapeutics, the brainchild of pharma giant Bayer AG (ADR) (OTCMKTS:BAYRY) and Versant Ventures, on cardiac stem cell technologies that it had acquired from the University Health Network (UHN) of Canada. These assets had been sitting idle while Vistagen focused on AV-101, until BlueRock expressed interest in clinically developing them.
The patents Vistagen originally acquired cover a range of technologies used to create stem cells for three specific areas of regenerative medicine – heart, liver and cartilage – that can be spread across a wide number of different target indications. This acquisition builds on a prior agreement set up in 2007, which saw VistaGen pick up two early stage technologies, related specifically to cardiac cell regeneration.
Under the terms of the sublicense, VistaGen will receive an upfront cash payment of $1.25 million, as well as potential future milestone payments and royalties.
The deal itself isn’t particularly transparent – we don’t know how the milestone and royalty structure side of the equation is structured – but it appears that the two technologies that BlueRock is interested in are the earlier two of the five total that UHN originally licensed to Vistagen. These were set to expire later this year, and according to the SEC filing outlining the sublicensing, the entities involved have agreed to an early termination of that arrangement, allowing for the fresh agreement to go ahead.
So it’s a $1.25 million deal, in what is essentially preclinical technology – why should this move the stock at all? Because BlueRock is not just some tiny biotech looking to pick up some cheap stem cell technology; it’s one of the most well-funded stem cell startups ever with Big Pharma backing by Bayer and Versant. The two entities committed $225 million in series A capital to BlueRock, capitalizing the company for at least the next four years, and as the company’s pipeline matures, we expect it won’t have any difficulty tapping its lead Series A investors for further capital, assuming it can get some momentum in the stem cell development space.
Why this is good for VistaGen beyond $1.25 million in the bank is that the cardiac technologies it has licensed to BlueRock are designed to aid the creation of epicardium cells from pluripotent stem cells, something that no medical research team has yet been able to accomplish. Epicardium cells are the inner heart cells, and their successful development could change the way healthcare deals with cardiac issues and events. They play a huge role in cardiac development, and this makes them perfect for helping patients recover from things like muscle wall weakening, heart attacks, wider heart disease – a wide range of cardiovascular impairments.
This cardiac stem cell deal between Bayer, Versant and Vistagen comes on the heels of a much higher profile cardiac stem cell deal between Johnson & Johnson (NYSE:JNJ) and Capricor Therepeutics Inc. (NASDAQ:CAPR) that took place in 2014. It was higher profile because, first, it involved a potential $325 million package that J&J has yet to decide on as to whether it is going all in. Second, the deal comes at Phase II stage rather than the investigational preclinical stage. Capricor is also developing cardiac stem cells for post heart attack treatment, and has already completed enrollment in its Phase II trial with results scheduled for Q4 of this year. J&J should be making its final decision on taking over the project by this summer, something that should give an indication of the potential value of this smaller scale deal between Vistagen and Bayer/Versant.
In any case, if BlueRock can use the technology that it has licensed from VistaGen to create epicardium cells from pluripotent stem cells, there’s a huge potential market in their application. It’s this market that VistaGen is set to receive milestones and royalties on, and that is potentially worth a lot more than $1.25 million, not least because the company charged with taking these cells to market is essentially an offshoot of Bayer.
Interestingly, the original inventor in these technologies, Dr. Gordon Keller, serves as the director of UHN’s McEwen Centre for Regenerative Medicine. He is one of team of cofounders of BlueRock. Essentially, then, Keller has licensed the technologies to VistaGen, only for the latter to license them right back to him (and Bayer, of course) a few years later.
VistaGen finished September with $6.3 million of cash and cash equivalents, which it expects will last through the first half of 2017. The additional $1.25 million that derives from the BlueRock deal should extend this into the third quarter.
Nothing’s guaranteed, as always, and Vistagen is a long way from seeing any milestone payments let alone royalties. VistaGen is still a development stage biotech, and it may need to raise money towards the end of next year. However, the BlueRock deal is nice to have on the backburner while it focuses on AV-101, and should help support the stock as Phase IIa data come in for AV-101 next quarter.
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