Shortly after market close on Tuesday, January 12, 2016, Japanese biotech Takeda Pharmaceutical Company Limited (OTCMKTS:TKPYY) announced a collaboration deal that will see it fund the development of two – as yet undisclosed – targets selected from privately held enGene’s pipeline. enGene hit headlines last year with some big pharma deals, and the Takeda collaboration is further testimony to the strength of its proprietary technology. At present, of course, we can’t pick up an exposure to this technology with a direct enGene buy, as its shares don’t trade on the open market. This said, we can get exposure through the company’s various collaboration deals, so let’s have a look at what this exposure entails, and what’s on offer.

The technology that enGene has created is a nucleotide delivery system. The best way to think of nucleotides is as building blocks of DNA – they consist of a number of separate components that we wont go into in too much detail here as it’s not overly important to our thesis, but all we need to know is that these components come together to instruct, and in turn construct, DNA and RNA. RNA is vital to protein synthesis, and proteins play a key role in modulating a cell’s actions.

As an example, we can illustrate with enGene’s lead candidate, a pre-clinical IL-10 drug targeting IBD. IL-10 is interleukin 10, which is a cytokine (just another word for a type of protein) that has long been identified as an anti inflammatory protein. The way it works is by downregulating another type of cytokine called Th1, which is the cytokine associated with the T helper cells that induce immune mediated inflammation. By downregulating these cytokines, IL-10 reduces inflammation – which is the driving factor behind inflammatory conditions such as IBD, Chron’s etc. By delivering RNA to instruct for the synthesis of IL-10 in the gut, a treatment can inhibit inflammation and treat the condition.

So if this is a well know therapy, why is enGene only now becoming attractive? Well, the answer is rooted in delivery. Gastrointestinal treatments are difficult to reach with oral treatments, as by the time the treatment reaches its desired location, it has broken down too much to maintain efficacy. There are some alternative delivery methods, primarily intravenous, but these can be painful at best and dangerous at worst. enGene’s delivery method allows for a maintenance of full efficacy via oral delivery, something that as yet is not commercially available, and it is this quality that has drawn the attention of big pharma. We’ve had a host of preclinical data suggest the drug and its delivery system is safe and effective, and the company is just about to kick of a raft of phase Is with its partners.

So which companies are involved with enGene?

First up, last October, Johnson & Johnson (NYSE:JNJ), through its subsidiary Janssen, put up an undisclosed payment and a share purchase, alongside a $441 million fund earmarked as milestone payments, to pick up exclusive rights to the IL-10 candidate we’ve already discussed. The companies plan to develop it towards an IBD target indication, with clinical trial initiation slated for H2 2016. On top of this IBD indication, Janssen also picked up the right to develop one further target, but we’ve not got any suggestion (as yet) as to what this target might be. Milestone’s to keep an eye on in the Janssen development pipeline are the initiation of phase I, and early stage data from the IBD indication.

Next, and referring back to the deal with which we opened this piece, Takeda has just sigend a deal to develop two of enGene’s candidates. This one is a little vaguer. We do know that the target indications will be gastrointestinal, but that’s hardly surprising given the nature of enGene’s tech. Takeda is going to foot the bill for all development costs, and enGene will take a royalty on the net sales of any commercialized candidate going forward. We also know that Takeda is going to investigate using enGene’s delivery method for antibody delivery, not just gene delivery. Again, a host of preclinical data has suggested efficacy in this arena, and it could be close on the heels of protein synthesis as an anti inflammatory therapy.

As yet, neither Takeda nor enGene have given us any indication as to when they intend to kick off clinical development. With Janssen just about to get the ball rolling, however, don’t expect Takeda to wait too long. The Japanese biotech space is booming at the moment, driven by reforms introduced as part of Shinzo Abe’s reformatory policies, and Takeda will want to ride this wave of activity while it lasts.