Quantum Leap In Funding

Immunotherapy Financing Takes A Quantum Leap

Tampa Bay Business Journal - by Margie Manning Senior Staff Writer

Friday July 31, 2009 

TAMPA — Quantum Immunologics Inc., a startup biopharma firm headed by health care entrepreneur Charles Broes, has now raised nearly $6 million to support an early stage clinical trial for a vaccine designed to treat women with breast cancer.

The treatment is among a growing number of studies into immunotherapy, or the concept that a patient’s own natural defense system can be primed to fight a disease such as cancer.

There are dozens of companies, including major pharmaceutical firms, racing to produce similar cancer-fighting vaccines. The hunt for financial backing to pay for expensive research and development is intense.

Quantum received [ INVESTORS MEDICAL FUND LLC purchased licensing rights from University of South Alabama  for a total cost and expenses of $3.9 million. In order to facilitate FDA tests and proceed toward a public offering, the IMF LLC transferred the licensing rights to QUANTUM IMMUNOLOGICS corporation in exchange for stock and warrants in QI. ] and since June 1 has raised another $4 million through a private placement, filings with the Securities and Exchange Commission show.

Mentor Capital Inc. (Pink Sheets: MNTR), a San Diego firm that provides funding to hedge funds and private companies, invested $2.2 million for a 20 percent stake in Quantum. Mentor also agreed to help Quantum with funding in the future, said Broes, Quantum’s chairman and CEO.

There was a meager $709 million in venture financing in the biopharmaceutical field in the first three months of 2009, but venture groups got back to business with $1.22 billion in new funding between April 1 and June 30, said Scott Lee, VP of HealthEdge Investment Partners LLC, a Tampa-based private equity firm that focuses on the health care industry. The increase was driven by a huge surge in public offerings in May.

Investing in biotech and biopharma likely will return to normal but not until there’s a broader economic recovery, Lee said.

Quantum was formed last year to take intellectual property developed by the University of South Alabama College of Medicine from the laboratory to a commercial product. The university licensed the technology to VRI in Lake Forest, Calif. VRI in turn recruited Broes, former chairman of American Enterprise Solutions, a once high-profile health care firm in Tampa.

10- to 15-year development cycle

Biotech and biopharma firms depend on a lot of capital injected over a long period of time, said Lee. That’s because it can take 10 years to 15 years to get a drug through three phases of clinical trials and to clear regulatory approvals before it goes to market.

Additionally, the cost of capital is high, especially for companies in early stage trials, Lee said. Companies borrowing money expect to pay it back at high rates with tight covenants and short maturities on the loans. Companies getting equity expect to give up a big chunk of ownership.

Quantum is preparing to raise another $15 million to complete the early stage trail and prepare for a larger test of the vaccine.

“We’re comfortable by the end of this year, the preliminary results from the trials will be useful enough to give credibility to the results we hope to have,” Broes said. “If the results are good, we’ll have plenty of capital.”

The company also is looking to bring in revenue from related applications, including veterinary uses, which have lower regulatory barriers, Broes said.

Adding trial sites

Quantum enrolled the first two patients in mid-July in its trial, a combined Phase I and Phase II trial being conducted in Mobile, Ala. It expects to enroll a total of 27 breast cancer patients who have failed conventional therapy and are in an advanced stage of the disease.

Using a medical technology called aphaeresis, blood is drawn from each patient’s arm and dendritic cells are removed. The cells are combined in the lab with an immunizing protein discovered by University of South Alabama scientists. The treated cells are then injected back into the patient, who receives three injections over 90 days.

An earlier study in Austria using the technology in renal cancer patients showed no toxic or other harmful outcomes and patients responded well, according to a background paper published by University of South Alabama.

Quantum just received approval from an independent review board to expand the trial from a single location in Mobile to other sites nationwide. Broes hopes in the future to work with the H. Lee Moffitt Cancer Center & Research Institute in Tampa, where he serves as a community member on the ethics committee.

mmmanning@bizjournals.com | 813.342.2473