Right now, GAP-107B8 is being assessed on ovarian cancer cells implanted in mice. If all goes according to plan, PharmaGap will file an application with Health Canada and the U.S. Food and Drug Administration for the first human trials by the end of next year.
Testing will determine the effectiveness of the the drug, which regulates cellular processes to limit the out-of-control growth in cancer cells that cause tumours.
The company chose ovarian cancer as its model, but ultimately expects to show results in a range of cancers, providing a large potential market when eventually approved for use.
However, the process won't "happen overnight," says PharmaGap's chief executive, Robert McInnis. Further, there's no guarantee his drug is going to make it.
"The failure rate of new drug discoveries and new drug candidates from the time of inception to getting into human use is astronomical," he says.
The journal Nature recently demonstrated a "clinical-trial cliff" showing that the failure rate of drugs in all stages of clinical trials increased between 1990 and 2004. In Phase 3 - the last stage before the drug is released to the public - alone, the failure rate increased from around 20 per cent to more than 50 per cent.
"Most of the product failures in Phase 2 and 3 trials are because researchers are unable to demonstrate efficacy or sufficient safety," the scientific journal stated in a September 2011 article.
Avoiding this dreaded cliff is a requirement to keep a business running smoothly. A company must invest millions of dollars, countless person-hours and investors' patience into developing a drug.
While most industries operate in months, drug development takes years and sometimes decades to accomplish. This situation makes it all the more frustrating - and risky - to companies who see their drugs fail.
To ensure the drug works the first time around - not only for patients, but also the financial backers who are eager for a return on their money - "you need to be very smart in the early stage to know what you're doing," says Mr. McInnis, noting that the way drugs are developed has changed during the past two decades.
Large pharmaceutical companies are increasingly looking to small biotech firms such as PharmaGap as their source of new drugs to better manage their historically large and inefficient R&D spending, he says.
Small firms can generate new leads targeting specific cancer cell processes, but are not in a position to develop the huge capital requirements to conduct the large Phase 3 clinical trials required for human use, or to market and sell new drug compounds.
With the advent of human genome decoding and other modern technological advancements, researchers are now able to target the drugs according to how the cells in the body behave.
As such, to think of a drug exclusively passing or failing a clinical trial is sometimes a simplistic way of putting it, says Peter Covitz, Nordion's senior vice-president of innovation.
The Ottawa-based company is preparing its own cancer therapy, called TheraSphere. It treats liver cancer by inserting radioactive micro-spheres into the branch of the artery that feeds the liver to the cancerous tumour within. The technology is in Phase 3 clinical trials, administered by Pennsylvania-based Theorem Clinical Research.
"For some diseases, certainly for cancer ... the definition of the disease based on the traditional clinical diagnoses is (actually) a collection of diseases."
Two patients could have the same kind of cancer, he adds, but at the genetic level they could actually be a lot different - which would determine how effective a drug would be.
Mr. Covitz speaks to a "tension" from a business standpoint. On the one hand, investors in the company are eager to see a return. On the other, the company needs to make sure it understands its product enough before moving to the next phase.
"It's important to ask the question, ‘How do you judge success even if a drug fails to get to market as a result of the trial?'" adds Martha Healey, who works on the regulatory side of drug testing as an Ottawa-based lawyer at Norton Rose.
"A couple of main reasons is either the trial did not show the results that the investigator or the sponsor was hoping to get, or it it had unexpected adverse effects."
A negative outcome isn't necessarily a bad thing, she notes, as it often yields scientific data that can help the drug development process further down the road.
PharmaGap, as a public company, is taking a more unusual approach to drug development than most, says Mr. McInnis, who was not with the company for its IPO.
"Being public at such an early, pre-revenue stage is certainly not the best thing for a small biotech company because it really excludes you from the venture capital markets as well as a large pool of federal and provincial funding opportunities," he says. "But I can identify with the people around the table at the time saying, ‘This is an opportunity, it brings in $1 million to fund operations when other options had been exhausted, and the company lives to fight another day.' It would be hard to argue against that at the time, or now."
The company's majority shareholder - at just under 20 per cent - is SC Stormont Holdings Inc., the financial management firm under serial entrepreneur Rod Bryden. Mr. McInnis is one of the three principals at Stormont, along with Bruce Linton of Clearford Industries Inc. and Mr. Bryden.
PharmaGap's staying power came for two reasons: its principal shareholders understand the long lead time in medicine, and the company was able to use its advancements to generate a large amount of trading on a regular basis, providing liquidity for shorter-term speculative investors that trade in the stock to generate quick returns. These factors provided the basis to fund the company through a series of small private placements.
"The share price usually moves on an announcement," Mr. McInnis says, "although that was more true up until about 12 months ago before the onset of the current market doldrums worldwide.
"So many times ... since 2005, you could buy at six cents, wait a couple of months and sell at 12 cents. Double your money. You didn't have to wait until the cure for cancer was found."
CLINICAL TRIAL STAGES
Phase 1: A firm contracts a research organization to do the clinical trials. It is run at a small number of sites with a few dozen people. The trials test multiple forms of the drug formulation, at different doses, and on different types of disorders. Takes 18 to 24 months.
Phase 2: Continue research based on what was found in Phase 1. Sometimes the research takes an unexpected turn; as a simple example, if the drug was originally for ovarian cancer but the lung cancer patients showed a better response, lung cancer patients would be chosen for this phase. The trial has 100 to 200 patients and typically takes 24 to 36 months.
Phase 3: Done by pharmaceutical companies due to the time and expense involved. Requires 1,000 to 2,000 patients studied over several years in several sites.
The drug must pass the clinical trials and secure the approval of the Food and Drug Administration, Health Canada and other regulatory bodies in other countries before it can be used by the public.
Source: Robert McInnis
