Cardia spin-off slated for funds, IPO

Research into a promising new anti-diabetes compound derived from tree bark will receive a major funding boost under a heads of agreement deal brokered in Melbourne this week.

Cardia Technologies' (ASX:CNN) wholly-owned subsidiary Dia-B Tech has entered the arrangement with Intramed, a private Tongan company researching potential drugs from South Pacific flora and fauna.

Under the agreement, Dia-B Tech will fund Intramed's research project known as IM014 -- Traditional Medicine, which involves a tree bark extract.

IM014 is focused on a natural insulin sensitising agent that has the potential to be developed as a new therapy for obesity and type 2 diabetes.

Validation work on the extract, led by researcher Dr Ken Walder, is being conducted at Deakin University's School of Health Sciences in Geelong.

Dia-B Tech had agreed to fund the project for two years, subject to achieving set milestones, with a minimum of AUD$600,000 budgeted for the research.

The Cardia subsidiary will own all the intellectual property and rights over the project and share any milestone payments and royalties it receives with Intramed.

The deal is subject to Dia-B Tech's successful listing on the Australian Stock Exchange, which Cardia chairman Pat Volpe said was on track to go ahead in the first quarter of next year.

Volpe said that Dia-B Tech would re-examine its arrangement with Intramed at the end of the specified two-year funding agreement.

Intramed has already conducted animal research with IM014, which resulted in a clear antidiabetic effect.

According to a statement, blood glucose concentrations were significantly reduced in both diabetic and non-diabetic animals treated with the bark extract.

The results were confirmed in tests using the compound in cells in culture, which showed a strong dose-dependent effect of the extract on glucose uptake by cells.

The researchers believe that by the end of the two years funding deal with Dia-B Tech they will have successfully isolated the active chemical ingredient from the bark extract using mass spectrometry.

The recently-appointed chairman of Dia-B Tech, former Federal Health Minister Dr Michael Wooldridge, said the IM014 project complimented and expanded the company's existing portfolio encompassing type 1 and type 2 diabetes.

"This agreement is in line with our corporate strategy of developing a portfolio of research projects with a particular emphasis on diabetes and obesity," Wooldridge said.

"Type 2 diabetes is one of the fastest growing diseases in the world today with in excess of 190 million sufferers worldwide, and the number is expected to increase to 330 million by 2025.

"Should the research prove successful, the potential commercial benefits to Dia-B would be substantial given that the active compounds are derived from natural sources."

The heads of agreement follows Cardia's financial results, which showed a $1.86 loss for the year after expensing research and development, and patent costs related to Dia-B and environmental technology subsidiary WaterPower.

Cardia's share price was trading at 9.5 per cent lower at 9 cents at the time of writing.