PolyNovo in $11m deal with Medtronic

PolyNovo Biomaterials, jointly owned by CSIRO and Xceed Biotechnology (ASX:XBL) has signed a partnering and licensing agreement potentially worth more than AUD$11 million with giant US-based device maker Medtronic.

In the deal, PolyNovo will refine its NovoSorb polymer for the prevention and treatment of cardiac and vascular disease, and tailor it to Medtronic's specially designed stents.

PolyNovo CEO Dr Ian Griffiths said Medtronic had resources to deliver on a complex, multidisciplinary development program, combined with global reach in sales, marketing and distribution. "The real value for PolyNovo in this deal lies in milestone payments and the potential for royalties on sales of products," he said.

Medtronic has a market capitalisation of US$71 billion with annual sales of $11 billion.

"It has taken almost a year since we commenced negotiations," Griffiths said. "The development relationship is a partnership. At PolyNovo, we will refine the polymer to best suite the stents that Medtronic is developing. Medtronic will then be responsible for all clinical and regulatory approvals. The deal is valid for the lifetime of the patents, once they are granted."

PolyNovo currently has four patent applications.

"It is a landmark agreement, in regard to a little Australian company doing a technology deal with one of the not the world's largest medical device company," said Xceed CEO David Kenley. "Medtronic has scoured the world for a biodegradable polymer and PolyNovo has developed it."

The agreement includes undisclosed milestone payments based on achieving certain regulatory milestones and a royalty on sales of future licensed products brought to market by Medtronic.

Medtronic has agreed to subscribe up to US$2 million in equity in PolyNovo based on achieving certain clinical milestones. Xceed will immediately invest AUD$3 million into PolyNovo, increasing its shareholding from 50 per cent to 60 per cent, with CSIRO holding the remaining 40 per cent.

"My role is to generate shareholder value and the board believes the best use of company funds is to further invest in PolyNovo," said Kenley. "The deal with Medtronic independently validates the significant value of PolyNovo's IP. There is a large potential in other biomedical applications including wound management, orthopaedics and cell delivery and going from 50 to 60 per cent is the best use of our funds.

"The $3 million ensures the financial stability of PolyNovo over the next few years. Xceed values very highly the relationship with CSIRO and we are pleased to be a joint shareholder in they company," Xceed has been granted an option by PolyNovo to invest a further AUD$2 million at various prices for a two-year period. "It is an opportunity to invest further at attractive predetermined prices over the next two years," said Kenley.

Concurrently the Xceed investment into PolyNovo will trigger CSIRO to assign all of its NovoSorb IP to PolyNovo, which has previously been subject to an exclusive licence arrangement. "We believe full ownership of the intellectual property will enhance PolyNovo's capacity to partner its intellectual property successfully in other fields and with other partners," said Kenley.

Medtronic has agreed to provide PolyNovo with a convertible loan facility of up to US$3 million.

Polymer technology

NovoSorb is a novel biodegradable polymer technology invented by CSIRO. PolyNovo was formed in early 2004 to commercialise NovoSorb in medical devices. To date, Xceed has provided all the funding for PolyNovo's operations.

A stent is a small mesh-tube mainly used in the treatment of coronary artery blockage. Stenting is a minimally invasive technique used to implant a tube-like scaffold to open a partially closed vessel.

"We are going to optimise NovoSorb, a novel biodegradable polymer, to replace the metal in stents," Griffiths explained. "If a stent is implanted, made out of NovoSorb, it will keep the vessel open. Once it has healed over, our polymers will harmlessly degrade leaving a near normal vessel -- we hope this would remove long-term complication and provide re-treatment options."

Stents are one core application for NovoSorb, which has also been used for orthopaedists and spinal repair, wounds management, and cell delivery. In May 2005 Polyonovo signed an agreement with CSIRO and the Industrial Research Institute of Taiwan on a new method of repairing damaged cartilage in the knees and joints using NovoSorb.