Q-Vis rises from the ashes -- again

Former WA biotechnology company Q-Vis (ASX:QVL) has risen from the ashes to reinvent itself as Salus Technologies.

Q-Vis, which originally listed in mid-2001 after a AUD$10 million IPO, was de-listed 18 months later after spending $15 million on its laser eye technology. The company relisted last September after a modest capital raising, and planned at that point to look at the possibility of resurrecting the eye technology.

Now the company is in the process of acquiring an interest from Mayne Pharma in a technology developed at CSIRO with the potential to treat cancer, HIV and other infectious diseases.

The deal involves Q-Vis/Salus acquiring 100 per cent of the issued capital of Kelpie Projects from its owner Gateway Capital. In turn, Kelpie will acquire Mayne Pharma's interest in Providex Therapeutics, a CSIRO spin-off that was formed to commercialise the atadenovirus vector technology developed by Dr Gerald Both, for $1.29 million plus an agreed royalty if Providex's prostate cancer therapeutic reaches the market.

Ultimately, Q-Vis/Salus plans to invest $4.5 million into Providex to increase its shareholding in the company from the initial 25 per cent to 55 per cent over the next two years. The other Providex shareholders include CSIRO, which currently owns 61.67 per cent of the company, and Sanofi-Aventis subsidiary Gencell SAS, which holds 13.33 per cent. Gencell will also provide Providex with the freedom to operate regarding some IP held by the French company that affects the CSIRO developed platform.

Q-Vis/Salus will also have the option for two years to extend its holdings in Providex to 63.3 per cent in a series B financing round.

The atadenovirus platform technology is based on a specific ovine strain of the virus (OAdV), which can be used to deliver vaccines and therapeutics without replication of the viral vector in the host. The lead project, which is poised to commence clinical trials later this year or early next year, uses the vector to deliver a gene expressing an enzyme under the control of a prostate-specific promoter to prostate tumours. The vector is followed by delivery of a prodrug, fludarabine, to the tumours, which is activated by the enzyme to become a highly toxic cell-killing agent that kills infected cells and nearby bystander cells.

The funding will be used to support the clinical trials of the prostate cancer project, as well as the ongoing work of Both and his team, who have been seconded from CSIRO. CSIRO will also provide laboratory space in its North Ryde facility.

"It's a good deal for the [Q-Vis] shareholders -- it's extremely unusual for a start up company to be at this late pre-clinical stage so early. It's because Mayne has done a lot of the work already," said Julie Anne White, who has taken on the role of managing director for the new company. "It's an extremely interesting technology with a lot of promise. If you want to rise from the ashes you need something with some guts to it."

The company is also optimistic that some short-term income can be derived from the technology, which has already attracted the interest of a number of potential commercial partners interested in evaluating the technology.

"If everything works, Providex will be essentially a business, with a clinical plan and licensing deals to generate short-term cash flow," White said.

"It's a clear platform technology that ideally will gather momentum and spin products off over the next few years."

To fund its acquisition, Q-Vis is planning two placements, a $420,000 capital raising which got underway earlier this week to raise working capital and to fund acquisition costs. Following the closure of this offer on October 25, and a proposed 1-for-25 consolidation of Q-Vis shares, a further capital raising of up to $5 million will be held. The company had cash reserves of $1.3 million at the end of the 2003-2004 financial year.

According to White, the prospectus for the larger offering is expected to be filed at the end of the month. The placement will be managed by Shaw Corporate Finance. A shareholder meeting will be held on November 19 to approve the consolidation and placement, and the company expects to have the acquisition wrapped up by the end of November.