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  Biotech firm turns over new leaf — literally

BENJ GALLANDER and BEN STADELMANN

Friday, June 5, 2009

Various media outlets run a familiar feature called "Where are they now?" in which a well-known actor, athlete or musician from yesteryear is put under the spotlight.

These stories are full of the quirks of fate — the former figure-skating champion who became a researcher for the CBC, the aging rocker who discovered his love for cooking and opened a vegan restaurant, or the teen idol of a sitcom who is now the principal of an elementary school.

In similar fashion, many once-thriving businesses simply go over a cliff and disappear, the equivalent of the famous drummer who lived hard and died young. But some public corporations reinvent themselves and pursue a completely new path.

The story of Inflazyme Pharmaceuticals starts with Dr. Hassan Salari, a professor of medicine at the University of British Columbia who was also a scientist with a very strong entrepreneurial streak. His dream was to create a new class of drugs to compete with steroids and treat diseases of inflammation, such as asthma, rheumatoid arthritis, multiple sclerosis and psoriasis.

Inflazyme was founded in 1992 and by 1999 was becoming a major player in Canada's biotech industry. An agreement for the development and commercialization of novel drugs — at that time, the largest biotech deal in Canadian history — was inked with giant Aventis Pharmaceuticals. Inflazyme moved from Vancouver's venture exchange to the TSE in the same year, and in 2000 the share price moved from penny status to exceed the $10 mark.

That did not last long as the tech wreck took its toll, but the company forged ahead. In 2003 it acquired Toronto-based GlycoDesign in a transaction valued at $12.8 million. In a further effort to improve its product pipeline, UK-based Adprotech was bought in a $20 million deal in 2004.

The path to commercializing a new drug is long, torturous and very expensive. By 2006 it was becoming increasingly dubious whether the company would have sufficient cash to make it to the finish line. This was the point where one Contra Guy picked up a speculative position on the cheap, convinced that the stock would likely bump upwards.

The climax came in January 2007, when the stock spiked on early indications of good results on a critical phase 2 trial for an asthma drug. He dumped his position with a nice profit. A good thing, too, because a few days later the stock hit the wall when the study results were officially announced — and 70 percent of Inflazyme's employees got pink slips a week later.

As it turned out, the new medication did "work" quite well, but in one of those mysteries of science, the placebo had equally good results. Apparently, just enrolling in a study is very good for your asthma.

By December 2007, it was all but over, with only two employees remaining: the CFO and a corporate development director. There was still a fair bit of intellectual property, which was worth something to somebody. An agreement was made to sell most of the remaining assets to a Swedish pharmaceutical company called Biolipox, which in turn was swallowed by Orexo, another Swedish outfit.

In January 2008, Inflazyme announced a merger with Z-Tech, a small medical devices company. But in April that proposal fell apart and the company was back to reviewing its options.

The solution turned out to be a change of direction — a return to British Columbia's roots in the forestry industry. In August, shareholders approved a four-for-one stock consolidation and a name change to Eacom Timber. The new president and CEO is none other than Rick Doman, a name famous in BC's forestry circles.

The Domans go back three generations in the lumber business, but it was Rick's father, Herb, and uncles Ted and Gordon who turned Doman Industries into a billion-dollar forestry empire. The glory days came to an end amidst an insider-trading scandal when Herb Doman was accused of tipping off BC premier Bill Bennett. The parties were found guilty, but the verdict was eventually overturned by the Supreme Court of Canada.

Rick took over as business conditions worsened, and by 2002 Doman Industries was bankrupt. The company later emerged as Western Forest Products. Rick Doman was replaced by a former executive from Weyerhaeuser.

For anyone who finds some shares of Inflazyme at the back of a dresser drawer and wonders if they are worth something, the answer is a little. Eacom currently trades at 4.5 cents. The mission to cure the ills of the world has been abandoned, though Orexo is still doing research and a few royalty payments may come in yet.

Meanwhile, Rick Doman is doing a little trading in the lumber market, and recently signed an option to buy a long-closed sawmill in Big River, Saskatchewan. Perhaps it is a baby step in a new direction for a failed biotech, and towards recapturing a little of the grandeur of his family's history.


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