From accident to bold plans - Kiwi biotech company takes science to market

From accident to bold plans - Kiwi biotech company takes science to market5 Sep 2018

Article By: Andrea Fox
Business Reporter, NZ Herald

Image: (From left) Andrew West, Mark Backhaus and Greg Moss-Smith are keen to keep research and manufacturing in New Zealand. Photo / Jason Oxenham

Some of the greatest scientific discoveries have been stumbled upon by a researcher hunting for something else. Now, Waikato start-up Synthase Biotech hopes to take its place on that list.

Synthase's back story certainly qualifies it for a spot. Now it has to prove it can turn an accidentally-discovered enzyme into a weapon against some of the greatest enemies of human health and wellbeing, such as arteriosclerosis, dementia, infertility and fatty liver disease.

Synthase's enzyme goes by the patented name of Aloxyn. Its production at the company's leased labs on Hamilton's AgResearch campus follows a journey that began with war and a discovery in the desert, touched down at the Pasteur Institute in Paris, and arrived in New Zealand via Burger King.

Synthase is aiming to develop and commercialise human drug applications to fulfil its brand boast of "extending life", but its principals also want to build an enduring New Zealand biotech company, generating tens of millions of dollars and employing dozens of people.
Meanwhile, as it prepares to step onto the arduous and hugely costly pathway to human drug candidacy, the company intends to generate income by selling its enzyme product in animal applications after highly promising proof-of-concept results. Other potential applications beckon in the food sector.

Just three years old and already with 15 staff, most of them scientists, Synthase's story starts with executive chairman and major shareholder Mark Backhaus, an American who has settled in Auckland.

His brother Andrew, a plant physiologist, discovered the enzyme "by mistake" says Backhaus, following up on research in the Arizona desert during WWII for an alternative source of latex, at a time when the Japanese had "pretty much tied up" access to rubber from Malaysia.

A desert shrub was found to contain latex, but getting it out was very difficult.

Backhaus' scientist brother took the latex gene and tried putting it into other plants to make extraction easier.

While doing that, he found an enzyme in the shrub which prevented the latex from oxidising.

To explain the significance of that discovery, this is a good place for Synthase executive director Dr Andrew West to jump in.

"The thing to understand here is that oxygen makes all multi-cellular life possible. But the downside is that oxygen kills you. You have big enough, long enough exposure, you're going to die because it's toxic," says the former scientist and ex-chief executive of AgResearch.

"We have these defence mechanisms that allow us to make use of oxygen long enough to breathe and have another generation before it knocks us out."

Oxidative stress causes the inflammation that wreaks so much damage on the human — and animal — body.

Back to Andrew Backhaus in the US, who after his discovery set about applying the enzyme to animal systems.

Mark Backhaus recalls that the first work his brother did was with rats. "He developed a way to produce this enzyme with a fermentation process. He basically cloned the gene to make more of this molecule, then used it with rats.

"He stopped a rat heart for 30 minutes and then applied the enzyme and the rat recovered 100 per cent of heart function."

A rat was induced to have a stroke, then made a 100 per cent functional recovery in 45 minutes, says Backhaus.

In both cases, the conclusion was that the enzyme stimulated recovery.

But why did Andrew Backhaus suspect an enzyme found in a plant system could target and eliminate lipid peroxides in animal systems — lipid peroxidation being the oxidation of fats?

"He knew that latex was very susceptible to oxidation, so with this enzyme present to stop it from oxidising [he reasoned] you could apply it to animal systems which don't have it," says his brother.

Next, the scientist went on sabbatical at the Pasteur Institute, where he discovered the enzyme was part of the rare cytochrome P450 enzyme group. Back in his labs at Arizona State University, he began urging its commercial arm to pony up for the costly job of patenting his discovery.

By this time, Mark Backhaus, who'd become a corporate landscape architect for Burger King in California, then gone on to acquire the rights to introduce the fast food chain to New Zealand in the 90s, had emerged "financially well-off" from the sale of his Down Under venture in 2009.

He approached Arizona State University to buy the enzyme patent rights, and in 2015 transferred all the intellectual property (IP) into a new company, Synthase Biotech.

"I brought it to New Zealand because I was living here and thought it was a great opportunity," says Backhaus.

Then followed more experiments at Auckland University's Liggins Institute, where Backhaus met Synthase's now chief technical officer Steve Hodgkinson, who suggested a commercialisation approach with lower regulatory and cost hurdles than diving straight into the human drug sector.

Backhaus has invested $1.6 million to get Synthase off the ground, and today owns 54 per cent through his company Pacific Brands.

The second biggest shareholder, with 16 per cent, is NuModern Ltd, whose shareholders are Andrew West, his wife Janine Cowling and Hodgkinson, who know each other through motorbike adventures.

Backhaus and West focus on capital raising for the start-up, which today has 16 mostly Kiwi shareholders and is valued at $19.6m. Andrew Backhaus has a small shareholding.

There have been two share issues at $2.50 and $5 apiece and a third round is underway at $7.50 a share. The target this time is to raise $5m, a big reach for a New Zealand biotech company, says Waikato resident West.

Enterprise Angels from Waikato, Taupo and Tauranga — a group who invest in early stage ventures — have been strong supporters, he says.

Synthase has also secured one of Callaghan Innovation's biggest grants — $825,000 to develop animal applications for artificial insemination and cattle in vitro fertilisation (IVF), which West calls a "dummy run" for human IVF.

The jump in the share price for this latest capital raising is because Synthase has appointed a chief executive and its manufacturing capability has "vastly advanced", says West.

Also needing support is a binding memorandum of understanding with Waikato University signed last year, which formalised a collaboration in joint research in industry enzymology.

The new chief executive is Kiwi Greg Moss-Smith, a 20-year veteran of building biotech companies in Australia, Denmark, Boston and the UK. He was head of commercial operations for GroPep from start-up to its $80m listing on the ASX.

When GroPep — like Synthase, a company with a candidate for both industrial and human drug applications — was acquired by Danish biotech heavyweight Novozymes, Moss-Smith helped merge it with three other companies to form a new business for Novozymes, establishing its global sales and marketing operations in the US.

A Nelson resident, Moss-Smith's last job was as a technical business adviser for Callaghan Innovation.

He gets straight to the point. "This is the best platform this country has got as a hope of getting a deep science biotech company that will actually endure here.

"We're taking Waikato University science students and bringing them into our company. On the manufacturing front we've been able to pull some of the top fermentation scientists in New Zealand who really don't have their talents exploited hardly at all.

"Fermentation is one of the core techniques for industrial scale biotechnology, but because we don't have industrial scale biotech in New Zealand, there aren't a lot of them around. We're building that capability with the intention that manufacturing and early stage R&D endures here."

Moss-Smith says the goal is that after about two years of selling high value industrial product to the animal health and reproduction sector, Synthase will have its manufacturing processes sorted and have "an appropriate quality management system so that we're ready to produce a drug candidate".

"From my experience, if you are trying to take a product like this to human clinical trials, from the point we are at now to get it to humans for the first time, it's about $10m to $15m worth of work. Half the cost of that is your manufacturing development, so what we are doing is getting that paid for by other products."

Moss-Smith says if Synthase succeeds in raising $5m this time, it will be well-positioned to list on the ASX in two years. So why not the NZX, given the company's aim to grow a resilient biotech company at home?

"NZX doesn't have the liquidity and New Zealand investors don't favour life sciences companies, so valuations are depressed, you don't get liquidity and your stock stays stuck," says Moss-Smith.

"Australia has a significant biotech industry — the ASX has over 200 listed biotech companies, and they come from other parts of the world to list there. We know the next stage beyond this we'll need about $15m."

The plan after listing is to split the company into two activities, Moss-Smith says. "The industrial products and the manufacturing for the drug business will reside in the New Zealand company. The drug development business would probably reside in Australia, where we can tap a better-developed system for developing drugs."

He predicts that in five years, the industrial side of the business "should be booking tens of millions of revenue" and manufacturing will be underway in Hamilton for phase one clinical trials for drug development.

Two industrial application products, for cattle semen and cattle embryo culturing, are due for launch early next year.

The semen product has been tested in a 20,000-cow US dairy herd. It has been added to 8500 artificial inseminations of 5000 cows via frozen semen. "We call it a semen activation product because it activates and extends the life of semen," says Moss-Smith.

The New Zealand and Irish dairy industries use fresh semen for artificial insemination — the enzyme works even better on that, he says.

On the embryo implant side, addition of the enzyme has improved the implantable grade by about 30 per cent, says Moss-Smith. "We can increase the number of embryos from a harvest quite dramatically."

Cue Synthase's strong interest in the enzyme's potential for human IVF.

"Oxidation stress in humans concerns fertility [specialists]," says West.

"Right now we're seeing a massive and steady decline in the fertility of males across the world. We don't know why and we're seeing it everywhere."

Extending the life of blood platelets is another pending target area for their unique and hugely exciting enzyme, say the Synthase principals.

Working with the company under its arrangement with Waikato University is Cambridge doctoral graduate and protein engineer professor Vic Arcus, a James Cook Fellow who was brought up in Hamilton. Enzymes are a protein.

"They do have a very interesting enzyme," says Arcus. "Because I'm a scientist, we always speak by degrees. I would say there is some evidence this enzyme can detoxify lipids in cells — and this can be beneficial."

Loosening up, he elaborates: "Lipid peroxidation is a certainly a major problem. So I think the potential domain where this enzyme might be efficacious, the potential is great."

Arcus has a tiny shareholding in Synthase, having signed up to its employee share offer – though he's not an employee.

He says he did so not just because he thinks the product has potential, but because it's a way academic intellectual property can be commercialised.

"It's just one model of where academic scientists [who] essentially make a lot of contribution to IP can then be recognised by way of share options."

Arcus notes that world-leading enzyme scientist, engineer and biotech start-up entrepreneur Frances Arnold of Caltech has made her name working on the cytochrome P450 enzyme family.

"These enzymes do have a really, really interesting chemistry."

This article was originally published by the NZ Herald on 31 Aug, 2018 and is republished here with permission. View the original here