A small Canadian biotech company was named to be among the "Top 10 Most Innovative" biotech companies for its biofilm dispersant technology. With a market cap of around $10M this looks like an attractive small-cap investment opportunity. To get a better sense of Kane's progress and future outlook, I sat down for an interview with Kane's CEO, Mr. Gord Froehlich.
Kane Biotech (KNE.V)is a small biotechnology company engaged in the development of products to prevent and disperse biofilms. Biofilms are a major cause of a number of serious medical problems including chronic infections and medical device related infections. They develop on surfaces such as catheters, prosthetic implants, teeth, lungs and the urogenital tract. Biofilms are pervasive, costly to deal with and approximately 80% of all human bacterial infections involve biofilms. The healing of chronic wounds alone costs the Unites States health care system $20 billion per year.
TB: Gord can you please tell us a little bit about how you came up with this unique idea for an anti-biofilm product, and why is it so important.
Gord: The idea really belongs to our CSO, Dr. Sri Madhyastha, who noticed that there was a lot of research done on finding better ways of killing the harmful bacteria, while nobody was really focusing on the environment that the bacteria thrive in. Biofilm is like a slime that builds up very quickly on almost any wet surface. In healthcare, biofilm presents a huge problem as it constantly builds on medical devices and open wounds. Once the biofilm is formed, the bacteria gets embedded in this biofilm, and antibodies cannot penetrate the environment to kill the bacteria. Dr. Sri's idea was to disrupt this biofilm habitat, thereby weakening the bacteria to the point where it can be easily dealt with.
This research is of immense importance as currently there is a $4 bn market for products specifically for treating healing wounds. If you count the auxiliary costs of hospital stays, the cost on our society is enormous and probably costs us $20 bn annually. Current treatment options are made up of all kinds of products including physical scraping of the biofilm surface with a scalpel. None of it really works, so you see a biofilm dispersant could have a dramatic impact in the field of bacterial infections.
TB: How would you use the DispersinB to fight an infection, and how effective is it?
Gord: DispersinB would be used in conjunction with an antibiotic or an anti-microbial, like silver for example. We have tested and patented the use of DispersinB with a number of anti-microbials and we found that DispersinB was synergistic with many of them. DispersinB helps the wounds heal faster by disrupting the biofilm.
TB: How big do you think the market for DispersinB could be? What are your expectations?
Gord: Ultimately we will have to wait for completion of clinical trials before we will have a really good idea. A common expectation is that with DispersinB, even if we crack only 10% of the $4bn market, with a 10% annual royalty we are looking at $40 M in annual revenues. That would be a game changer for Kane.
TB: You've signed a number of non-disclosure agreements (NDAs), is there a lot of interest in Kane from other pharmas?
Gord: That is correct, we have signed a number of NDAs. A lot of companies are kicking the tires, so to speak, they want to be informed, they are very interested in progress we are making with DispersinB. We have a great working relationship with these companies, they've provided some insightful feedback on the FDA application process. They are very interested to hear what the FDA will say about DispersinB.
TB: Last week you submitted a briefing document on DispersinB wound spray to the FDA, in preparation for the submission of an Investigational New Drug Application. Can you discuss your plans for DispersinB clinical trials?
Gord: We are now waiting for feedback from the FDA to determine if there is any additional information that they require and also the type of clinical studies needed. Their feedback will have a big impact on the design of our study. The FDA could request we do a small, 15 to 20 patients safety study. That would be followed up by a larger, perhaps 150 patients, study with several control arms like placebo, DispersinB with a wound dressing, wound dressing alone, etc. But, as I said, the FDA could request something we did not anticipate, so we will really have to look at their feedback, in about 3-4 months time, before deciding on exactly how to proceed.
TB: There was some discussion that DispersinB could be treated as a device, rather than a drug?
Gord: With DispersinB primary mode of action is a topical wound spray for application on the skin, not as an ingested or injected drug, and there are a number of paths that might apply. After talking to a number of wound care companies we decided to submit our briefing document as an investigational new drug (NYSE:IND). The claims and future reimbursement codes would likely be higher, and the costs, and clinical work of a premarket approval (NYSEARCA:PMA), through the device regulations, would be similar to the IND. We need to remember that the FDA are primarily interested in ensuring safety and efficacy of a product regardless of the path we might propose.
TB: Are there any competitors and companies that Kane can be compared to?
Gord: There aren't many direct competitors, because very few are working on biofilm technology, but there are many companies that are in the wound care business. One is MediWound, an Israeli wound care company. They were bought out by Teva for $200M. Another company is Nucryst out of Alberta, they were bought by Smith & Nephew for their silver based dressing. This was a private sale so I don't know the amount it was purchased for, but you can see that it is a very active space with several global pharmaceutical players.
TB: You also have an interesting research collaboration agreement with the U.S. Army. Can you give us an update?
Gord: We have signed a research co-op agreement with the US Army almost two years ago. They actually came to us as they wanted to assess our technology in combination with their proprietary antibiotic. They are interested in treating combat trauma wounds where infections can set in quickly, so they are very interested in trying to prevent infections. They spent a lot of time testing with DispersinB and they liked their results. They have just recently signed a new contract to develop a final product, a wound gel combination of DispersinB and their antibiotic. That product will undergo testing against various bacteria. The army seems very keen on it. We are excited.
TB: Could the army help speed up the FDA process?
Gord: The Army has the connections and the resources to do the trial much quicker than we could. I do not know if this will happen, it would be great for Kane if it did.
TB: What is the potential value of a contract with the Army, if everything goes well. Are you expecting to supply every soldier with a wound gel containing DispersinB?
Gord: As we understand it, the Army's intention would be to have a wound gel in each solders backpack. There are about two hundred thousand US soldiers who would be supplied, with expected refill rate of 18 months. Currently they carry antibiotics that cost roughly $20 / tube. If we project the same pricing for Kane's DispersinB based wound gel, we could be looking at a very lucrative agreement. Now, where things can get interesting is if the US Navy, and also the British, the French, and other armies came on board. That would be huge for Kane.
TB: With DispersinB you are targeting the wound care market, but the market for biofilm dispersant is much greater than that. Could DispersinB be used to treat Cystic Fibrosis?
TB: Recently you had a major change of the board of directors, what is the reason for this?
Gord: As Kane has gone through various stages in its growth process we needed people with different expertise to help us navigate through various challenges. Our previous chairman, Dr. Albert Friesen , has led the board of the company through the research period, and now as we turn towards commercialization stages, Phillip Renaud, and Essam Hamza have joined to board to help us with their connections and great knowledge of the capital markets. Richard Cherney has also joined the board, his legal expertise with life sciences companies and mergers and acquisitions will be very beneficial. Our current board has a great mix of talents and connections.
TB: What is your plan going forward?
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Disclosure: I am long OTCPK:KNBIF.