Caldera close to global breakthrough on new prostate cancer test, seeks new investors

Caldera Health founder Jim Watson

Caldera Health, a New Zealand biotech company working on a gene-sequencing replacement for the world's most widely used prostate cancer test, is seeking new investors to complete a $2 million capital raising to finish clinical studies and put the research in front of potential commercial partners.

Auckland-based Caldera has attracted $5.93 million of investment since being incorporated in 2009, made up of $5.4 million from investors including New Image Group founder Graeme Clegg, Stephen Tindall's K One W One, the government's NZ Venture Investment Fund, and about $568,000 from Callaghan Innovation and its predecessors. It has raised about $1.1 million of the $2 million sought in its latest offer of 2.5 million shares at 80c apiece. Each share comes with a 'stapled' option to buy another share at that price by 2017. Investors need to put in a minimum of $750,000.

Caldera was co-founded by Jim Watson, an immunologist fighting his own 11-year battle with metastatic prostate cancer, who realised the standard prostate specific antigen, or PSA, blood test was so limited that there was "a huge unmet need in men's health for a test that diagnosed early prostate cancer." In 2012, the US Preventive Services Task Force recommended against mass PSA screening because it threw up both false positives and negatives, didn't distinguish between aggressive cancers and benign strains or even other prostate conditions, and led to over-diagnosis and unnecessary prostatectomies.

Caldera's alternative is based on the use of RNA biomarkers to distinguish between healthy and cancerous tissue. The stage 2 clinical study currently under way is to demonstrate that the genetic biomarkers correspond with what is known as a Gleason score, where prostate tissue from a biopsy is rated on the level of 'disorganisation' of cells, a cancer indicator used alongside the PSA that's also regarded as limited because it can't detect whether a cancer is aggressive. If and when a Caldera test is developed, it would be used alongside the Gleason score.

The current testing regime in use worldwide is likely to be spurring unnecessary medical interventions on a massive scale. Watson says an estimated 60-70% of men with a Gleason score of six are likely to have a non-invasive cancer, while those that go on to develop metastatic cancer that spreads, typically to the bones, make up just 30%.

"The dilemma in the diagnosis of prostate cancer today is that the PSA test has no predictive character and the biopsy score of six gives no indication whether it is indolent or aggressive cancer," Watson said. In reality, many men opt to have their prostate removed, just to be sure, subjecting themselves to the health risks and sheer costs associated with biopsies and often unnecessary surgery.

Caldera will sell about 23% of the company in its latest funding round, lifting total shares outstanding to 11.1 million and valuing the firm at $8.9 million.

The latest funding round will also finance a permanent chief executive, pay for new automated testing equipment, enable two more scientists to be hired and help Caldera execute its partnership strategy, from which it expects licensing revenues to flow. It will also allow the RNA biomarker analysis to be applied to breast cancer, one of the wider applications for the work.

Managing director Graham Watt is a former executive at Roche Diagnostics, part of the Basel, Switzerland-based Roche Group, the world's biggest maker of cancer drugs. Mr Watt says a partner such as his old firm or Siemens AG of Germany have the scale to transform the RNA biomarker work to a test that could eventually replace the PSA test and be the basis for wider applications.

"We see ourselves as generating the IP (intellectual property), developing the test to the point it's credible for an international partner such as Roche," he said. "They'd have the means to add more clinical studies to get greater depth of data, they'd also be able to deal with the thorny question of regulations in the US and Europe, and then they have the marketing power to launch the tests."

The revenue stream generated from licensing fees, which may include an upfront payment or even equity investment, would fund product development for the New Zealand molecular biology company. Some industry yardsticks imply licensing fees could amount to 5% of the sale price of the test, he said.

The company says there is huge potential for considerably more precision in molecular diagnosis as health science enters the world of personalised medicine, where therapies are much more designed to meet individual needs.

(BusinessDesk receives funding from Callaghan Innovation to cover the commercialisation of innovation.)


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