Business Editor

A SMALL SA biotechnology company that conducts its research in laboratories situated deep in the Knysna forest near Plettenberg Bay is set to have a disproportionately large effect on the international pharmaceuticals sector after signing its first licensing agreement with a US group.

Shimoda Biotech, which specialises in innovative drug delivery systems, has a proprietary cyclodex- trin technology that improves the efficacy of existing drugs by making them easier to absorb. It is also developing targeted delivery systems that take drugs to specific cells and ensure they are taken up without degenerating or causing unwanted side-effects.

CEO Lawrence Penkler, previously in charge of innovative research at SA Druggists, says cyclo- dextrin technologies focus on placing drug molecules in carrier compounds. In the case of the product, licensed to US pharmaceutical firm Innovative Drug Delivery Systems, common anti-inflammatory drug Voltaren has been incorporated in a water-soluble compound derived from glucose.

In its new form the product, called Diclofenac, extends Voltaren's present range of medical applications, as it can be given intraven- ously to ease post-operative pain.

Bioventures, an R80m biotechnology venture capital fund managed by Gensec Bank and Real Africa Holdings, has announced it had bought an unspecified R12m minority stake in Shimoda. Fund manager Heather Sherwin says the investment was motivated partly by Shimoda's products and scientific and management skills, but also as it has already started to yield cash.

"Shimoda has a substantial product pipeline, and some of its products have near-term cash generating abilities," she says. "This is unusual in a young biotech company as the drug development cycle tends to be so long."

Penkler says Diclofenac will undergo the final phase of the laborious clinical testing process in the US, and could be on the market by 2005. The company has already received the first of three "milestone payments" and will be the beneficiary of royalty streams for the life of the international patents.

Two other compounds developed by Shimoda using cyclodextrin technologies speed up the rate at which the body absorbs drugs by up to eight times. One of these compounds carries a commonly used anaesthetic and is currently undergoing first phase clinical trials, while the other carries an analgesic and has progressed to second trial stage.

Penkler says the firm's strategy is to use the cyclodextrin products to generate short-term revenue that will fund the development of targeted drug delivery systems.

Penkler describes the targeted delivery products as Shimoda's "blue sky" projects, a reference to the attention the commercial potential of such technologies is attracting in the international pharmaceuticals industry at present.

More than 100000 US deaths were attributed to adverse reactions to prescription drugs in 1998 the fourth-largest official cause of death making targeted drug delivery a hot research subject.

Also, response rates to some cancer therapies are low as 20% to 30% as the drugs are so toxic they cannot be given in the quantities required to be more effective for fear of killing the patient. A carrier that targets specific cells and delivers the drug directly to them will allow lower doses to be used more effectively, with fewer side effects.

Biotechnology is defined by Deloitte & Touche as "the application of science and engineering in the direct use of a living organism, or part or products of living organisms, in their natural or modified forms for commercial purposes".

Sherwin says Bioventures does not intend focusing on any specific area in the life sciences, but will seek early stage start-up biotechnology firms that have clearly defined target markets and proprietary technologies or patented organisms that are "scalable" for the export market.

The fund will take an equity stake of between 10% and 75% in firms that fulfil these requirements, depending on circumstances, but insists on board representation no matter the size of the shareholding.

Bioventures is managed as a joint venture between Gensec Bank and Real Africa Holdings, but also has as minority investors Genbel Securities, the Industrial Development Council and the International Finance Council.