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Archive for December 6th, 2011

SALE OF CORTICAL PTY LTD

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Cortical Pty. Ltd. (www.cortical.com.au) to solicit interest for the acquisition of all, or substantially all of, Cortical’s assets.

Headquartered in Melbourne, Australia, Cortical is a discovery-phase, biotechnology company that is focused on the development of inhibitors of MIF (macrophage migration inhibitory factor) for the treatment of inflammation and other diseases.

Cortical has recently overcome a major roadblock in MIF research, resulting in a cellular assay platform that has enabled fast compound ranking, SAR and screening.  Cortical has developed a library of proprietary MIF inhibitors, including a primary scaffold currently in lead optimization.

To date, Cortical has raised more than $5 million in three rounds of venture capital financing, lead by GBS Ventures (Melbourne, Australia).  In addition, Cortical has benefited from more than $1 million in government assisted grants.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to Cortical’s Assets (as defined herein) has been supplied by Cortical.  It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, andcompleteness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Cortical’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Cortical Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either expressed orimplied, of any kind, nature, or type whatsoever from, or on behalf of Cortical and Gerbsman Partners. Without limiting the generality of the foregoing, Cortical and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Cortical Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. Thismemorandum and the information contained herein are subject to the Confidential Disclosure Agreement attached hereto as Appendix B.

Company Profile

Cortical is a discovery-phase, Australian biotechnology company developing small-molecule inhibitors of MIF for the treatment of inflammation and other diseases.

Macrophage Migration Inhibitory Factor (MIF) is a differentiated disease target:
·     MIF is a unique pro-inflammatory protein.
·     The MIF knock-out mouse has a normal phenotype, except in disease models.
·     MIF plays a pivotal role in immune-inflammatory diseases, atherosclerosis, metabolic disease and cancer.

Cortical has recently overcome a major roadblock in MIF research, resulting in a cellular assay platform that has enabled fast compound ranking, SAR and screening.  Cortical has developed a library of proprietary MIF inhibitors, including a primary scaffold currently in lead optimization.

To date, Cortical has raised more than $5 million in three rounds of venture capital financing, lead by GBS Ventures (Melbourne, Australia).  In addition, Cortical has benefited from more than $1 million in government assisted grants.

Cortical’s program is lead by Prof Eric Morand who is both a highly respected thought leader in this field and a practicing Rheumatologist.  Dr Morand has published widely; including seminal MIF research and technical reviews: Morand et al., MIF: a new cytokine link between rheumatoid arthritis and atherosclerosis. Nature Reviews Drug Discovery 5, 399–411 (1 May 2006); see Appendix C. The technology originated at Monash University and Cortical was established to exploit its unique know-how around the inflammation target MIF.  Cortical is seeking partners with resources to fully support the MIF program, thereby maintaining its leadership position in the development of MIF-based therapies.

Cortical believes its assets are attractive for a number of reasons:

Cortical has recently overcome a major roadblock in MIF drug development, resulting in a robust cellular assay platform that has enabledCortical to advance their primary MIF inhibitor scaffold to lead optimisation.   Until recently, Cortical and other competitors in the field ranked compounds using various physical assays which were not considered a reliable predictor of in vivo activity.  Utilizing unique target know-how, Cortical has now successfully developed a robust cellular assay to enable drug development against this well validated biological target.

Cortical’s program provides the platform for MIF inhibitor development:

1.    Composition of Matter and Use claims over independent scaffolds
2.    Library of  >1000 compounds, SAR driven program
3.    Lead candidates in optimization phase
4.    Proprietary  assay methodology (TRADE SECRET) – unique in MIF space
5.    X-ray crystallography (TRADESECRET – Cortical compound-MIF co-crystals)
6.    Preclinical oral proof of concept established in several disease models
7.    Mechanistically driven clinical strategy

Impact of Technology on the Market:

Cortical’s program has targeted first-in-class oral cytokine inhibitor drugs with potential applications in inflammatory disease and cancer indications.
The inflammatory disease market is over $60 BN annually with strong recent growth expected to continue[1 – footnote) . Future growth in this sector may be driven by a new wave of targeted therapies based on orally available small molecules.
MIF is a unique cytokine-like molecule which has been validated as a therapeutic target in a wide range of inflammatory diseases (such as RA, asthma/COPD, lupus, MS, SLE colitis, atherosclerosis), metabolic diseases and cancers.

•  The inflammation market has an unmet need for oral targeted small-molecule approaches
•  Small-molecule MIF inhibition offer huge advantages to a developer:

A.  a biologically distinct target, in an uncrowded space
B.  opportunity in a wide breadth of inflammatory indications § blockbuster (e.g. RA) and niche indications (e.g. SLE)
C  oral administration – a competitive advantage compared with biologicals
D.  mechanism-based application to enable steroid sparing therapy
E.  additional roles of MIF in atherosclerosis, metabolic disease and cancer

•  Potential first-in-class line of therapeutics
§  There are no small-molecule targeted therapies currently approved in inflammation.
§  There are no known clinical-stage MIF antagonist programs worldwide.

Cortical’s Pipeline

Cortical is developing first-in-class small molecule cytokine antagonist compounds which directly target MIF.  Cortical’s novel small molecule MIF inhibitors have been discovered through a structure-based drug design approach, proprietary compound-target crystallography data, and proprietary screening assays.
Cortical molecules have good drug development characteristics such as novelty, ease of synthesis, stability, oral bioavailability, lack of off-target interactions and clean non-GLP toxicity profiles.
Cortical compounds have demonstrated preclinical proof of concept with once daily oral activity in in vivo models of rheumatoid arthritis, atheroma, endotoxic shock, delayed type hypersensitivity, and acute liver inflammation.

Cortical’s Intellectual Property and Trade Secret Summary

Cortical Pty Ltd has 4 active patent applications in various stages of approval, allfiled as Composition of Matter applications.  Three applications have been filed around a benzamidazole pharmacophore (Therapeutic molecules and methods 1, MIF inhibitors, and Therapeutic Small Molecules and Uses Thereof).  A fourth patent application has been filed around a bicyclic pharmacophore (Novel methods for treatment of inflammatory diseases).  This is presented in more detail in Appendix B.

In addition to patents, Cortical has developed and holds a number of trade secret data packs:

(1)  The cellular assay:
Following feedback from large pharmaceutical company partners, Cortical focused on reducing to practice a cellular assay amenable to high throughput screening, and has been successful. Other players in the field have not succeeded in solving this technical problem; literature biological assays do not reliably predict activity against the MIF target.  Physical assays such as tautomerase and biacore show binding of compounds to MIF but these have been shown to not be directly predictive of MIF in vivo activity inhibition.
Cortical has strategically elected not topatent or disclose this assay system to any parties so that this unique ability to successfully rank compounds based on in vitro cellular data remains a competitive advantage.

(2)  The crystal structures:
Cortical holds a number of high resolution proprietary compound-protein X-ray co-crystallography data-sets which demonstrate how Cortical compounds bind to MIF.  At 1.6 Å, these crystal structure data-sets further strengthen the SAR rationale.

Management

Nicole Fowler –CEO:

Nicole Fowler was appointed CEO of Cortical in October 2008.
Nicole has a BSc (Hons) from Monash University, an MBA from Melbourne Business School, with over 15 years experience in biotech. Previous roles include big pharma early discovery (SmithKline Beecham, USA), clinical trial management (Parexel, USA and ICTI, Europe) and the manufacture of generic sterile injectables and biologicals (Southern Dental Industries, Australia and Southern Cross Biotech, Australia). During the last 8 years Nicole has focused on working within young biotech companies managing the translation of academicwork into preclinical and clinical development, capital raising, and in-licensing/out-licensing of intellectual property.

Professor Eric Morand, MD, PhD – Scientific Co-Founder and Chief Scientific Officer

Eric is a Professor of Medicine at the Monash University Centre for Inflammatory Diseases at Monash MedicalCentre, Melbourne. Eric’s laboratory first identified the role of MIF in rheumatoid arthritis and SLE. He is an acknowledged expert in research on MIF research and glucocorticoid-regulated proteins, and is an author of over 100 papers in peer-reviewed journals in the area of inflammatory diseases. His academic research group has won grants from the NIH, National Health and Medical Research Council Australia, Royal Australasian College of Physicians, and Arthritis Foundation of Australia. He is also the Deputy Director, Rheumatology Unit, Monash Medical Centre, Melbourne, Australia and heads the Monash Lupus Clinic.

Board of Directors

·     Nigel Stokes, Chairman: Sydney, Australia
·     Brigitte Smith: Managing Partner, GBS Ventures – Melbourne, Australia
·     Prof Eric Morand: Founder – Melbourne Australia

The assets of Cortical will be sold in whole or in part (collectively, the ” Cortical Assets”). The sale of these assets is being conducted with the cooperation of Cortical. Cortical will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Cortical should not be contacted directly without the prior consent of Gerbsman Partners.

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity toinspect and examine the Cortical Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon anywritten or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Cortical Assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Wednesday, January 18, 2012 at 5:00pm Pacific Daylight Time (the “Bid Deadline”)  to Gerbsman Partners office at 211 Laruel Grove Avenue, Kentfield, CA 94904. Please also email steve@gerbsmanpartners.com <mailto:steve@gerbsmanpartners.com> with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of$200,000 (payable to Cortical Pty. Ltd.).  The deposit should be wired to Gerbsman Partners Trust Account.  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by Gerbsman Partners.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

Cortical reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder andbidders may not have the opportunity to improve their bids after submission.

Cortical will require the successful bidder to close within a 7 day period. Any or all of the assets of Cortical will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Cortical Assets shall be the sole responsibility of the successful bidder and shall be paid to Cortical at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
Steve@gerbsmanpartners.com
Gerbsman Partners
(415) 456-0628

Kenneth Hardesty
Ken@gerbsmanpartners.com
Gerbsman Partners
(408) 591-7528

Philip Taub
Phil@gerbsmanpartners.com
Gerbsman Partners
(917) 650-5958

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