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A drug developer founded by Canadian researchers has raised US$80-million from leading U.S. life sciences investors to fund its second attempt to develop innovative cancer-fighting drugs.

Turnstone Biologics Inc. said the investment was co-led by PFM Health Sciences and Point72, key “crossover investors” that typically invest in private life sciences companies heading toward public offerings. Other backers include Eventide Asset Management, Citadel company Surveyor Capital, Ridgeback Capital Investments, Takeda Ventures, Versant Ventures, OrbiMed, F-Prime Capital, Canada’s Northleaf Capital Partners and Teralys Capital. Versant and OrbiMed have been two of the most active foreign investors in Canada’s ascendant biotechnology sector.

Versant managing director Jerel Davis said Turnstone, which has raised US$170-million in venture capital to date and secured even more from partnership agreements with pharmaceutical giants, “is in a really good position” to either go public or partner with a Big Pharma heavyweight within the next 12 months.

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Turnstone was founded in Ottawa six years ago to develop what are known as “cancer vaccines” based on research led by Dr. John Bell of the Ottawa Hospital; McMaster University’s Dr. Brian Lichty; and Dr. David Stojdl from the Children’s Hospital of Eastern Ontario. The company, which is managed out of San Diego but has its core research team and the majority of its 95 employees in Ottawa, had significant momentum from the outset, hiring U.S. industry veteran Sammy Farah as chief executive officer and raising US$41-million in venture capital in 2016. A year later, it struck a research, option and licence agreement with pharma giant AbbVie Inc. to fuel development.

Turnstone generated promising early data from its lead drug candidate. But in 2019 it decided to shelve the project after rival cancer-vaccine developers generated disappointing efficacy data from clinical trials. “We had a very high bar for what we wanted to see from our own technology, to see if we could break through with a cancer vaccine approach,” Mr. Farah said in an interview. “The field has struggled to get through that.”

The startup shifted focus to two other promising and validated areas of cancer medicine: Its lead product is an engineered “vaccinia” virus that delivers a multitude of proteins to a tumour that can both attack the cancerous growth and summon the patient’s immune system to do the same. In late 2019, the company entered into a strategic collaboration with drug giant Takeda Pharmaceutical Co. Ltd. to co-develop and commercialize the drug, starting with an upfront US$120-million cash payment. Turnstone can receive another US$900-million in payments from Takeda if the drug hits a series of milestones, plus royalties on sales if the product gets to market.

The second product is a treatment Turnstone picked up with the purchase of a California startup. It involves harvesting cancer-fighting T-cells from an existing tumour, identifying the ones that are effective at killing tumours, creating more of them and reinjecting the treatment to enhance the body’s cancer-fighting arsenal. The approach has worked on leukemia, multiple myeloma and lymphoma. A handful of U.S.-based publicly traded biotechs including Iovance Biotherapeutics Inc. have achieved multibillion-dollar valuations based on promising early results from their treatments for solid tumours. “That’s the trend we’re hitching our wagon to,” Mr. Davis said.

Turnstone has begun initial safety tests on humans for its first drug and expects to start the same for the second by 2022. The company hopes to then move to efficacy studies later next year for both treatments to determine if the drugs do what they’re supposed to in patients.

“I’m a bit hesitant to say when we have product ready for approval [but] the next three years will be an exciting period where we think about these programs entering pivotal studies hopefully leading to their eventual approval,” Mr. Farah said.

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