by Rick Peterson
March 23, 2009

At the top of this letter you’ll see the title “Financing Canada’s Future” – which describes what we’re doing here at Peterson Capital.

We’re providing the capital markets exposure and support that our clients need to grow, thrive and bring new products and services to market that will create jobs, create wealth and help shape Canada’s future. We really believe that.

If there was ever one company that we work for that confirms we’re on the right track in fulfilling this mission, it’s Vancouver-based life sciences company Med BioGene Inc. ( MBI-TSXV).

There are some very big things happening with this little company that is five-years old, has 10 employees and has been a Peterson Capital client since the fall of 2007. CEO Erinn Broshko and his team are clearly at the cutting edge of advances in the life sciences field, and are today only a few months away from launching a product that could have profound effects on the way we diagnose and treat lung cancer patients in North America and possibly around the world.

Four Reasons to Watch Med BioGene
Med BioGene is developing tests that analyze an individual’s genetic activity to diagnose disease or to tailor treatment to that particular individual. This is what many call “personalized medicine”. The company is focused on bringing to the US market in the second half of this year a major lung cancer test called LungExpress Dx™ . It also has similar tests for lymphoma and cardiovascular disease in the pipeline.

Here are four reasons why this is a company to watch:

1. LungExpress Dx™ analyzes the molecular profile of a patient’s tumour to provide information to assist in tailoring treatment for that specific patient.  By better selecting patients for chemotherapy, LungExpress Dx™ has the potential to increase the five-year survival rate by up to 33% while decreasing health care costs significantly.  The main reason for the expected cost savings is a decrease in treatment failure and terminal care costs associated with cancer recurrence; these costs in the US can range from between $150,000 to $500,000 per patient.
2. On March 18 Med BioGene announced that it had concluded its final licensing and collaboration agreements with the University Health Network in Toronto for LungExpress Dx™. This clears the way for the commercial launch of LungExpress Dx™ into the US market in the second half of this year. Med BioGene will be completing a final series of tests and rounding out its US sales and marketing strategy and team over the next few months.
3. The field of molecular diagnostics – also known as “genomics” – is of significant interest to health care professionals and investors around the world. The use of gene technology has been proven to be highly effective in helping “personalize” medicine, which means doctors can better determine the treatment and care of each individual according to their particular genetic make-up, rather than simply applying standard health care solutions according to the category of disease that a patient has. Survival rates go up, and health care costs go down.  In short, molecular diagnostics test like LungExpress Dx™ have the potential to save lives save money.
4. Med BioGene appears today to be on a similar path to that of a much larger and very successful molecular diagnostic success company, Genomic Health Inc. ( GHDX-NASDAQ $22.10 ). Genomic Health launched six years ago a very successful test similar to LungExpress Dx™, but instead of lung cancer, they focus on breast cancer. The company has a market cap of nearly US$600 million, with revenue in 2008  of US $110 million. The graph below shows how Genomic Health’s sales started off slowly and then quickly accelerated, with a corresponding move in the market cap.

Med BioGene is unique because LungExpress Dx™ predicts which patients will benefit from chemotherapy, and which patients will not benefit and, possibly, may be harmed by such treatment. Lung cancer is the leading cause of death in the western world, and accounts for more deaths than breast cancer, prostate cancer and colon cancer combined. For many years doctors have been searching for a way to better identify lung cancer patients who will benefit from chemotherapy. LungExpress Dx™ is expected to address this significant unmet need by improving the selection of patients who will benefit from chemotherapy, and thereby saving lives and money.  If things continue to evolve for Med BioGene as they appear to be, there’s every reason to believe that they can enjoy success at a similar scale as Genomic Health.

Product Launch Key to Market Recognition for MBI
The key to gaining market recognition for Med BioGene will be the successful launch of LungExpress Dx™ later this year. The company is working diligently on this process now and, as I pointed out in my last Peterson Capital letter, CEO Erinn Broshko has consistently met the timelines and milestones that he originally set out for the company since it was launched under his direction three years ago.

Earlier last week, Erinn announced the appointment of Dave Matthews as CFO of Med BioGene. Dave has a stellar 20-year track record in the life sciences sector and joins the team to orchestrate the launch of LungExpress Dx™ later this year. Prior to joining Med BioGene, Dave was managing director of Aspreva Pharmaceuticals S.A., the European subsidy of Aspreva Pharmaceuticals Corp., which was acquired in 2007 by Galenica Group for US $915 million. Prior to joining Aspreva, Dave was CFO for StressGen Biotechnologies Corp. (now Nventa Biopharmaceuticals Corp.) and Allelix Biopharmaceuticals Inc., which was acquired in 1998 by NPS Pharmaceuticals for $60 million.

So, the next several months leading up to the LungExpress Dx™  product launch will be interesting ones for Med BioGene. Don’t let the poor valuations and apparent lack of interest in the equity markets mask the reality of the tremendously interesting and important things happening at companies like Med BioGene, and others like it in the life sciences space.