INTERVIEW-BioMS on hunt for new drug technologies

* BioMS has C$50 million to spend

* Key data expected early next year

* Shares up 5.5 percent at C$2.90

(Figures in U.S. dollars unless noted)

By Scott Anderson

TORONTO (Reuters) - BioMS Medical Corp (MS.TO) is on the hunt for new technologies after the tiny drug company struck one of the largest biotech deals in Canadian history last year.

Flush with cash and itching to get back into the drug development arena, BioMS, known for its multiple sclerosis treatment dirucotide, is seeking a return to that specialty once again, its president and chief executive, told Reuters.

And, unlike a lot of its peers in the Canadian biotechnology space, the Edmonton, Alberta-based company has no cash flow problems.

"It's very nice that we do have some cash in the bank, so that we can take our time and look for some additional technologies in the course of the next year," CEO Kevin Giese said.

"From a cash perspective, I think it's quite nice for us that we don't have to go back to the market for any cash and that we should have some surplus. I think we are quite rare."

Giese said BioMS would probably be looking for clinical development opportunities for auto-immune and central nervous system treatments, which are seen as growth areas.

"Right now, we are looking at some second technologies that we would be interested in possibly picking up in 2009. It's good for us as it is a buyer's market out there."

Giese estimates the company has about C$50 million ($40.5 million) to spend next year, after commitments to partner Eli Lilly (LLY.N) and his own company's overhead are considered.

Biovail Corp (BVF.TO), Canada's biggest publicly traded drug company, shifted its focus to the field of central nervous system treatments earlier this year when it bought privately held drugmaker Prestwick Pharmaceuticals for $100 million.

U.S.-based Prestwick holds the Canadian and U.S. rights to Xenazine, a drug used to treat chorea, an ailment associated with Huntington's disease.

Karen Boodram, an analyst at Pacific International Securities, in Vancouver, British Columbia, said BioMS is in a good position to make acquisitions, given its strong cash position.

"In today's market, with C$50 million, he (Giese) could probably pick up something quite attractive," she said.

"Just within the Canadian borders, there are a lot of companies that fortunately have good technologies, but unfortunately aren't cashed up."

KEY DATA EXPECTED

BioMS struck it rich late last year when it signed a global licensing and development agreement with Eli Lilly for its multiple sclerosis compound. The deal gave the U.S. drug giant exclusive worldwide rights to the experimental MS drug MBP8298, also known as dirucotide, being developed by BioMS.

Under the agreement, BioMS received an upfront payment of $87 million, potential development and sales-milestone payments of up to $410 million and escalating royalties on sales if the drug is approved.

The companies will collaborate on the development of the drug, also called dirucotide, and will share in certain development costs. Lilly will be responsible for future research and development, manufacturing and marketing.

BioMS shares, which soared more than 50 percent to C$4.39 the day after the Lilly deal, currently sit at C$2.90 on the Toronto Stock Exchange.

Giese expects data to be presented on dirucotide early next year with key Phase 3 trial results and a new drug application in the United States readied for 2010. The treatment received fast track approval from the U.S. Food and Drug Administration earlier this year.

But Douglas Loe, an analyst at Versant Partners, who holds a position in BioMS, is not convinced that buying additional technologies ahead of the key dirucotide data dates is the most prudent use of cash.

"The magnitude of the opportunity that dirucotide presents to the company would be so much greater than any technology that they could acquire in the near term, however attractively priced that it might be," Loe said.

"All available capital should be deployed to facilitating company stability rather than incurring additional clinical and financial risk by acquiring assets that are almost certainly likely to be inferior to dirucotide and the commercial opportunities it presents to the company."

($1=$1.23 Canadian)

(Reporting by Scott Anderson)