Among the Canadian biotechnology stocks that have rewarded shareholders this year is Vasogen Inc., a Toronto-based firm specializing in treatments for coronary disease. After spending most of 1999 stuck at the $2 level, shares of Vasogen (VAS/TSE) began climbing last fall, as one of its products approached testing on humans.

This year, the stock has continued to rise, swept up by investors’ renewed interest in biotech stocks and positive news on two other products. The shares have gained as much as 209% so far this year, after ending 1999 at $6.10. Its peak of $18.85 was reached on March 3, 2000. Since then, the stock has declined, following the downward path of most biotech stocks this month. The stock closed up 25¢ yesterday at $12.50.

Vasogen is not a member of the Toronto Stock Exchange’s biotechnology & pharmaceuticals sub-index, whose highest percentage increase so far this year was 33.5% greater than its end-of-1999 level. It reached that peak on Feb. 17. Rob Millham, an analyst at Research Capital Corp. in Vancouver, rates Vasogen a "speculative buy" with a 12-month price target of $15.

"I think they have tremendous potential," he says. "All the market segments they are going after are in the billions of dollars. If they get one success at the human level, I think the stock will prove to be cheap at current levels. "But, as with any biotech stock, you’ve got to temper some of that enthusiasm with reality." The reality, Mr. Millham says, is that Vasogen’s products have undergone limited testing on humans thus far. The company is working on several treatments designed to control damaging reactions of the body’s immune system. "They’ve had some very exciting results in the lab," says Mr. Millham.

Vasogen’s lead product is VasoCare; a procedure aimed at alleviating hardening of the arteries in heart patients. Atherosclerosis, the development of cholesterol-containing plaque on blood vessel walls, is a leading cause of heart disease and stroke. In tests so far, VasoCare has been shown to greatly reduce the development of Atherosclerosis in mice.

On March 15, the company announced the results of recent tests to a meeting of the American College of Cardiology in Anaheim, Calif. The tests, performed under the supervision of top cardiology specialists at the University of Toronto and St. Michael’s Hospital in Toronto, showed the treatment "retards the development of atherosclerotic plaque by up to 75%."

It also has been shown to help patients with peripheral vascular disease—circulatory problems in the legs that can require amputation—to walk further and enjoy an improved quality of life, the company says. VasoCare involves the treatment of a small amount of a patient’s blood in a proprietary device developed by the company. The sample is treated for about 10 minutes, and then injected back into the patient.

The therapy involves three 20-minute sessions over two weeks. David Elsley, Vasogen’s chief executive, says about $5-billion (US) is spent each year in the United States on cholesterol-lowering therapies. VasoCare is also being tested on peripheral vascular disease patients. That study is expected to be completed by the end of this year and, if successful, would make it possible for the procedure to be used in Europe.

The approval process for medical devices is much shorter than for drugs, which makes it possible to bring a device to market in two to three years, versus up to 12 years in the case of drugs. Approval for VasoCare in the U.S. market would likely come 12 to 18 months after Europe’s go-ahead, Mr. Elsley says.

After that, Vasogen hopes to have a deal with a partner in place, and further develop VasoCare for use against Atherosclerosis-related heart disease. Further results from Atherosclerosis studies on VasoCare at the University of Toronto, meanwhile, are expected over the next six months. The work involves animal subjects, not human patients.

"We are in discussions with a number of multinational health care concerns," Mr. Elsley says. "We would expect our first strategic alliance to be completed within the next 12 months." Under the partnership scenario, Vasogen would collect an initial licensing fee and ongoing royalties from a larger company, which would have the right to market and distribute VasoCare.

Other Vasogen treatments, all using the same technology and also seeking to control reactions of the body’s immune system, are aimed at congestive heart failure, leukemia, psoriasis and the protection of organs during major vascular surgery. Testing on human patients is underway or upcoming on each.

On March 9, the U.S. Food & Drug Administration approved clinical trials on human patients for the congestive heart failure treatment called VA991. "They are at a very pivotal stage for a biotech company— making the transition from the lab to humans," says Mr. Millham.

Part of the company’s success in the stock market this year, he says, is the general enthusiasm displayed by investors for biotechnology stocks.