Author: Luke Timmerman

Luke Timmerman wrote:

Novalar has convinced one of the world’s biggest drugmakers, Paris-based Sanofi-Aventis, that it might be onto something.

The San Diego-based biotech is announcing today that it has struck a partnership in which Sanofi’s unit in Germany will have exclusive marketing rights to the vasodilator drug phentolamine mesylate (OraVerse) in that country, plus an option to extend the license to other European countries. Novalar already markets the drug to dentists in the U.S., and the two companies plan to seek approval in Europe later this year. Novalar will get an undisclosed upfront payment, plus milestones, and double-digit percentage royalties on sales in Europe.

Novalar’s drug, which I first wrote about in November 2008, is designed to reverse the numbing effect of local anesthesia that dentists give. It’s supposed to help increase blood flow to tissues like the lips, gums, and cheeks, so that the numbing agents wear off in about half the time. The drug has gotten off to a slower start in the U.S. marketplace than Novalar had initially hoped, and it more recently got slapped on the wrist by the FDA for publishing a marketing brochure that regulators thought overstated the drug’s benefits and minimized risks. (Novalar says it has quit using the brochure in question).

By branching into Europe and working with Sanofi, Novalar says it has hitched its wagon to a company that has about 80 percent share in Germany’s local anesthesia market. The dental anesthesia market is worth 30 million Euros annually in Germany. The whole of Europe represents a big opportunity, since an estimated 270 million anesthesia cartridges are sold there per year—about the same as in the U.S.

Novalar is currently marketing its drug in its original six regions of the U.S.—New York, California, Texas, Florida, Illinois, and the Baltimore/Washington, DC area, says CEO Donna Janson. She didn’t disclose the company’s U.S. sales in 2009, or say whether Novalar plans to introduce its product across the entire country in 2010. But Janson says she’s “quite pleased” with how the product is doing, and its potential growth in Europe.

“Sanofi-Aventis is the perfect partner to lead OraVerse,” Janson says. “A lot of people know they are the No. 4 pharmaceutical company in the world overall, but a lot of people don’t know they are the largest dental pharmaceutical company in Germany.”

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Luke Timmerman wrote:

Dendreon stock is in for some wild times today. The Seattle-based biotech company woke up this morning to a new rumor that suggests it will have to appear before an FDA advisory panel one more time before it can get clearance to sell its prostate cancer drug in the U.S.

Shares of the company (NASDAQ: DNDN) fell 4 percent at the opening, but bounced back to climb 4 percent to $34.04 at 10:25 am Eastern time. Trading volume was big even by Dendreon standards, with 11 million shares changing hands in the first hour, up from its 2.6 million share average from the past three months.

The report that lit the spark was from Elliott Favus of Favus International Research, who said he has contacted doctors who have been invited by the FDA to participate in an advisory panel meeting to discuss sipuleucel-T (Provenge). The Favus comment was quoted today by Adam Feuerstein in TheStreet.com.

The notion that Dendreon would have to appear before an FDA panel again has been around for a while, and Dendreon has said repeatedly that a panel hasn’t come up in its ongoing dialogue with the agency about the product. Dendreon spokeswoman Katherine Stueland said it again this morning: “We’ve had no indication from FDA we should prepare for a panel.” The FDA website also doesn’t list any panel that would include Dendreon, nor does its telephone hotline, said analyst David Miller of Biotech Stock Research in Seattle, a longtime Dendreon bull.

“We do not believe this rumor to be true,” Miller wrote in a note to clients this morning.

Analyst Cory Kasimov of JP Morgan, another bull, issued a skeptical note today, and said even if the rumor is true, he would view any price drop in Dendreon as a buying opportunity.

Any whiff of an FDA panel is sure to give Dendreon shareholders with any memory a case of the willies. The company appeared before the FDA’s Cellular, Tissue and Gene Therapies panel in March 2007, and secured a 17-0 vote in favor of the drug’s safety, and a 13-4 positive vote that said it demonstrated “substantial” evidence of effectiveness. That caused Dendreon stock to rocket from $4 before the event to more than $20 a share after the positive votes. That didn’t last long, as the company crashed to Earth in May 2007, when the FDA delayed the product, saying it wanted to see more evidence from an ongoing study of 500 men, known as Impact. Those results are in now, and they confirmed Dendreon’s earlier trial that showed a survival benefit for men on Provenge, and all indications since have been that the FDA wouldn’t need to convene a second advisory panel.

The agency’s deadline to complete its review of the drug is May 1.

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Luke Timmerman wrote:

The world of DNA sequencing is buzzing about a startup based in Guilford, CT, and San Francisco called Ion Torrent Systems. This stealthy operation, which is advised by Harvard genomics pioneer George Church and supported by a partner in Seattle, finally pulled off the veil last weekend on a tool that uses semiconductors to generate digital readouts of DNA, in an instrument that costs one-tenth as much as competitors’.

Ion Torrent CEO Jonathan Rothberg, who founded 454 Life Sciences before selling that company to Roche for $140 million in 2007, revealed the new unorthodox approach at the Advances in Genome Biology and Technology meeting in Marco Island, FL. Rothberg gave his 30-minute talk in front of more than 500 of the world’s leading scientists who work in sequencing centers.

The company’s idea is to create an instrument that combines the insights of DNA pioneer Jim Watson with that of semiconductor visionary Gordon Moore, Rothberg said. The technology impressed and surprised a number of genomic scientists who blogged about it, including Daniel MacArthur, Keith Robison, and Luke Jostins.

“There was a lot of buzz. [Rothberg] really impressed people. They may be onto something,” says Todd Smith, the founder and chief science officer of Seattle-based Geospiza, a company that makes software for biologists to analyze genomic data, and a partner of Ion Torrent. “Then again, there are always people who are going to say, ‘Great concept, now show me the data,’”

The new technology attacks the standard mode of sequencing from a completely new angle. The existing heavyweights—Roche, Life Technologies, and Illumina—tag the individual units of DNA with light, or fluorescent, signals. And they use sophisticated lasers and cameras to read the flow of those tags. The tags add some cost, and the cameras make for expensive capital equipment that can run around $500,000, plus the chemicals to keep them running.

Ion Torrent, which has been in stealth mode since 2007, avoids the tags, lasers, and optics. Instead, it has built a proprietary ion sensor which spots hydrogen ions that have an electrical charge associated with each individual base of DNA—represented by the letters A, C, G, and T. Those ions are read as they pass through a tiny pore at the bottom of a sample well. Ion Torrent didn’t respond yesterday to a request for a follow-up interview.

The Ion Torrent machine professes to be able to perform a “run” of sequencing for as little as $500, in one hour of work. But that doesn’t mean it can …Next Page »

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Luke Timmerman wrote:

Cell Therapeutics has been walking a “tight-wire act” for more than a year, and now we’ll see if the company keeps its balance or crashes to the ground on March 22. That’s the date FDA has now set for a re-scheduled a meeting of cancer drug experts who will recommend whether the Seattle-based company ought to win clearance for pixantrone, its lead drug candidate for non-Hodgkin’s lymphoma.

Cell Therapeutics (NASDAQ: CTIC) had been planning to make its case in front of the FDA’s Oncologic Drugs Advisory Committee on February 10, but that meeting was cancelled because of the big snowstorm in the Washington, DC area. The panel will make its recommendation, but the FDA has the final word on whether pixantrone should be cleared for sale. The FDA’s deadline to complete its review is April 23.

Shares of Cell Therapeutics fell 10 percent to 59 cents this morning, and Reuters surmised this was because the company’s auditor said there was “substantial doubt” that it could continue as a going concern because it only had $37.8 million in cash and investments heading into 2010, about enough to operate through the end of September. The notice that Cell Therapeutics is in financial jeopardy isn’t new to people who have followed the company for any period of time. At this time last year, the company had only a few weeks of cash left, but it found a way to cut costs, sell off one marketed drug, and raise enough capital to support the pixantrone new drug application.

Everything now is riding on whether the FDA panel says on March  22 the benefits of pixantrone outweigh the risks. The FDA staff already issued a critical analysis of the application, noting that pixantrone carries “substantial” side effects, and that its pivotal trial ended up enrolling fewer patients than it was originally designed to accommodate. Quite a few investors are betting this drug will fail, as 81 million shares were held in a short position as of February 12, according to data compiled by NASDAQ. The company has 615 million shares outstanding, according to NASDAQ.

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Luke Timmerman wrote:

San Diego-based Optimer Pharmaceuticals, the developer of an antibiotic for a dangerous hospital infection, said today it has raised $51.5 million through a secondary stock offering after deducting expenses. The company (NASDAQ: OPTR) sold about 4.9 million shares of common stock at $11 a share. Jefferies & Co. was the sole book-running manager in the offering. Last month, Optimer said its fidaxomicin drug candidate passed its second pivotal test against C.difficile bacterial infections, and that it plans to apply for FDA approval of the drug in the second half of 2010.

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Luke Timmerman wrote:

The suspense is excruciating for the people at Bellevue, WA-based Light Sciences Oncology. They have been waiting almost a year longer than expected for results from a couple of cancer studies that could make or break their company. They have no idea if they are waiting because their drug is a big success, helping cancer patients live longer, or whether it’s some kind of fluke.

That’s the sort of uncertainty that many biotech companies have to live with. Light Sciences Oncology expects it will have more clarity about its future sometime this summer, when it rips the blinds off a study of 208 patients with liver cancer, and another one of 450 people with colorectal cancer that has spread to the liver.

“The proof for us will be in the pudding this year,” says CEO Llew Keltner.

It’s been a long and sometimes lonely journey for this 38-person company, which aspires to treat cancer in a way unlike anything on the market. The company is developing a drug/device combination therapy against solid tumors that aren’t treated well with conventional drugs that circulate through the body. The Light Sciences therapy is designed to work by inserting a disposable catheter into a solid tumor, mounted with a light-emitting diode on the tip, and turning on the light. The patient is then injected with an inactive chemical drug called talaporfin sodium (Aptocine) that becomes activated to kill tumors within a limited wavelength around the light. It’s supposed to fight cancer without damaging the healthy tissue nearby. Surprising findings last year, presented at the American Society of Clinical Oncology, suggested the drug-light combo has a second mode of action, by awakening the immune system to fight cancer cells in other parts of the body.

Llew Keltner

This company has been around since 1995, and certainly encountered its share of skeptics along the way. It existed many of those years through the largesse of one particularly generous shareholder, Craig Watjen, who made his fortune as the treasurer in the early days at Microsoft. But this isn’t just one rich guy’s vanity project or basic science experiment—Light Sciences has raised more than $137 million in its history, secured access to another $35 million last November, and has been backed by some savvy folks. The former director of the National Cancer Institute, Vincent DeVita, chairs the company’s scientific advisory board. Essex Woodlands Health Ventures, Johnson & Johnson Development Corporation and Novo A/S are backing the company. Light Sciences Oncology flirted with the idea of an IPO before withdrawing its prospectus two years ago, citing poor market conditions.

All the important business questions—whether Light Sciences can rekindle its IPO hopes, whether it will secure a partnership with a Big Pharma company, whether its treatment can win FDA clearance—will depend on the results of the two clinical trials this summer.

The first trial started recruiting patients back in …Next Page »

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Luke Timmerman wrote:

Arena Pharmaceuticals (NASDAQ: ARNA), the San Diego-based developer of an obesity drug, said today that the FDA has set a deadline of October 22 for completing a review of Arena’s application to market lorcaserin in the U.S. The company’s application includes 18 clinical trials that enrolled more than 8,500 patients. If the FDA clears the drug for sale, it will be Arena’s first marketed product.

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Luke Timmerman wrote:

Avila Therapeutics can’t be accused of thinking too small. This Waltham, MA-based startup is on a quest to show it has the scientific chops to build a better drug than one of Boston’s anchor biotech companies—Vertex Pharmaceuticals.

So this is shaping up to be a big year for Avila (AH-vill-uh), as it plans to start clinical trials of a drug for hepatitis C, and another with potential for certain cancers and autoimmune diseases. The company raised $30 million last July, recruited an experienced biotech dealmaker as CEO, and has laid out some ambitious goals to put its money and people to work.

For those new to the Avila story, it’s built on chemistry. The company is developing conventional small-molecule oral pills with a special feature. The Avila drugs form covalent bonds with their targets on cells. These bonds are supposed to completely, and irreversibly, shut down the biological activity of the intended protein target they hit on cells. That’s different from conventional therapies that connect with their targets via ionic or van der Waal bonds, which puts them in a state of “dynamic equilibrium” in which they are bouncing on and off the target, says CEO Katrine Bosley.

Why does that matter? By completely shutting down the target, Avila thinks it has found a way to improve upon the trailblazing work of Vertex in hepatitis C, and it might be able to nail other targets pharma companies have long pursued, but couldn’t effectively block.

“It’s getting the attention of pharma companies. Pharma companies are always looking for new innovation from beyond what they do within their four walls, and covalent drugs haven’t been much explored in the industry,” Bosley says. “As we develop a data set that says we can develop very specific covalent drugs, it’s intrigued a lot of people. Scientists are scientists. If you can get a new result that can’t be achieved another way, they want to talk about that.”

Katrine Bosley

I pressed Bosley for a bit more explanation of how its lead drug is differentiated from Vertex’s telaprevir. That drug, a protease inhibitor, has helped Vertex create an $8 billion stock market valuation, largely because clinical trials have shown it can basically double the traditional cure rates for patients with hepatitis C, while shortening the usual year-long treatment regimen by half. Analysts predict Vertex could exceed $2 billion in U.S. sales alone after a couple years on the market, and the worldwide potential is vast with an estimated 170 million people infected.

Bosley didn’t want to sound dismissive of what Vertex has done. “Obviously everybody is excited about Vertex’s telaprevir, it’s a great drug, they’ve done a beautiful job advancing the molecule and developing the clinical paradigm in treating hepatitis C,” Bosley says.

But Bosley clearly sees room for improvement, and Avila thinks it has found a way. One of the challenges with viruses is that they mutate, essentially switching …Next Page »

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Luke Timmerman wrote:

Light Sciences Oncology, the Bellevue, WA-based developer of a technology that combines a drug with a light-emitting diode to kill tumors, said today it has completed enrollment in a pivotal clinical trial of patients with colorectal cancer that has spread to the liver. The trial enrolled 450 patients who were randomly assigned to get talaporfin sodium (Aptocine) plus chemotherapy, or the chemotherapy alone. The study is examining whether the new drug can keep the cancer from spreading further, and help people live longer. Results are expected later this year, the company said.

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Luke Timmerman wrote:

San Diego-based Trius Therapeutics hopes to sell 6 million shares to investors at a range of $12 to $14 apiece, according to an updated IPO prospectus filed with the Securities & Exchange Commission. The company, a developer of new antibiotics, is scheduled to attempt its IPO the week of March 15, according to a calendar from Renaissance Capital. If the deal is completed, Trius plans to trade under the ticker “TSRX.” The major stockholders who stand to gain are Sofinnova Ventures, InterWest Partners, Versant Ventures, Prism Venture Partners, and Kleiner Perkins Caufield & Byers.

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Luke Timmerman wrote:

SonoSite (NASDAQ: SONO), the Bothell, WA-based maker of portable ultrasound machines, said today it has agreed to pay $88.8 million to buy back 2.96 million shares at $30 apiece. That represents about 16.9 percent of the company’s outstanding shares, and leaves it with about 14.5 million shares outstanding. The deal was managed by JP Morgan Securities. SonoSite stock closed yesterday at $29.67, just a few cents below its 52-week high.

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Luke Timmerman wrote:

OncoGenex Pharmaceuticals,  the Bothell, WA-based developer of a prostate cancer drug, said today that its chief financial officer, Stephen Anderson, left the company yesterday. OncoGenex (NASDAQ: OGXI) is searching for a replacement, who is “suited for the next stage of company growth, with deep ties in the biopharma investment community and experience transitioning a pharmaceutical company from R&D stage to commercial development,” the company said in a statement. OncoGenex stock closed yesterday at $16.72, down 43 percent since December 21, when it announced a partnership with Teva Pharmaceutical to co-develop its lead drug candidate, OGX-011.

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Luke Timmerman wrote:

San Diego-based Amylin Pharmaceuticals (NASDAQ: AMLN), along with partners Eli Lilly and Waltham, MA-based Alkermes (NASDAQ: ALKS), said today that the FDA deadline for reviewing a once-weekly injectable diabetes drug has been pushed back one week, to March 12, because of the mid-Atlantic snowstorm earlier this month. If approved, analysts expect the drug, exenatide once-weekly, will become a blockbuster seller as the first diabetes treatment that can be taken with less frequent, once-weekly injections.

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Luke Timmerman wrote:

Two years have passed since GlaxoSmithKline anointed a startup called Regulus Therapeutics as a leader in the bleeding-edge world of microRNA drugs, and now the pharma giant has made clear it likes what it sees so far.

Regulus, a Carlsbad, CA-based spinoff from neighboring Isis Pharmaceuticals and Cambridge, MA-based Alnylam Pharmaceuticals, is announcing today it has clinched a second collaboration with Glaxo to develop a microRNA drug for hepatitis C. The new deal provides undisclosed upfront cash, milestone payments potentially worth $150 million, and escalating royalties worth a double-digit percentage of worldwide sales if the drug reaches the market. Glaxo’s upfront payment reimburses Regulus for its R&D work to date, and the big company will assume the expenses of clinical trials.

This is the second time Glaxo has pulled out its checkbook for Regulus, after it agreed to pay as much as $600 million in April 2008 to develop drugs against four microRNA targets for inflammatory diseases. It was a strong statement for the field of microRNA therapies, which are thought to have broad potential as a new class of treatment because they can affect not just one gene or protein in isolation, but full networks of genes—which might be useful in treating complex diseases like diabetes or cancer. Regulus hasn’t yet advanced any of these drugs that work this way into a clinical trial. But this new deal will allow it to move its lead candidate, a blocker of microRNA-122, into its first clinical trial as a hepatitis C therapy in the second half of 2011, according to CEO Kleanthis Xanthopoulos.

“GSK really made a bold and visionary move in the fledgling field of microRNA a couple of years ago, and by selecting us as the lead company,” Xanthopoulos says.

Kleanthis Xanthopoulos

Xanthopoulos picked Glaxo as the partner on this lead program partly because it shows the big company is happy with Regulus’ progress, the terms were good for a single drug program, and he personally knows Glaxo’s senior vice president of anti-infectives, Zhi Hong, has the right expertise to move ahead with the miR-122 blocker.

Regulus and Glaxo are moving ahead fast with this program partly because of the work done by a competitor, Denmark-based Santaris Pharma, Xanthopoulos says. Santaris published a big paper in Science in December that said its own miR-122 blocker produced a powerful effect against the hepatitis C virus in chimpanzees—an animal model that is thought to be highly predictive of what will happen next in humans. That study confirmed what Regulus was seeing in its own animal experiments, and helped accelerate its program by providing some more clarity on the appropriate dosing, Xanthopoulos says.

The unhappy result of the Santaris paper is that it potentially puts the companies on a collision course over who owns the relevant intellectual property. Regulus contends …Next Page »

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Luke Timmerman wrote:

Seattle biotech had more than the usual flow of good news this week.

—The top executives at Seattle-based Dendreon provided a detailed overview to analysts this week about their plans for the year ahead. Dendreon is planning to spend $460 million of its cash hoard on the commercial push for sipuleucel-T (Provenge), a first-of-its-kind immune booster for prostate cancer that most analysts expect will be approved for sale by May 1. The company (NASDAQ: DNDN) expects this investment to pay off by 2011, when it forecasts it will turn cash-flow positive for the first time.

—Sage Bionetworks, the nonprofit research collaborative based in Seattle, said it has received a $6.7 million grant to train a new generation of computing and math-savvy biologists. This is one important element of the vision of Sage founder Stephen Friend, who is attempting to spark what amounts to an open source-style movement for biology. If you’d like to hear Stephen describe this, take a listen to a good interview he did with Keith Seinfeld of KPLU.

—The team at Gilead Sciences‘ branch in Seattle can breathe a sigh of relief now that the FDA has finally approved their inhalable antibiotic for cystic fibrosis. Gilead (NASDAQ: GILD) paid $365 million to acquire Seattle’s Corus Pharma to get this drug in 2006, but it has been held up by FDA delays. Getting U.S. sales from this drug certainly doesn’t hurt the local team’s ability to justify its new $50 million offices in South Lake Union.

—My colleague from Boston, Ryan McBride, contributed an interesting follow-up on Microsoft’s latest foray into health IT, through its acquisition of Andover, MA-based Sentillion. Stay tuned for more to come from us on what the Microsoft Health Solutions group is doing.

—Michael Martino, the CEO of Seattle-based Arzeda, is leaving the company to take a new job that pays, and enables the company to conserve its cash. Arzeda, a spinout from the University of Washington lab of biochemist David Baker, uses computers to custom-design enzymes for industrial purposes.

—One of the more interesting startups I cover for our Boston site, Cambridge, MA-based Genocea Biosciences, said this week that it licensed some important intellectual property to make vaccines for genital herpes from the University of Washington and the Fred Hutchinson Cancer Research Center.

—Seattle-based NanoString Technologies is making some big strategic decisions about who will be its next leader, and what it will really aim to accomplish in the years to come with its technology for generating digital readouts on gene expression. NanoString has made some headway in selling this tool to academic researchers, but new executive chairman Bill Young wants to see more progress in selling it to pharmaceutical companies, and new applications that might make this a serious diagnostic tool.

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Luke Timmerman wrote:

San Diego-based Anadys Pharmaceuticals reports that its hepatitis C drug appears to get better at wiping out the virus over time, although the company will have some explaining to do about why patients on a placebo appear to be doing almost as well.

Anadys (NASDAQ: ANDS) is announcing today that its lead product candidate, ANA598, when given in combination with standard therapies, was able to eliminate any sign of the liver-damaging virus in 73 percent of patients after 12 weeks. That’s more encouraging than an earlier snapshot, which showed the Anadys compound eradicated the virus in 56 percent of patients after four weeks.

Sounds great, but that’s not the end of the story. The control group of patients, who just got standard therapy and a placebo pill, saw their 12-week response rate climb to 71 percent, putting it almost on par with those who got the Anadys drug. Data was available from 26 patients who got a low dose of the Anadys drug taken twice daily, and 14 other patients in the control group.

The improvement in the control group was unexpected, and was most likely “an anomaly,” says CEO Steve Worland. Only half of the patients from the control group were analyzed, so the numbers were inflated when just a couple of patients saw significant improvement between weeks 10 and 12, Worland says. Historical studies suggest that by the time the most important data rolls in from this trial, after a full 24 weeks of observation, only about 45 to 60 percent of patients in the control group will likely have achieved undetectable levels of virus in the blood. If that’s the case in this study, that will show the advantage of ANA598 as long as it keeps the virus in check, Worland says.

“We’re happy with the results,” Worland says. “This is a clear signal for us to go ahead further in development. If people ask whether there’s an effect from ‘598, it’s clear.”

Anadys CEO Steve Worland

What is encouraging in the data, Worland says, is that ANA598 showed greater viral-killing activity over time, the drug was well-tolerated, and researchers still haven’t seen any cases of the virus bouncing back, which some people have expected would happen with drugs in this class of non-nucleoside polymerase inhibitors. Based on the updated data, Anadys is resuming partnership talks with other companies that are seeking to change the standard of care for hepatitis C by combining cocktails of anti-viral drugs, as is done with HIV. Anadys is vying to provide a vital ingredient in the new treatment regimens for this chronic disease that affects an estimated 170 million people around the world.

As with any drug that might be taken by large numbers of people with a chronic disease, the safety profile is critically important. Anadys was previously dogged by worries about a link between its drug and rashes, so that’s one of the important questions to ask about the new 12-week data. About 41 percent of patients on the Anadys drug developed a rash, while 33 percent reported that effect in the control group. All of the rashes were mild, except one, which cleared up after the patients quit taking the Anadys drug, the company says. That one rash was classified as a Grade 3 side effect because the rash covered more than half of the patient’s body, but Worland noted that it didn’t cause blistering or ulcers.

Much more data is still to come throughout this year. Anadys enrolled another group of patients on a higher dose in this study, and expects to report how well that form of the treatment killed the virus in patients at the initial four-week observation point. Those results should be released before the end of March, and then the subsequent 12-week follow-up data from the group on the higher dose should be released before the end of June, Worland says.

Anadys plans to discuss the latest results in greater detail on a conference call with investors at 5 pm Eastern (2 pm Pacific) today. You can follow it via webcast at the Anadys company website.

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Luke Timmerman wrote:

Sometimes in biotech you have to root for your biggest competitors to succeed. That’s why yesterday was a very good day for the folks at San Diego-based Ocera Therapeutics.

The big news came out yesterday from suburban Washington D.C., where an FDA advisory panel recommended that regulators approve a new drug from Morrisville, NC-based Salix Pharmaceuticals (NASDAQ: SLXP). The drug, rifaximin (Xifaxan), is designed to treat hepatic encephalopathy, a condition in which people get brain damage because their damaged liver is unable to clear toxins from their bloodstream.

The panel’s 14-4 recommendation sent shares of Salix soaring 20 percent in after-hours trading to $28.90 a share. One of the more interested people in attendance at that meeting was Ocera CEO Laurent Fischer. He tells me that immediately after Salix won approval, he hopped on a plane to visit potential partners and investors in New York, some of whom will undoubtedly be more interested now in hearing about other ideas, like Ocera’s, that also seek to treat hepatic encephalopathy.

“We were cheering from the bench for rifiximin,” Fischer says.

Ocera, a private company founded in 2005, has raised $62 million from Domain Associates, Sofinnova Ventures, InterWest Partners, and Thomas McNerney & Partners. Ocera’s vision, as I described in a November feature, is to develop a drug that acts like a sponge in the gastrointestinal tract. The compound, an oral pill called AST-120, is made to bind efficiently with toxins like ammonia and other metabolic byproducts in the gut, while avoiding common digestive enzymes or vitamins, Fisher has said.

People with cirrhosis of the liver often lose their ability to break down those compounds, which can flow to the brain—causing cognitive impairment, a loss of balance that causes them to fall down, or impair their ability to do daily tasks like drive a car. This disease is hard to diagnose, but an estimated half of the 1 million people in the U.S. with cirrhosis suffer from some degree of hepatic encephalopathy, and the incidence is similar in Europe, Fischer says.

Laurent Fischer

While Salix is now likely headed toward FDA approval of its product, Ocera is a bit further behind. But there are clear differences, Fischer says. The Salix product is generally oriented toward patients with more severe forms of the disease, and it will be used in combination with lactulose, an existing drug.

Ocera is charting a similar course, but is pursuing patients with milder forms of hepatic encephalopathy, and with its drug that acts on its own. Yesterday, Ocera announced it has completed enrollment in a mid-stage study of 150 patients, who were randomly assigned to get its experimental product or a placebo. Results from that trial should be available by mid-2010.

Ocera may have a little wind in its sails for now, but like everything else in biotech, this story will hinge on the data. If the data is positive for Ocera, then it will be off the races to run a pivotal trial that could someday put the company on the same national stage that Salix was on yesterday. If not, it could be back to the drawing board.

But given that Salix is making money for investors, it will be interesting to see if this perks up interest from Ocera’s partners and investors. It’s possible that Ocera could be an IPO candidate later this year, if it has positive Phase 2 data in hand with a drug that could have significant market potential. Fischer didn’t scream IPO to me in so many words, but it didn’t take much to read between the lines of what he said.

“We’re hopeful that we’ll have alternatives to private financing,” Fischer says. “It’s a large opportunity for Ocera and our partners.”

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