Tranzyme signs partnership with Bristol-Myers Squibb

It’s a deal that both companies needed and that will add 10 to 12 jobs in the Research Triangle Park area.

Tranzyme Pharma, a Durham drug develop company that employs 25, had been looking to raise at least $30 million to get its first drug to market. (More on that here.) The deal with Bristol-Myers Squibb will net Tranzyme $16 million in the next two years. But if the partners are successful in finding new medicines, developing them and bringing them to market, the deal could be worth hundreds of millions of dollars.

To expand discovery and early development work under the partnership, Tranzyme plans to add 10 to 12 employees.

Like other large drugmakes, New York-based BMS is facing serious generic competition. In the next five years, the company stands to lose about 37 percent of its sales as two of its biggest sellers go off patent and compete with cheaper generic copy cats. The deal with Tranzyme offers BMS hope to find replacements for its product lineup.

In other business news:

• Credit Suisse will start hiring 300 at its RTP operations, where the Swiss banking giants already employs about 1,000.
• Quintiles Transnational raises $525 million on the bond market to pay its large stakeholders a fat dividend.
• Swiss ag biotech company Syngenta, which develops all of its new biotech crop seeds in RTP, added 100,000 square feet to the about 200,000 square feet it already had in RTP and agreed to buy 50 acres for future expansions.

RTI receives $101 million contract to reduce malaria

Anopheles mosquito having a meal.

RTI International, a research institute in RTP, received a $101 million contract from the U.S. Agency for International Development to fight malaria in Africa.

Under the contract, RTI workers will spray the inside walls of homes to kill anopheles mosquitos, which carry the parasite that causes malaria and transmit it to humans.

Foom 2006 to 2008, about 6 million homes in 11 African countries were sprayed. Under the new contract, the effort will be extended to a dozen.

The five-year program aims to cut the malaria-related childhood mortality in 15 African countries in half. Malaria kills more than 1.2 million people every year and causes worldwide economic losses of $12 billion.

In other research news:

• RTI researchers calculated the cost of mandatory CO2 emission reductions. (More about that here.)
• The 15 percent of adult Americans with a disability account for 27 percent of U.S. adult health-care spending. (More about that here.)
• Dr. Ronald Kahn of the Joslin Diabetes Center visits RTP to talk about digging for the roots of diabetes, and UNC researchers stumble over a genetic marker for diabetes in African-Americans. (More about that here.)

Researchers team up to probe drug side effects

David Threadgill

Dr. Paul Watkins

Dr. Paul Watkins, a liver toxicity expert at the University of North Carolina at Chapel Hill and a founding member of the Hamner-UNC Institute for Drug Safety Sciences in RTP, is teaming up with David Threadgill, head of the genetics department at N.C. State University, to study why some patients have serious liver reactions to otherwise safe drugs.

The two researchers were awarded a $1 million grant from the National Institute of Diabetes and Digestive and Kidney Diseases to conduct their work.

For the two-year project, Watkins and Threadgill will use a specially bred mouse that represents the genetic diversity in the human population. The researchers expect to uncover genetic risk factors that could lead to tests to identify patients at risk and improve the safety of future medicines.

Could Tranzyme be the first U.S. biotech IPO in 2009?

Tranzyme Pharma is one of dozens of drug development companies in North Carolina’s Research Triangle area, a biotech hot spot that is ranked third in the nation by number of companies. The Durham company has diligently advanced therapies based on a hormone that was discovered a decade ago, a technology  also used by two rivals. Now, Tranzyme’s Board of Directors has to decide how to pay for the final development step and get its drugs to market: Go public, sell the company or go back to its investors hat in hand one more time.

Part 1: Ghrelin – a new hormone is found.

Part 2: Getting a ghrelin drug to market.

Part 3: Next – a crucial decision.

Duke plans to spend $700 million on new cancer center

Duke University Health System announced plans to build a seven-story cancer center and an eight-story medicine pavillion.

Duke’s expansion is projected to cost $700 million and be completed within four years. During construction, about 1,500 jobs will be created, about 1,000 when the project is finished.

This will be the second cancer center going up on a university campus in the Triangle.

The University of North Carolina at Chapel Hill just finished a $200 million cancer hospital and opened it to patients mid-August.

GSK diet pill under scutiny

The Food and Drug Administration is looking into the possibility that a diet pill could cause serious liver injuries.

Orlistat, which GlaxoSmithKline markets as Alli and Roche as Xenical, is linked to 32 adverse event reports the FDA has received from 1999 to 2008. All of the cases occurred outside the U.S.

In other company news:

• Alcatel-Lucent lays off 12 percent of its Triangle work force.
• Affiliated Computer Services plans to fill 465 jobs at a Raleigh call center.
• BDSI wins a 2-year patent extension for its Onsolis technology.
• Durham-based Carolina Solar Energy brings on line a five-acre solar farm in Person County that feeds electricity into Progress Energy’s power grid.

Developing medicines is a minefield that Tranzyme Pharma has navigated well so far. But the Durham company is about to embark on one of its trickiest missions.

Unlike its two rivals, which had to cut costs, delay projects or sell itself in past months, Tranzyme has had enough cash to sit out the financial crisis of the past 18 months. With the recession easing and Wall Street coming back to life, the company is about to act on one of three options: Go public, sell part or all of itself or go back to its investors hat in hand one more time.

Tranzyme’s board of directors and executive management will have to weigh costs and benefits of each option, said Mike Constantino, who oversees Ernst & Young’s life science business in the Southeast. “They have to look into their own crystal ball.”

Like any investor, they will want to squeeze the most out of their stake in the company, Constantino said. But, he added, “this is a very interesting time.”

Initial public offerings of stock, favored by venture capitalists because IPOs can recoup large investments plus gains, all but vanished when the burst housing bubble turned into a full-fledged financial crisis about a year ago. (See Renaissance Capital graphic on right.)

Elixir Pharmaceuticals, a Tranzyme rival, filed for an IPO in September 2007 and withdrew the filing in May 2008. Tranzyme, which had toyed with the idea to go public  about the same time, also scrapped its IPO plans.

As investors became tight-fisted, venture capital fundraising and investment declined sharply.

With sources of cash limited, research and development companies cut costs and then turned to other deals that brought in money or kept the research alive. Some sold themselves. Others sold the rights to some of their medicines to large drugmakers.

Tranzyme was able to stretch the about $20 million in venture capital it received in 2007. But now, the company cannot wait much longer.

To stay competitive, Tranzyme has to figure out a way to pay for the large, international tests it must embark on next to get regulatory approval for its experimental drugs.

Vipin Garg, Tranzyme’s chief executive, said the company may still find a large drugmaker willing to buy it or the rights to develop and commercialize its drugs. Existing and possibly new investors may be willing to put another $30 million into the company, enough to get a first product ready to go to market.

But Wall Street’s rekindled appetite for biotech and pharma stock sales in past weeks could prompt Tranzyme to revive its IPO plans, Garg said.

After being dead in the water for months, the market looks like its coming back, said John Fitzgibbon, who tracks IPOs on iposcoop.com.

Wave of IPOs to come?

Several publicly traded pharmaceutical companies were able to sell large chunks of stock, including Inspire Pharmaceuticals of Durham, which raised $115 million on Aug. 10. The same day, Cumberland Pharmaceuticals, a specialty pharmaceutical company in Nashville, Tenn., pulled off the first IPO of a health care company in 12 months, according to Renaissance Capital.

Fitzgibbon expected a wave of IPOs after Labor Day. Venture capitalists are under a lot of pressure to recoup investments, he said. “There’s a big backup.”

Ernst & Young’s Constantino also projected a possible flurry of activity on Wall Street after Labor Day. If the IPO window opens, he said, it could stay open into the first quarter next year and allow Triangle biotech companies such as Tranzyme and Talecris Biotherapeutics to take the plunge. Talecris, which makes blood-based therapies, aims to raise as much as $1 billion in one of the Triangle’s largest IPOs.

In the past eight years, Tranzyme raised about $55 million in venture capital and moved its drug development ahead steadily without the unpleasant surprises that so often accompany a biotech company’s maturation. It’s an accomplishment that earned Garg this year’s Ernst & Young Entrepreneur of the Year award in the Carolinas.

Targeting gastrointestinal problems with custom-made ghrelin drugs was a strategy that proved smart financially and scientifically.

In three different tests TZP-101, Tranzyme’s most advanced drug, was safe and highly effective, according to results announced in October and April. The oral version, TZP-102, is being tested as a treatment for chronic gastroparesis, which particularly affects patients with diabetes.

By mid-2010, the company could have two therapies ready to advance into final testing and a pipeline of other ghrelin drugs in the wings.

Garg acknowledged that an IPO that raises $50 million to $100 million would allow Tranzyme to go ahead with the testing and build a sales force to bring its drugs to market.

A sale is likely to accomplish the same, but Trazyme would no longer be an independent company and the Triangle would lose a corporate headquarters.

And then, there’s the punt: Asking Tranzyme’s existing investors for another cash injection to gain time.

The call is the board’s.

Work on promising ghrelin medicines has gotten to a critical stage a decade after Japanese researchers discovered the hormone that stimulates hunger and is linked to insulin production.

A handful of ghrelin therapies are being tested in patients and two more are ready to advance to the final stage of drug develoment. But a clinical trial can cost tens of millions of dollars and raising enough money for this stage has always been a challenge for small companies running on venture capital. The financial crisis of the past 18 months has forced two of the three companies working on ghrelin drugs to take drastic steps.

In February, Sapphire Therapeutics, a New Jersey company, was bought by the Swiss pharmaceutical group Helsinn for an undisclosed amount. Three months later, Elixir Pharmaceuticals near Boston offered itself to Swiss pharmaceutical giant Novartis. The deal with Novartis is worth up to $500 million and has allowed Elixir to continue to operate.

That leaves Durham-based Tranzyme Pharma as the company still looking for a deal.

“We’re going to take advantage of the momentum,” said Vipin Garg, Tranzyme’s chief executive. (See photo, left.)

Garg had long intended to find a partner to finish testing Tranzyme’s ghrelin agonists and bring them to market. TZP-101 and its oral version, TZP-102, target gastroparesis, an inability of the stomach to empty food efficiently.

About 5 million Americans suffer from the disease, which is a major complication in patients with diabetes, and existing treatments carry the risk of side effects. The Food and Drug Administration granted TZP-102 expedited review, Tranzyme announced July 23. That could shave six month off the approval time. But TZP-102, which is currently being tested in patients, isn’t likely to come to market before 2013.

Large drugmakers such as Merck, Pfizer and GlaxoSmithKline have shown interest, Garg said. “But you want to make sure you make the right deal.” Tranzyme turned down an offer because it was too low, he said. “Sometimes you have to wait.”

Dealing for drugs

Dealmaking in the biotech and pharma industry has flourished in the past 18 months. Large drugmakers with deep pockets replenished their bare drug development pipelines and small, venture-funded R&D companies sold themselves or the rights to their offspring as more and more investors put away their checkbooks. While the financial crisis deepened in 2008, biotech dealmaking reached $93.7 billion, according to Health Care M&A Monthly. (Top 40 biotech deals of 2008)

Dealmaking accelerated in the first three months of 2009, with two deals – Pfizer buying Wyeth and Merck buying Schering-Plough – accounting for more than $100 billion, according to Windhover Information.

In pursuit of getting a ghrelin drug to market, Elixir, Sapphire and Tranzyme had raised a total of nearly $200 million in venture capital before the recession began December 2007, according to filings with the Securities and Exchange Commission and news reports. Diabetes and obesity are growing problems and some of the ghrelin drugs under development are projected to generate as much as $2 billion in annual sales if they pass regulatory hurdles and are approved.

But by early 2009, Elixir, a company the Boston Globe in 2007 called “one of biotech’s brightest players,” had scrapped plans to sell stock to the public and cut about half of its work force. Sapphire was also in need of investments. Only Tranzyme was able to bide its time.

Shots on goal

Each company is trying to reach goal using a different route.

Elixir and Sapphire are developing ghrelin drugs discovered by others. Tranzyme came up with its own ghrelin drugs. Elixir, which had raised nearly twice as much venture capital as each of its rivals, took the riskiest approach with the highest potential payoff.

All the while, each was closely watching its rivals. Elixir, Sapphire and Tranzyme employ fewer than 50 each and their scientists meet and talk to each other at conferences. Some of the current or former executives are personal friends.

Elixir started out researching sirtuins, drugs that manipulate a gene involved in the onset of diseases related to age and obesity, such as Type 2 diabetes. When development of the sirtuins proved too slow, the company shifted gears and bought the development rights for drugs that were more advanced. Two of them, versions of a new diabetic treatment Elixir scooped up from a Japanese company, could come to market in the next two years.

Novartis is interested in a third experimental drug, Elixir’s oral ghrelin blocker that has shown to increase insulin sensitivity in animal studies. The Swiss drugmaker has an option to buy Elixir should tests in patients confirm the findings. A $12 million venture capital injection accompanied the Novartis deal.

Elixir is also getting a fourth experimental drug, an oral ghrelin agonist, ready for clinical tests. The drug came from Bristol-Myers Squibb and targets diabetic gastroparesis and cachexia, a wasting disease that affects terminally ill cancer patients.

Sapphire bought the rights to its ghrelin agonist from Novo Nordisk shortly after being founded near Houston as Rejuvenon. Versions of the ghrelin agonist are being tested in patients suffering from post operative ileus, a bowel impairment following surgery, and cancer cachexia.

The company moved to New Jersey five years ago after hiring a new CEO, and was renamed a year later. But by the time the recession started, the whopping $37.8 million in venture capital Sapphire had raised in 2004 was dwindling. In June 2008, the company managed to raise just $7.5 million, SEC filings show. Less than a year later, Helsinn bought Sapphire.

Further development of the ghrelin drugs is now up to Helsinn, which is turning Sapphire into its U.S. R&D and commercial operation.

Garg said he talked to Helsinn about how much the Swiss company thought Sapphire was worth. “I wouldn’t do the deal Sapphire did,” Garg said. “We’re not desperate enough.”

Continued in part 3.

Tranzyme Pharma is one of dozens of drug development companies in North Carolina’s Research Triangle area, a biotech hot spot that is ranked third in the nation by number of companies. The Durham company has diligently advanced therapies based on a hormone that was discovered a decade ago, a technology  also used by two rivals. Now, Tranzyme’s Board of Directors has to decide how to pay for the final development step and get its drugs to market: Go public, sell the company or go back to its investors hat in hand one more time.

This is the first part of three.

People who claim their weight problem is related to a gland aren’t all wrong.

Sure, taking in too many calories and not exercising enough carry much of the blame for the obesity epidemic. But there is indeed a gland that plays a role in feeling hungry.

It’s the pituitary gland, an important structure that sits at the base of the brain and is about the size and shape of a garbanzo bean (shown in picture).

A hormone produced mostly in the stomach lining provides a key signal that it’s time to eat. Discovered by Japanese researchers in 1999, ghrelin gets around in the blood. It can be found in many places in the body, including the brain, the heart and the digestive tract.

Ghrelin stimulates the release of growth hormones in the pituitary gland. Researchers believe that this partly explains why teen-age boys can have such outsized appetites.

There’s a lot that researchers have yet to figure out about ghrelin, for example how it affects insulin producing cells in the pancreas as food is digested into glucose. Generally, high ghrelin levels are linked to low levels of insulin.

Insulin is a hormone that helps cells absorb glucose from the blood as fuel. Blood glucose levels rise when cells have a harder and harder time responding to insulin or when the pancreas produces insufficient amounts of insulin. The result is frequently Type 2 diabetes, a disease linked to obesity and other risk factors.

In 2007, an estimated 24 million Americans, or 7.8 percent of the U.S. population, suffered from Type 2 diabetes, according to the National Diabetes Information Clearinghouse, which is part of the National Institutes of Health.

The disease is particulalry prevalent among Americans 60 years and older. (See NDIC chart.)

The discovery of ghrelin, which was published December 1999 in the science journal Nature, was a breakthrough.

It wasn’t easy to find and synthesize it, Masayasu Kojima, one of the researchers who discovered it, wrote in the journal ScienceDirect.

The hormone’s chemical structure and its origin in the stomach surprised the researchers. Its existence had long been suspected, because ghrelin receptors, places in a cell where it docks, were known. But the Japanese researchers had expected ghrelin to be produced in the brain. The discovery took more than a year and one failed test after another, Kojima wrote.

The day the correct synthesized sample was ready, Kojima bicycled to pick it up.

“On my way back I espied a bale of turtles swimming in the Senri river,” he wrote. “This brought me high hopes for the sample: for the turtle is respected as an augury of good fortune in Japan.”

The tireless work of the Japanese researchers revealed the origin and the structure of ghrelin. Their discovery allowed chemists at pharmaceutical companies to come up with versions of the hormone that target particular areas in the body.

Three East Coast companies were inspired to develop ghrelin therapies. One of them is Tranzyme Pharma, a drug development company in Durham, just south of Research Triangle Park.

Each company is using a different version of ghrelin and is testing them in animals or patients.

It is unclear which version will make it all the way to the pharmacy shelve. Much work remains to be done, said Mark Peterson, an organic chemist who is Transzyme’s vice president of operations. “People know a lot about ghrelin and ghrelin receptors,” Peterson said. “But there is still a lot to be learned about the molecular biology.”

Continued in part 2.

The Entrepreneur of the Year awards program, run by Ernst & Young, one of the four big business auditing companies, is changing that.

Garg was named one of six winners of the award in the Carolinas Thursday night at the Westin Hotel in Charlotte. He is now eligible for the national awards, which Forbes.com has called one of seven “Get-Ahead Executive Retreats.” Last year, Matthew Szulik, CEO of Red Hat in Raleigh, won a regional and national Entrepreneur of the Year award.

The attention clearly boosts Garg’s and Tranzyme’s standing, but the jury is still out whether it will help RTP. Tranzyme was poised to consider an initial public offering a year ago, but Wall Street was reeling from the credit crisis. A partnership with a large drugmaker or a sale of the company were also options.

The Entrepreneur of the Year winners in the Carolinas were selected by a panel of regional business, academic and community leaders. Among the accomplishments they looked at to pick Garg were the more than $50 million in venture capital he helped raise for Tranzyme in 2005 and 2007 to fund the company’s research.

Investors wouldn’t have risked that much money if Tranzyme’s executive leadership had fumbled or the company’s technology had raised questions. So far, Garg and his executive team have overseen a smooth development of Tranzyme’s most advanced experimental drug to late-stage testing. A second drug is in Phase II testing and two other compounds are in animal testing.

Tranzyme’s technology aims to stimulate or block the ghrelin receptor, which is found on the surface of cells lining the stomach and the small and large intestines. Ghrelin is a hormone that is involved in many physiological processes, including the release of growth hormone, appetite regulation, gastric acid secretion, gastrointestinal motility and blood pressure regulation.

TZP-101, the company’s most advanced drug, is projected to enter Phase III testing for post-operative ileus and is in Phase II testing for diabetic gastroparesis, two painful disorders in which portions of the gastrointestinal tract stop functioning.