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.
