By Matthew Willett

Staff Writer

Corus Pharma Inc., which focuses on drugs to treat unmet needs in respiratory and infectious diseases, raised $18.5 million in its Series A financing round.

Investing in the privately held Seattle company’s round were Burrill & Co., of San Francisco; Cascade Investment, of Kirkland, Wash.; and JP Morgan Partners and OrbiMed Advisors, both of New York. Funding from the placement will be used to advance the company’s operations, identify and license new development candidates and conduct clinical research.

Founded just five months ago, Corus’ first two development programs center on sleep apnea and cystic fibrosis. By the end of the year, CEO Bruce Montgomery said, the sleep apnea program will have yielded Phase II results, and the cystic fibrosis program will be ready to enter the clinic.

Montgomery, the former vice president of research and development at PathoGenesis Corp., now part of Emeryville, Calif.-based Chiron Corp., and a former executive at Genentech Inc., of South San Francisco, founded Corus and has served as its CEO since its inception.

“We’ve got two programs to start with, and we’ll take them through Phase II and then we’ll have an indication as to whether there’s more financing available at that point, or [whether to] consider outlicensing,” Montgomery said.

In fact, he said, Corus’ business plan is one of middleman status, taking promising drug candidates from academic or public research efforts, developing those candidates through Phase II and outlicensing or selling the programs outright.

The Phase II sleep apnea drug is a “fairly large” polymer that decreases the effort to reopen the collapsed upper airway responsible for both snoring and apnea, and the CF drug is an inhaled monobactam-class antibiotic.

“When academic or research data shows something is probably safe and effective in humans and we can figure out how to either license it in or wrap up the [intellectual property] in a delivery system or some other means, taking it through development takes a shorter time line to success than starting at basic research,” he said. “If we can cut that front end off you can deliver a faster return to your investors.”

And by using a chemical industry mechanism, he said, a spinout model, Corus can maintain maximum shareholder value. The spinout model, he explained, works by making wholly owned subsidiaries for every development program. The first, for sleep apnea and snoring, Corus named after the Roman god of nighttime thunder, Summanus. Corus itself, a Seattle respiratory drug discovery company, is named with similar symbolic meaning for the Roman god of the northwest wind.

“If you do a spinout, shareholders get the stock spinout at the same time you sell the subsidiary,” Montgomery said. “Shareholders get either stock, which is tax-free, or if they get cash there’s only one set of tax paid, their income tax, rather than corporate gains.”

The focus on respiratory and infectious diseases, he said, is a reflection of the company’s competencies.

“Essentially, [investors] bought into the business plan: identify compounds and take them through clinical trials,” he said. “And at the time of the clinical trials when you find that they work, we won’t necessarily be selling the product ourselves. We believe that a lot of money can be made selling the product outright. It’s a stick to your knitting’ approach. What we do best is drug development, and there seems to be a shortage now of products. Other companies want to add products to their line, and there aren’t that many available.”