BioWorld Today Contributing Writer

There's a lot of toenail and fingernail fungus among us, enough that Topica Pharmaceuticals Inc., has raised $27 million in a Series B financing to support a Phase IIb/III trial of the privately held Palo Alto, Calif.-based biotech's luliconazole topical antifungal agent for treatment of onychomycosis.

New investor Third Rock Ventures and existing investors Prospect Venture Partners and Yasuda Enterprise Development Corp. Ltd. led the round.

An estimated 35 million Americans have onychomycosis, a fungal infection that is challenging to treat because it takes up residence in the nail bed underneath the tough nail plate. Topica said that current treatment options are limited: An FDA-approved topical treatment with cure rates of 5.5 percent to 8.5 percent after a year, and systemic orals with cure rates between 17 percent and 38 percent that require hepatic monitoring and have been associated with drug-drug interactions and toxicities.

Topica noted that millions of onychomycosis patients are not treated, perhaps because of the low cure rates and side effects of current treatments, adding that the U.S. market is worth a potential $3 billion annually.

Greg Vontz, Topica's president and CEO, told BioWorld Today that the company has enough money to take it through the anticipated completion in early 2014 of the Phase IIb-III trial involving about 300 patients with mild-to-moderate distal subungual onychomycosis of the toenail.

The trial, which will start in the first half of 2012 and will be conducted at about 20 centers in the U.S., will assess safety and efficacy of the 10 percent luliconazole solution in two dosing regimens applied for 48 weeks and evaluate the impact of luliconazole on clear nail growth and fungal eradication at week 52, according to Topica.

The company said that primary endpoint will be "complete cure at week 52" – an endpoint combining clinical assessment of a completely clear nail and a negative fungal assessment by KOH (potassium hydroxide staining) and mycologic culture. Complete cure is the primary clinical endpoint for the conduct of pivotal clinical trials seeking FDA approval, Topica said.

In June, the company reported that results from its Phase I/IIa trial evaluating a 10 percent solution of luliconazole after maximal use topical application in adults with moderate-to-severe distal subungual onychomycosis of the toenails showed all 24 patients enrolled completed the trial at the starting dose, the 10 percent luliconazole solution was well tolerated and steady state levels of luliconazole were reached in the plasma by day eight due to the time required for the drug to cross the nail plate and nail bed before reaching circulation.

Topica has been "all-in" on developing luliconazole exclusively for the treatment of onychomycosis since September 2010, when it entered a sublicense and purchase option agreement with an undisclosed partner to develop luliconazole exclusively for tinea infections of the skin, such as athlete's foot, in the Americas and Europe. Additional terms were not disclosed.

The agreement involved some naming sleight of hand.

Vontz said that as part of that deal, Topica was renamed Tinea Pharmaceuticals Inc., a company that continues to own the luliconazole tinea investigational new drug application until the purchase option is exercised by the unnamed partner.

He anticipates that the purchase option will be executed shortly after an ongoing luliconazole tinea Phase III is unblinded and Tinea Pharmaceuticals will dissolve. Meanwhile, Vontz said, a new company with the onychomycosis rights was spun out and assumed the legacy name: Topica.

Luliconazole in 1 percent cream and solution formulations was approved in Japan in 2005 for the treatment of tinea infections of the skin and has been used to treat more than 8 million patients in Japan, where it has been sold under the trade name Lulicon for athlete's foot.

Topica's predecessor company, Janus Pharmaceuticals Inc., of Pasadena, Calif., gained rights for exclusive development and sales of Luliconazole from Tokyo-based Nihon Nohyaku Co. Ltd. (NNC) for North America, Europe and South America in April 2007. Luliconazole was co-developed by NNC and Pola Pharma Inc., also of Tokyo.

Vontz said he could not discuss details of the company's Series A, other than to say that it happened in 2008 and was led by Prospect Venture Partners. The company currently has seven full-time employees.

In other financing news:

• Allon Therapeutics Inc., of Vancouver, British Columbia, completed its public offering of units and common shares to pull in gross proceeds of $4.5 million and a subscription receipt for $1.1 million, totaling about $5.4 million. The firm sold 9.8 million units priced at 25 cents apiece and 7.7 million common shares priced at 25 cents each, plus one subscription receipt to Neuro Discovery II LP, a current insider of Allon. Net proceeds will be used for clinical trials activities related to completion of enrollment and ongoing patient dosing for the trial testing davunetide in progressive supranuclear palsy, as well as for general corporate purposes and working capital.

• Foundation Medicine Inc., of Cambridge, Mass., added $8.5 million from new investors Kleiner Perkins Caufield & Byers and Google Ventures to its Series A round, which had previously included $25 million from Third Rock Ventures. Foundation is developing a comprehensive cancer diagnostic test that it hopes to launch next year. (See BioWorld Today, April 15, 2010.)

• Regeneron Pharmaceuticals Inc., of Tarrytown, N.Y., priced its offering of $400 million worth of 1.875 percent convertible senior notes due Oct. 1, 2016. An additional $60 million worth of notes will be available to cover overallotments. The initial conversion rate will be approximately $84.02 per share, a 30 percent premium over Monday's closing price. Regeneron also entered into convertible note hedge and warrant transactions aimed at minimizing dilution from conversion of the notes. Net proceeds from that offering will be approximately $391.3 million and will be used for general corporate purposes while Regeneron prepares for an FDA decision next month on macular degeneration drug Eylea (aflibercept injection).