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VC-01 Diabetes Therapy 'Cells' Investors on Viacyte

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By Marie Powers
Staff Writer

Tiny Viacyte Inc. is going after a whopper of an indication with a stem cell-derived cell therapy to treat Type I and insulin-dependent Type II diabetes. The novelty of its combination product, known as VC-01, lured its largest investors – Johnson & Johnson Development Corp., Sanderling Ventures and Asset Management Company (Johnson Trust) – back to the table for a private equity round.

The rights offering to Viacyte's Series B and C preferred stock holders provided the company with $10.6 million through the sale of Series C-1 preferred stock, together with warrants to purchase stock. The funding served as a match for a $10.1 million strategic partnership award (SPA) approved last October by the California Institute for Regenerative Medicine (CIRM) to support the clinical evaluation of VC-01, Viacyte's encapsulated cell therapy product. The company's board authorized the sale of additional shares of Series C-1 preferred stock and warrants, which could occur in one or more subsequent closings this year, according to Paul Laikind, Viacyte's president and CEO.

Laikind joined the San Diego-based company a year ago from the Burnham Institute for Medical Research, where he served as senior vice president of business development and chief business officer. He previously founded and served as senior executive at San Diego biotechs Gensia Pharmaceuticals Inc., Viagene Inc. (acquired by Chiron Corp. in 1995) and Metabasis Therapeutics Inc. (acquired by Ligand Pharmaceuticals Inc. in 2009). (See BioWorld Today, April 25, 1995, and Oct. 28, 2009.)

Although Viacyte had attracted funding from CIRM – including a $20 million award in 2009 – and from JDRF, the company's last venture round took place in 2007.

"It was clear that we needed to do some additional financing or some sort of a strategic deal to push forward," Laikind told BioWorld Today. "We're getting into the very capital-intensive stage of moving the product into the clinic."

The combination product consists of pancreatic precursor cells, designated PEC-01 , manufactured through directed differentiation of stem cells sourced from a proprietary human embryonic stem cell line and encapsulated in an immune-protecting and retrievable device, called Encaptra. When implanted under the skin, the PEC-01 cells are designed to mature into functional insulin-producing islet cells, regulating blood glucose in a manner similar or identical to a normal pancreas.

The rights offering, in combination with the CIRM SPA, gives the company more than a year of cash, according to Laikind, and comes on the heels of a comprehensive pre-investigational new drug (IND) meeting with the FDA last fall in which Viacyte "mapped out" the program for VC-01 , including its existing data package, required preclinical safety studies and design of the initial clinical trial. Findings from ongoing GLP safety studies are expected to report by year-end, with an IND filing in the first quarter of 2014.

Firm Could Pursue Type I Diabetes Market Solo

Importantly, the FDA agreed to allow Viacyte to conduct its initial clinical study in patients with stable Type I diabetes who do not produce insulin or C-peptide, the marker for insulin, enabling the company to establish clear safety and efficacy endpoints. "We expect that we will be able to wean patients off of their insulin and measure C-peptide production, which they otherwise wouldn't have," Laikind said.

Although trial design is not yet finalized, the company envisions a dose-ranging study beginning with a subtherapeutic dose administered to a small cohort followed by a therapeutic dose administered to a group of 30 to 40 patients.

Viacyte has its roots in one of the first biotechs seeking to exploit the potential of the Edmonton protocol, which established a set of procedures for islet transplantation from donor pancreases to restore normal insulin production in people with Type I diabetes. San Diego-based Cythera Inc., together with Bresagen Ltd., of Adelaide, Australia, merged in 2004 with San Diego-based Novocell Inc., a spinout of cell transplant therapy company Neocrin Co. In 2010, Novocell was renamed Viacyte. (See BioWorld Today, June 5, 2003, Jan. 28, 2004, and July 17, 2007.)

And Viacyte isn't the only biotech exploring an encapsulation approach to cure diabetes. Islet Sciences Inc., of New York, is developing a ready-to-use suspension of FDA-approved porcine islet cells that are microencapsulated in a highly biocompatible biopolymer alginate to reduce the body's immune response to the implanted material. The company plans to move the technology into human studies this year. (See BioWorld Today, Dec. 27, 2012.)

Sernova Corp., a regenerative medicine cell therapy firm based in London, Ontario, also is pursuing islet transplantation using its Cell Pouch System. (See BioWorld Today, Jan. 11, 2012, and Aug. 17, 2012.)

The financing puts Viacyte in a sound position to raise additional funds and to attract strategic partners, if and when the company opts to go in that direction. Viacyte intends to take VC-01 through proof-of-concept studies and could conceivably address the Type I diabetes market on its own, but the insulin-dependent Type II population requires an enormous program with a commensurate commercial opportunity.

"My view from years in this industry is to build companies that are able to stand on their own two feet and be successful," Laikind said. "Part of the reason for this financing is to have the wherewithal to continue to push this product forward. We're going to take this product into the clinic, we're going to prove its value, and we're going to keep moving on the development."