DUBLIN – Zambon SpA is acquiring Breath Therapeutics BV for €140 million (US$155.8 million) up front plus up to €360 million more in regulatory and commercial milestones linked to the progress of Breath's drug-device combo, which is currently in phase III development for bronchiolitis obliterans syndrome (BOS), a fatal form of airway inflammation that can arise in lung transplant recipients.

It's a rapid and profitable exit for Gimv and Sofinnova Partners, which co-led a €43.5 million series A round in Munich-based Breath just over two years ago. The company has moved quickly since it was spun out of Starnberg, Germany-based Pari Pharma GmbH in 2016 to develop a liposomal formulation of the immunosuppressive drug cyclosporine A (L-CSA-I), which is delivered to the airways by a custom-designed nebulizer, Pari Eflow. (See BioWorld, March 9, 2017.)

"It's nice when you can do a deal when you can take some cash off the table – the up-front is quite substantial – and still keep some upside," Karl Nägler, partner at Antwerp, Belgium-based Gimv, told BioWorld. "It's a very attractive deal for the investors. It's not heavily weighted on the commercial milestones," he said. Breath has not disclosed its series A post-money valuation, but the present deal represents "an attractive multiple from a venture viewpoint," he said.

Breath had "a realistic plan" to commercialize L-CSA-I itself, Nägler said, but the costs of doing so were high. It would have needed to raise a large series B round and to complete an IPO to ensure it had the funds needed to develop a commercially successful product. A link-up with Zambon now will eliminate that requirement, while giving Breath access to an organization with longstanding commercialization expertise.

Bresso, Italy-based Zambon wasn't the only interested party. After an initial approach from the long-established, family-held firm, Breath hired former investment banker Leopoldo Zambeletti as an advisor to flush out other potential bidders. One other party "went relatively far," Nägler said, but Zambon's rapid due diligence and evident interest in the asset prevailed.

"The transaction with Zambon is super-strategic for them," Graziano Seghezzi, partner at Paris-based Sofinnova Partners, told BioWorld. "They will do their utmost to get the product approved and sold," he said. "They will do it with the team we put together." That includes a unit based in Menlo Park, Calif.

Zambon does not have a direct U.S. presence – it works through distributors in the region – but it already has another U.S.-focused phase III asset in severe respiratory disease, a nebulized formulation of colistimethate sodium powder in development for prevention of pulmonary exacerbations in patients with non-cystic fibrosis bronchiectasis, who are colonized with Pseudomonas aeruginosa. The program has received qualified infectious disease product (QIDP) and fast track designation from the FDA. The product is already marketed in Europe as Promixin. The phase III studies are due to read out in 2022, about a year behind the two phase III trials of L-CSA-I, which commenced earlier this year. (See BioWorld, March 26, 2019.)

Significant market potential

L-CSA-I has the potential to become Zambon's biggest product. It could reach sales of $500 million, said Seghezzi, given the current lack of alternatives for BOS.

Although most closely associated with lung transplant rejection, BOS can also occur in patients undergoing stem cell transplantation and in those exposed to environmental contaminants. Breath's formulation of cyclosporine A follows a number of earlier unsuccessful attempts to develop versions of the drug for administration by inhalation. Chiron (now part of Novartis AG, of Basel, Switzerland) filed an NDA for Pulminiq all of 15 years ago, but the product never reached the market. It employed propylene glycol as a solvent, but it proved to be an irritant to patients' lungs. Its nebulizer required one hour's use per day, whereas the Pari Eflow device requires just five to 12 minutes.

Pari itself abandoned a phase IIb prevention trial of the present product, owing to a slow event rate. The current trials, in contrast, are focused on treatment rather than prevention.

Reaching agreement with the FDA and the EMA on the phase III protocols was an important milestone for the company, Nägler said. "You're talking about lung function, not mortality, as the primary endpoint."

The studies, each of which is recruiting 110 patients, are measuring the mean change from baseline to 48 weeks in forced expiratory volume in one second. If they are successful, what is already a profitable payday will become even more lucrative.

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