Talk about an introduction.
Autoimmune disease drug developer Aspreva Pharmaceuticals Corp. generated $57 million worth of interest for its Series A round of private equity financing.
The industry's largest single round of private funding this year, it consists of $53 million in venture capital funds and $4.2 million in converted debt. The financing's timing, coupled with the Victoria, British Columbia-based company's business objectives, led to the large investment.
"By the time we went out to do this financing, which we started in November, the overall environment out there was improving," Aspreva Chairman and CEO Richard Glickman told BioWorld Today. "I think the fact that the company represented a novel business model that no one had ever seen before really intrigued people. Second, the fact that we were extremely product-focused had a significant impact on our ability to raise capital. Also, the approach we took at the company provides for clinical and drug development in its lowest-risk format - label expansion - really appealed to investors as well. And the facts that the company is projecting revenues next year, and cash-flow break-even next year, are the kinds of attributes that in this market, or any market, just made sense."
He said the funding would support the company until it reaches cash-flow positive operations next year. Perhaps most alluring to investors, Glickman added, is Aspreva's plans for CellCept (mycophenolate mofetil), a marketed product in-licensed from F. Hoffmann-La Roche Ltd. for use in another indication.
Banking on CellCept's potential in the autoimmune space, the company will use its Series A proceeds to fund pivotal trials of CellCept in lupus nephritis, myasthenia gravis and pemphigus vulgaris. Glickman said the trio of studies would begin shortly to fit into a regulatory approval timeline forecast of 2006.
"These are three key diseases treated by different specialists, representing a broader range of diseases than a single specialist would see," he said. "We chose diseases that had what we call signal indications, which are designed to provide an opportunity for a physician to use this drug to treat a particular indication where there is likely to be greater demand for the drug."
Clinical research from investigator-sponsored studies, including data reported in the March 4, 2004, issue of The New England Journal of Medicine, demonstrated CellCept's promise over Cytoxan (cyclophosphamide), the current standard of care in treating lupus. Other studies have shown positive results in myasthenia gravis, pemphigus vulgaris and autoimmune hepatitis. Use of CellCept allows for a reduced need for steroids, Glickman said.
In October, the company gained worldwide rights to develop and commercialize the product for all autoimmune indications, except in Japan. Long marketed as a transplant medication, its sales have turned it into a blockbuster product for Roche. Under terms of the licensing arrangement, the Basel, Switzerland-based pharmaceutical firm will register and invoice resulting sales and will share proceeds.
"So many drugs are used off-label in treating a number of less common diseases, but often the evidence base is not there," Glickman said. "So our goal is to increase the evidence base for a drug, and take it from the point of view where a drug looks promising and is being used in refractory patients to first-line therapy."
The company plans to produce label expansions for existing products and aims to grow through further product partnerships.
Given its initial focus on CellCept for autoimmune diseases, the 22-employee company initially will work to build a franchise in that indication. Glickman projects a sales force to concentrate on autoimmune diseases, though he noted that the business model allows for moving toward other therapeutic indications as well.
Aspreva will have the ability to task its sales specialists to the particular needs of a given licensing arrangement. In the case of CellCept, Aspreva will take a lead role in the compound's expanded development, regulatory filings, commercialization efforts and medical education. Roche will maintain a role in manufacturing and distribution.
Glickman said the company would grow to 55 employees by the fourth quarter, increasing to a head count of about 140 by the end of next year, given growth needs in clinical and business development, as well as medical education.
"Each molecule will be developed on the basis of the individual needs of the companies we work with," said Glickman, who in December 2001 founded the company along with Noel Hall, its president, and Michael Hayden, chairman of the medical advisory board. The three came together while serving as directors for the Canadian Genetic Diseases Network, a government-backed initiative to foster research and development collaborations among scientists across the country.
"This plan was conceived while we were struggling with the issue of how to make drugs available to patients who need them the most," Glickman said. "Given the current business environment out there, and also looking at current companies that try to make drugs available under orphan programs, we felt that this particular model would be far more feasible from an economic and social perspective."
Aspreva's early funding came from a January 2003 friends-and-family round, worth $1.7 million, and $4.2 million in debt sold last October. Glickman said the company would not have to pursue additional venture capital backing unless such funding proves necessary for in-licensing product opportunities.
Menlo Park, Calif.-based The Sprout Group led the first-round investment, with significant participation from InterWest Partners, as well. Other investors in the international syndicate included HBM Partners, of Zurich, Switzerland; Thomas Weisel Healthcare Ventures, of San Francisco; BioAsia Investments LLC, of Palo Alto, Calif.; and Axiom Venture Partners, of Hartford, Conn.
Sprout partner Ron Hunt will join Aspreva's board in conjunction with the financing, as will Arnold Oronsky, a general partner at InterWest, also of Menlo Park.
BMO Nesbitt Burns and Harris Nesbitt, the investment and corporate banking arms of Vancouver, British Columbia-based BMO Financial Group, served as Aspreva's financial adviser and private placement agent.