Molecular Insight Aims for Straight Shot to Market with $150M Bond Financing

11/16/07

With a fast-tracked drug in one hand and too little money in the other, Cambridge, MA-based Molecular Insight Pharmaceuticals (NASDAQ: MIPI) recently settled on a bond financing to get one last big cash infusion before that final dash to market. The company has been around since 1997 and is working on about half a dozen targeted radiation-based imaging agents and cancer drugs. Three of those are in trials now, and the goal is to get one to market by 2009.

Management calculated Molecular Insight would need $100 million more to reach that milestone. At the end of last week, it priced $150 million in bonds with a syndicate of institutional investors. “We had several options, but we didn’t want to have to go back to the market again before we launched,” says CEO David Barlow, “Now, we have enough money to last even beyond our first product launch.” The bonds are due in 2012.

Molecular Insight specializes in hitching radioactive particles to small-molecule drugs that are highly targeted to specific cell types. The drugs are basically vehicles to transport the radiation. The company is developing these “hot” drugs both as imaging agents that light up the target cells when viewed with a special camera and as super-precise radiation treatments for cancer. The latter application fills an important niche because “once a tumor has spread, you can’t do external beam radiation,” Barlow says.

Molecular Insight’s lead drug candidate, Azedra, is a new twist on an old treatment that combines a molecule called MIBG (metaiodobenzylguanidine) with radioactive iodine. Azedra is different because, thanks to the company’s proprietary labeling technology, it contains less unnecessary “cold” or non-radioactive drug. According to Barlow, that means it delivers a bigger payload with fewer side effects.

MIBG homes in directly on neuroendocrine tumors—a rare form of cancer that secretes hormones—where it delivers its radioactive payload. The old MIBG/iodine treatment has long been approved in Europe, but no one has ever tried to sell it in the U.S., probably because it addresses such a small market and because the patent is old. A small amount of the treatment was formerly available here for compassionate use, Barlow says, but even that source dried up 2005, leaving U.S. patients with no access at all. Not surprisingly, Azedra has been given fast track status by the FDA. And because there are relatively few patients with neuroendocrine tumors it has also been given orphan status which means, among other things, that the clinical trials of the drug may involve as few as a dozen subjects.

So why bother to develop an old drug (or at least a new version of one) for a rare disease?

Well, Genzyme and others have shown there is money to be made in orphan diseases. Patients with advanced neuroendocrine cancer have no existing treatment options (which means Molecular Insight has a clear market opportunity), and the firm has plans to test the drug in other cancers too. Barlow says it is also protected from competition should anyone finally decide to market the old version of the drug here in the U.S., because Molecular Insight’s labeling technique is covered by newer patents and because Azedra should, he says, outperform the older drug.

The drug is only in Phase 1 U.S. trials now, but is scheduled to move quickly. “Our charge is just to show [Azedra] has the same performance as the approved drug,” says John Babich, president, chief scientific officer, and one of the company’s founders. Given that it’s fast tracked, if the drug truly works better than the old version it should be reasonable to get it approved by 2009.

But the real payoff will be if Molecular Insight can build momentum for its entire pipeline of radiolabeled small molecules. Cancer is probably the most crowded market out there for new drugs right now, but a couple of recently approved radioactive antibodies, Bexxar (GlaxoSmithKline) and Zevalin (Biogen Idec), have shown the targeted radioactivity approach can be remarkably effective. Those drugs only treat blood-born cancers, however, and Babich thinks that in most other cancers, small molecules will work better than the much larger antibodies.

“To get into solid tumors, drugs have to find their way out of circulation into the tissue, and the vasculature creates pressures that push large molecules back,” Babich explains. “Using an antibody is like trying to launch a Hobie Cat into the wind. Meanwhile, we’re just throwing a football into it.”

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