Today marks a major milestone in Cambridge, MA-based Radius Health’s long quest to enter the multibillion-dollar osteoporosis market. The company announced that it has raised $91 million in a third financing round, which includes $66 million in equity. What’s more, upon the closing of the financing, Radius merged with an unlisted shell company (“MAC”), so that it can take on the status of an SEC-reporting company and apply to be listed on a national stock exchange. The financing will be used to complete pivotal Phase 3 clinical trials.
CEO C. Richard Lyttle says Radius was able to make a convincing case to investors that its treatment will break new ground in osteoporosis, the gradual loss of bone that affects many aging people, especially women. “Investors want to put money towards products with really good data behind them, and we had Phase 2 data showing this drug is able to build bone in women,” he says. “We believe we’ll be able to offer women a new agent to treat osteoporosis.”
Radius is developing a novel “anabolic,” or bone-building drug, called BA058, which is an analog of human parathyroid hormone-related protein. In early studies of the drug—which Radius is formulating both as an injection and a skin patch—patients have re-grown some bone, while facing little risk of hypercalcemia, or too much calcium in the blood, which can be a side effect of current treatments.
The treatment is so promising that Radius has had little trouble raising cash in what has been an extremely challenging fundraising environment for most life sciences companies. Prior to today’s financing, the company had raised $106 million in venture capital from an A-list group of investors including MPM Capital, BB Biotech Ventures, MPM Bio IV NVS Strategic Fund, the Wellcome Trust, HealthCare Ventures, and Scottish Widows Investment Partnership.
The new round includes those investors, along with newcomers BB Biotech, Brookside Capital, Saints Capital, Nordic Bioscience, and Ipsen Pharma. It also includes a commitment to a $25 million loan facility from GE Capital, Healthcare Financial Services, and Oxford Finance. Nordic will also manage the Phase 3 trials of BA058—a coup, says Harvey, because Nordic is a renowned leader in osteoporosis, having been involved in trials of Amgen’s (NASDAQ: AMGN) recently approved denosumab (Prolia) and other osteoporosis treatments.
No doubt those investors were attracted to what is becoming an incredibly rich market opportunity. The aging of the population has led to a rapid increase in osteoporosis around the world. According to a recent study by Global Industry Analysts of San Jose, the annual market for osteoporosis treatments will reach $8.8 billion by 2015, even though many of the most popular treatments are losing their patent protection and going generic. Radius’s CFO, Nick Harvey, points to a Cowen & Co. report estimating the current market size to be $7.6 billion. Thus the market is growing rapidly, and because there’s only one other similar anabolic treatment out there—Eli Lilly’s (NYSE: LLY) teriparatide (Forteo)—Radius has a chance to take a significant share of overall sales, Harvey says. Forteo brought in $830 million in sales last year, Harvey says, but many patients had to abandon the drug because of harsh side effects. “Improving compliance is really critical,” he says.
In conjunction with today’s announcement, Radius also said it formed a collaboration with 3M (NYSE: MMM) to develop the transdermal patch version of its drug—which company executives believe could boost patient compliance even more. Lyttle says Radius had experimented with various delivery methods, including inhaled and oral versions, but decided a skin patch was the best option. The company will use 3M’s “microneedle” technology to deliver BA058 through the skin. The patch contains 360 very small needles that deliver a full dose in about 15 minutes, Lyttle says. “If you rubbed it, it would feel like very fine sandpaper,” Lyttle says. “You put it on and then you’re done.” The patch is currently in Phase 1 testing.
When Lyttle spoke to Xconomy in 2008, he projected the market for the injected version of his drug would be about $700 million a year, while a patch could bring in as much as $1.4 billion. He stands by those estimates today. “The subcutaneous product could go even higher, but we believe the transdermal drug will capture a bigger part of the market,” he says.
Lyttle and Harvey hope the BA058 injection will be approved by the end of 2015, and the patch no more than two years after that. Lyttle says Radius will look for a marketing partner for the injection towards the end of the Phase 3 trials. The financing will also help the company advance a treatment for menopausal hot flashes, which is currently in Phase 2 testing.
As for taking on the status of a publicly traded company, Harvey estimates it will take about six months to complete the process. Radius will file a prospectus to trade over the counter, after which it will transfer to the Nasdaq. It’s a roundabout way to go public, but Lyttle says it was preferable to staying private and attempting an initial public offering later. “Investors prefer to invest in a public company,” he says. “And we were able to raise more than the last few IPOs in the field have raised.”
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