Radius Health CEO: Skin Patch Data is the Value Driver

5/13/13Follow @benthefidler

For Radius Health, it’s all about September.

That’s when the Cambridge, MA-based biotech will unveil the mid-stage data on a version of its experimental osteoporosis drug, BAO58, which is administered through a patch affixed to the skin.

CEO Michael Wyzga makes no bones about it: the moment is huge for Radius, despite the fact that the patch isn’t the company’s most advanced drug program (an injectable version is currently in late-stage clinical trials). The way Wyzga sees it, good news could swing Radius’ value high enough to make its big move.

“It’ll be a killer drug when we get it out there,” says Wyzga, who was Genzyme’s CFO before joining Radius in December 2011. “As we go past that, we’ll see. But we’ll do it on the back of a good valuation and good results.”

Radius has raised $240 million in total funding through four separate financing rounds from investors such as MPM Capital, Brookside Capital, BB Biotech Ventures, and F2 Biociences III. F2 led its latest round last month, a $43 million haul just five months after Radius yanked a potential IPO.

Radius believes it can change the market for osteoporosis treatments by adding a skin patch armed with an effective anabolic drug to the mix.

Osteoperosis, a degenerative bone condition that the International Osteoperosis Foundation says affects roughly 200 million women worldwide, is typically treated with bisphosphonates such as risedronate (Actonel, Warner Chilcott) and ibandronate (Boniva, GlaxoSmithKline) that work by preventing the bones from decaying. Some patients who take bisphosphonates still suffer from bone fractures—about 2 million osteoporosis-related bone breaks occur in the U.S. alone every year, according to Radius.

This has left an opening for a new crop of drugs, such as Eli Lilly’s (NYSE: LLY)  teriparatide (Forteo) and Amgen’s (NASDAQ: AMGN) AMG-785 (still in clinical trials), that work by building up the bones rather than preventing them from weakening. Teriparatide posted $1.2 billion in sales in 2012.

Both of those drugs are administered through injections, however. While Radius has developed an injectable version of BA058 that is currently undergoing a 2,400-patient, 18-month late-stage clinical trial that will wrap up in late 2014, Wyzga believes Radius can unlock its real value after the data on the patch comes out later this year.

Michael Wyzga, CEO of Radius Health

“If we could find a way to keep it private at least until that point and maybe until a little time after that, we surmise that we’re going to have pretty good results,” he says. “[And] we surmise that can be a pretty good value driver.”

Radius is a little fortunate that it will even be able to consider such a thing, because it would’ve been a publicly traded company by now if Mother Nature hadn’t stepped in.

Radius, which already reports its results publicly after merging with an unlisted shell company in early 2011, has toyed with the idea of an IPO for almost two years now without pulling the trigger. Radius announced plans to go public and raise $86 million in February 2012, and it set a range of $8.50 to $10.50 apiece for 6.5 million shares in October.

Wyzga says the company was all set to price at the end of October, but Hurricane Sandy barreled through New York City and shut down the financial markets for days. Radius thought of pushing the offering back a week, but that would’ve put its IPO right in the middle of the pre- and post-election market turmoil. So Radius passed, and ultimately yanked the IPO altogether in November.

Instead, the company raised $43 million privately in April, and now hopes that bit of luck will help it create more value in September.

“[We] would have ended up inevitably giving away a lot of value if [we] tried to do this in one fell swoop and the one fell swoop would’ve been done in the IPO,” he says. “Once you’re a public entity, you could have spectacular results, and then something untowardly happens in Spain, and all of a sudden you’re kind of in the same mix [as everyone else].”

Truth be told, Wyzga would have no problem keeping Radius private. Private companies are familiar with their shareholders and have more decision-making flexibility regarding potential licensing deals or capital raising moves, he says. Wzyga, for example, recalls living through the messy Genzyme-Carl Icahn proxy battle, which ultimately led to the billionaire activist investor winning a few seats on the biotech giant’s board roughly a year before it was sold to Sanofi.

“Maybe I’ve been a little marked by that,” he says. “I think it’s always functionally easier to be a private company than a public company.”

Wyzga says Radius has been approached by strategic partners hoping to “get in front of the patch data.” But the company hasn’t budged or reached out on its own, and won’t anytime soon.

“I’m not an optimistic guy—as a matter of fact, most stuff doesn’t work,” he says. “[But] we are dangerously close on this patch data. We’ve made it so far.”

The $43 million Radius raised in April will get the company through the data release with another six or seven months to spare, which Wyzga believes will be ample time for Radius to make its move, assuming the data are good.

Wyzga concedes that, should the drug make it through clinical trials and win approval from regulators, Radius likely can’t—and doesn’t necessarily want to—build the necessary infrastructure to sell it on its own. That would appear to set Radius up for a buyout or partnership when the timing is right.

“I think it’d be a blast to build it out in the U.S., but I’m not sure we’ll get that far. And value maximization, I think, is the key to our current shareholders,” he says.

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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