Ventrus Attracts Investors With Hemorrhoid Drug and Two Other Late-Stage Drug Candidates

8/2/11Follow @arleneweintraub

Ventrus Biosciences CEO Russell Ellison jokes that he doesn’t know how his mother would have reacted if he told her 20 years ago what he’d be doing today. Jokes help when you work at a place like Ventrus (NASDAQ: VTUS), where the lead drug candidate may just become the first ever FDA-approved prescription product to treat hemorrhoids. Ventrus’ two other clinical candidates are difficult to describe in detail, this being a family-friendly website. But let’s just say they also address what could be delicately called “below-the-belt” disorders.

Ventrus’ Wall Street debut has been nothing to joke about, however. The New York City-based company went public at $6 a share last December, raising $17.4 million. The stock traded all the way up to $21 in the spring—making Ventrus one of the few successful biotech IPOs of the last several years—before settling into the $12-a-share range.

On July 14, Ventrus priced a secondary offering at $10 a share and managed to raise an additional $45 million. “A lot of people bet against us,” Ellison says, noting that many short traders piled in, expecting Ventrus’ stock to drop on the secondary offering. “But it was a successful deal.”

Hemorrhoids don’t appear on the top of many drug companies’ priority lists—and that’s exactly why Ellison sees an opportunity in Ventrus’ lead drug, VEN 309. The only marketed remedies for hemorrhoids are over-the-counter products like Preparation H, which merely mask the painful symptoms, Ellison says. Steroids are sometimes prescribed, but they can also be ineffective. That spells opportunity, he says. “Apart from surgery, there aren’t many options for patients,” Ellison says.

VEN 309 is a compound that limits the activity of 5-HT2A receptors, which have been implicated in the blood-vessel clotting and contraction that leads to hemorrhoids. The drug improves blood flow through those restricted vessels, which also lessens pain, itchiness, and other symptoms. Unlike most compounds that target 5-HT2A, Ventrus’ drug doesn’t affect the central nervous system. And it’s topical, so it can be applied in high concentrations to the affected area, without causing untoward side effects, Ellison says.

Leerink Swann, which was one of the investment banks that underwrote the secondary offering, estimates that VEN 309 will be bringing in $280 million in worldwide annual sales by 2019, and that peak sales could reach $600 million a year. Leerink analyst Joshua Schimmer believes the stock should be valued at $24 to $26 a share—about twice its current price. “The company is addressing an overlooked therapeutic area of lower GI diseases,” Schimmer wrote in a July 25 report.

But getting VEN 309 to market has been anything but easy for Ellison and his team of six employees. Ventrus was founded in 2007 and raised $15 million in private funding and convertible debt, Ellison says. The company intended to go public, but found itself “in the nuclear winter for private biotech companies,” Ellison says. “The company had to focus on keeping the lights on.”

Ventrus started its dialog with the FDA about VEN 309 in 2008. The agency’s regulators were open to reviewing a prescription hemorrhoid treatment, but because there was no precedent, they demanded that tiny Ventrus design a massive clinical-trial program that could answer some key questions. For example, the FDA wanted to know exactly what the clinical benefit of the drug would be, Ellison recalls. And if the symptoms went away after a week of treatment, they wondered, would they just return the following week?

Answering such questions would require a three-arm study, with 200 patients per arm. But there was a problem: “We had very little money in 2008,” Ellison says. “We had to put the program on hold.”

Now freshly funded, Ventrus is gearing up to start the Phase 3 program on VEN 309 at 70 trial sites around the country. The company expects to be able to report the first set of data early next year. If all goes well, Ventrus could win approval in 2014 and to launch the product in 2015.

So what are the other two drugs in Ventrus’ pipeline? We’ll leave them out of this profile, except to say one is going into Phase 3 trials and the other is currently in Phase 2 clinical trials. Leerink Swann’s Schimmer estimates that together they’ll be bringing in more than $50 million in annual sales by 2019. (For more details on those drugs, check out the pipeline list on Ventrus’ website.)

Ellison joined Ventrus about six months before its IPO from Paramount Biosciences, a pharma and healthcare investment firm. His previous experience included working for Sanofi-Synthelabo and Hoffman-La Roche. He says he couldn’t pass up the opportunity to work at a company with three late-stage drug candidates. “These aren’t science projects anymore,” he says. “I love first-to-market products. It’s challenging, but in a good way.”

As for those jokes Ventrus tends to inspire, Ellison has formed a grand plan. “I have a long compendium of really good jokes,” he says, “which I plan to give to Jay Leno when we launch our first drug.”

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