Enteris Emerges From the Ashes of Unigene, Hunts for Deals

8/28/13Follow @benthefidler

What’s in a new name? More than usual for Enteris Biopharma.

That’s because the Boonton, NJ-based biotech is part of what remains of Unigene Laboratories, a three-decade old company best known both for a way to turn injectable peptide drugs into pills, and disappointing Wall Street investors. Unigene is now in the biotech graveyard, having been vanquished by debt and crippling regulatory decisions, and ultimately sold in pieces at a few auctions earlier this year.

But a group of ex-Unigene executives are hoping that’s only a sad chapter leading to a better ending. Brian Zietsman, Nozer Mehta, and Paul Shields, all of whom were part of Unigene’s old leadership, are heading the newly-formed Enteris, which is built around Unigene’s peptide and small-molecule drug delivery technology. Chicago hedge fund Victory Park Capital, Unigene’s old lender, scooped up the former Unigene technology, called Peptelligence, by using $15 million of the close to $57 million in debt it was owed by the company to make a credit bid. It then rounded up Zietsman (Enteris’ president and CFO), Mehta (chief scientific officer), and Shields (VP of operations), and gave them an unspecified funding commitment to do what Unigene couldn’t—turn Peptelligence into the backbone of a successful business.

Enteris’ plan is a familiar one. It wants to use Peptelligence to create a stream of licensing deals, either helping drugmakers turn injectable peptide drugs into pills, or reformulating already-marketed, injectable or even oral small-molecule drugs that have problems being properly absorbed in the body. Enteris is scouring the market for drugs that bring in a lot of cash, are close to the end of their patent lives, and that it says it can improve based on certain characteristics—such as solubility limitations—by reformulating them. By doing so, Enteris would offer a pharmaceutical company a chance to add to new patent life to an injectable, or even oral drug about to lose market exclusivity.

If that sounds a little familiar, it’s because Unigene had the same idea when it began a turnaround headed by then-CEO Ashleigh Palmer a few years ago.

So what makes this group think that a fresh start will change things? For one, a clean balance sheet: Enteris itself has no debt, and is being funded by Victory Park until it becomes cash flow positive, according to Zietsman.

Second, the Enteris team publicly declares that it never lost faith in its technology, and that Unigene was only weeks away from a life-saving deal with Victory Park and the company’s founders to convert a big chunk of its debt to equity.

“The turnaround strategy would’ve worked at that point,” Zietsman says.

Instead, Zietsman says, Unigene was blindsided. All of its development programs were tied to different formulations of calcitonin salmon—a product approved for decades as an osteoporosis treatment. But in 2012, the EMA, and subsequently an FDA advisory panel, both recommended that calcitonin-based drugs shouldn’t be used chronically as an osteoporosis treatment because of growing concerns that the benefits didn’t outweigh the risk of cancer.

The regulatory actions “literally brought the company to its knees overnight,” Zietsman says.

Unigene had been taking percentage royalties from an osteoporosis nasal spray known as Fortical that was developed using its technology. Unigene also licensed an oral calcitonin tablet to Tarsa Therapeutics in 2009, and grabbed a 16 percent equity stake as part of the deal, along with a royalty stream and milestone payments tied to development goals. That potential revenue stream was delayed by the FDA and EMA actions before Tarsa ever even filed an application with regulators. Unigene eventually defaulted on its debt with Victory Park, went bust in June, and was liquidated through public auctions under what’s known as Article 9 of the Uniform Commercial Code, a tool companies and their creditors can use to flip assets more quickly and less expensively than in a Chapter 11 filing.

Enteris has no revenue-generating products on the market, or anywhere close. And though Zietsman says there’s been plenty of interest from pharmaceutical companies keen on reformulating their small-molecule drugs into new chemical entities with longer patent lives, Enteris is also very early in the process of proving that it can effectively do so the way it has with peptides. It’s only done some feasibility studies, as well as rat and dog models, of a number of products.

But while Enteris faces those uncertainties, as well as competition—nearby Emisphere in Roseland, NJ, is also developing an oral peptide platform—Enteris’ team says that it has a few selling points that differentiate Peptelligence and can make it the foundation of a viable business. Those include an enteric acid coat covering a drug that keeps it from dissolving in the stomach, and certain excipients—the filler substances mixed with active pharmaceutical ingredients—that are supposed to open tiny gaps in the intestinal wall between cells, and aid the drug’s absorption.

Now, Enteris has to make it work. It has two plans to do so: to find licensing partners, and potentially make its own drugs down the road before the money runs out. It helps, as Zietsman says, that Enteris “isn’t starting from scratch.”

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

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