Phenomix Aims to Grab Piece of $10 Billion Diabetes Market

2/4/09Follow @xconomy

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which included a measurement of how much their blood sugar was reduced, and how many patients were able to get to an acceptable standard of hemoglobin A1c in the blood. The data still haven’t been published, and Shawver wouldn’t provide much more detail than that. However, she said the company’s drug is unique because it achieves a very steady concentration in the bloodstream instead of usual peaks and valleys, the drug isn’t metabolized in a way that could leave tiny metabolites that can cause unpredictable side effects, and it has low volume of distribution into tissues, which can be unpredictable. “Those are properties that give us confidence we have a very safe product,” she says.

Phenomix would probably be forced to disclose a bit more if it had been able to go through with an IPO, which it planned to do last year, until the stock markets slammed that window shut. The company still was able to get capital it needed to move the diabetes program forward in October, by signing a partnership with Forest Laboratories.

Forest provides the marketing muscle that’s essential for a little company like Phenomix if it hopes to compete in the diabetes market. Forest has shown it can hold its own in the marketing department in crowded categories, like with the anti-depressant escitalopram (Lexapro). The deal with Forest also brought in $75 million in upfront cash to Phenomix, and allows for the smaller company to receive as much as $340 million in milestone payments over time if the drug reaches certain goals. The deal calls for the companies to co-promote in the U.S., and equally divide profits in this country.

I asked Shawver if this deal provides enough of a financial cushion to Phenomix, even though it didn’t get the IPO cash it was looking for. The company has several other options to generate cash this year, she says. These include offering dutogliptin’s partnership rights outside North America, possibly signing a partnership with a bigger company that wants a piece of a hepatitis C drug it has in development, and there’s a chance she could raise another private round of financing. Even without making those things happen, the company has more than enough cash to get through this year, she says.

Hepatitis C is yet another fiercely competitive market, with Cambridge, MA-based Vertex Pharmaceuticals and Kenilworth, NJ-based Schering-Plough blazing a trail with a new class of protease inhibitors in development, and a slew of others, including San Diego-based Anadys Pharmaceuticals, piling in with different kinds of therapies at earlier stages of development. Phenomix says it will have an idea by “late in the second quarter” whether its candidate can compete in this market or not.

Phenomix got its start in 2002 based on some scientific insights, still very early in development, from researchers at Australian National University in Canberra, the Genomics Institute of the Novartis Research Foundation in San Diego, and the Baylor University College of Medicine in Houston, TX. It was at a point in time when investors were burned by hype over the Human Genome Project leading to cures. So a lot of scientific work got scuttled, in favor of highly concentrated work on lead compounds for diabetes and hepatitis C.

“We’ve found we had to persist through a strong competitive landscape for our lead programs, the DPP4 and hepatitis C programs,” Shawver says. “We just have to focus on what’s differentiating about our drugs and continue to execute on our plans.”

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