Lpath, a Developer of Lipid-Targeting Drugs, Nears a Fork in the Road

6/17/09

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up to $422 million over a number of years in milestone payments to Lpath. The San Diego biotech received an upfront payment of $18 million last fall, and could receive royalties ranging from seven to 10 percent of sales if a drug eventually is approved.

Getting the keys back, as Pancoast put it, would force Lpath to raise money fast in a terrible investment climate. The company’s most recent quarterly filing warns that Lpath’s history of losses – about $36 million to date– raise doubt about the company’s ability to continue as a going concern. Without an infusion from Merck Serono, Lpath lacks the capital to fund its operations into next year, the filing said.

Lpath is making progress raising cash through grants and development partnerships, Pancoast said. This month, Lpath received a $3-million, three-year grant from the National Cancer Institute to develop sonepcizumab. And the company is actively seeking a partner to help it develop the sonepcizumab for age-related macular degeneration, the leading cause of blindness in the elderly. In pursuing a blindness drug, Lpath is following a strategy deployed by Genentech, which modified the bevacizumab antibody for an age-related macular degeneration drug called ranibizumab (Lucentis). The drug prevents the growth of leaky blood vessels in the eye, the cause of blindness in one form of AMD.

“We’ve had indications of interest from several parties and hope to have a partnership within the next 12 months,” Pancoast said.

Armed with his PowerPoint presentation, Pancoast was in Denver last week on a mission to persuade investors to purchase the company’s stock, which is trading around 95 cents a share. Pancoast complained the company’s shares were undervalued, given the upside of the Merck Serono deal. “Four years ago, when we had one preclinical candidate, the stock was at 80 cents a share. I think we’ve made more progress than 15 cents,” he said.

At its current price level, the company, which has 23 employees, has a market capitalization of about $49 million, approximately its cash position if it receives an infusion from Merck Serono, a division of Germany-based Merck. Lpath had $6.7 million in cash at the end of the first quarter. Pancoast said he expected to see a “flurry of bets” placed on the stock when Merck Serono’s decision deadline draws near. Here’s his prediction: “We feel confident they will opt in.”

Denise Gellene is a former Los Angeles Times science writer and regular contributor to Xconomy. You can reach her at dgellene@xconomy.com Follow @

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