Ocera Cheers from the Bleachers As Rival Succeeds with New Drug for Brain Damage

2/24/10Follow @xconomy

Sometimes in biotech you have to root for your biggest competitors to succeed. That’s why yesterday was a very good day for the folks at San Diego-based Ocera Therapeutics.

The big news came out yesterday from suburban Washington D.C., where an FDA advisory panel recommended that regulators approve a new drug from Morrisville, NC-based Salix Pharmaceuticals (NASDAQ: SLXP). The drug, rifaximin (Xifaxan), is designed to treat hepatic encephalopathy, a condition in which people get brain damage because their damaged liver is unable to clear toxins from their bloodstream.

The panel’s 14-4 recommendation sent shares of Salix soaring 20 percent in after-hours trading to $28.90 a share. One of the more interested people in attendance at that meeting was Ocera CEO Laurent Fischer. He tells me that immediately after Salix won approval, he hopped on a plane to visit potential partners and investors in New York, some of whom will undoubtedly be more interested now in hearing about other ideas, like Ocera’s, that also seek to treat hepatic encephalopathy.

“We were cheering from the bench for rifiximin,” Fischer says.

Ocera, a private company founded in 2005, has raised $62 million from Domain Associates, Sofinnova Ventures, InterWest Partners, and Thomas McNerney & Partners. Ocera’s vision, as I described in a November feature, is to develop a drug that acts like a sponge in the gastrointestinal tract. The compound, an oral pill called AST-120, is made to bind efficiently with toxins like ammonia and other metabolic byproducts in the gut, while avoiding common digestive enzymes or vitamins, Fisher has said.

People with cirrhosis of the liver often lose their ability to break down those compounds, which can flow to the brain—causing cognitive impairment, a loss of balance that causes them to fall down, or impair their ability to do daily tasks like drive a car. This disease is hard to diagnose, but an estimated half of the 1 million people in the U.S. with cirrhosis suffer from some degree of hepatic encephalopathy, and the incidence is similar in Europe, Fischer says.

Laurent Fischer

Laurent Fischer

While Salix is now likely headed toward FDA approval of its product, Ocera is a bit further behind. But there are clear differences, Fischer says. The Salix product is generally oriented toward patients with more severe forms of the disease, and it will be used in combination with lactulose, an existing drug.

Ocera is charting a similar course, but is pursuing patients with milder forms of hepatic encephalopathy, and with its drug that acts on its own. Yesterday, Ocera announced it has completed enrollment in a mid-stage study of 150 patients, who were randomly assigned to get its experimental product or a placebo. Results from that trial should be available by mid-2010.

Ocera may have a little wind in its sails for now, but like everything else in biotech, this story will hinge on the data. If the data is positive for Ocera, then it will be off the races to run a pivotal trial that could someday put the company on the same national stage that Salix was on yesterday. If not, it could be back to the drawing board.

But given that Salix is making money for investors, it will be interesting to see if this perks up interest from Ocera’s partners and investors. It’s possible that Ocera could be an IPO candidate later this year, if it has positive Phase 2 data in hand with a drug that could have significant market potential. Fischer didn’t scream IPO to me in so many words, but it didn’t take much to read between the lines of what he said.

“We’re hopeful that we’ll have alternatives to private financing,” Fischer says. “It’s a large opportunity for Ocera and our partners.”

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