The notion that Regulus Therapeutics might go public in 2011 sounds like nonsense at first blush. The San Diego-based startup doesn’t have a shred of evidence that says its experimental drugs are safe, or even a little effective, in human beings. And it will be at least another year before the company enters the vital proving ground of clinical trials.
Yet Regulus, the microRNA drug developer that’s barely three years old, just might provide a litmus test on the mood for biotech investment in 2011. It spoke volumes last month when a company as young as Regulus, with a big scientific idea and a couple key partnerships, was able to win a coveted presentation slot at the biggest biotech investing event of the year, the JP Morgan Healthcare Conference.
Even more improbable—about 50 people showed up to hear CEO Kleanthis Xanthopoulos tell the Regulus story at what amounted to the graveyard shift at the conference—1 pm on Thursday afternoon, long after most attendees had flown home. When I met with the tireless chief of Regulus a couple hours later, he still had three more meetings left that day.
“There is a lot of interest in Regulus,” Xanthopoulos says. “People are now beginning to view microRNA as not just a big idea with potential to be disruptive, but something that is much closer to reality than people had anticipated even a year ago.”
Xanthopoulos knows the drill of the IPO process, having been the founding CEO at San Diego-based Anadys Pharmaceuticals (NASDAQ: ANDS), which he helped take public six years ago. He wouldn’t answer directly when I asked him if he’s gearing up for an IPO this year, but he did make it clear he’s paying attention to the markets. He pointed out that he noticed that a number of biotech companies went public in 2010, many are lined up to go out this year, and most have drugs in clinical trials that offer lower-risk/reward profiles than Regulus. That means he offers something different for portfolio managers looking to diversify their holdings with a classic biotech swing-for-the-fence story.
“The fact that we were selected to present—it’s not serendipity,” Xanthopoulos says. He adds: “We spent a lot of time giving updates to investors, to bankers, to analysts.”
Alnylam CEO John Maraganore didn’t do anything to dispel the idea of a Regulus IPO. Maraganore has rooting interest, of course, since Alnylam pooled some intellectual property with Carlsbad, CA-based Isis Pharmaceuticals to found Regulus in late 2007—and Alnylam still has a 45 percent ownership stake in the spinoff. Maraganore is also chairman of the board of Regulus.
“If and when Regulus goes public, or gets sold, gee, we will own 45 percent of something that’s really valuable,” Maraganore says. “That’s more money for us, and we won’t have to sell a single share of Alnylam.”
The Regulus story at this point is mostly still about a big idea, and a lot of validation from its pedigree as an Alnylam/Isis spinoff. It has sizable partnerships with GlaxoSmithKline and Sanofi-Aventis. Those transactions have enabled Regulus to grow into a 55-person organization, with several years of cash on its balance sheet, without having to spend time raising traditional venture capital, Xanthopoulos says.
Why all the fuss? The money and brainpower is being directed in an effort to turn Regulus into the leading developer of microRNA drugs. Biologists didn’t even know these tiny microRNA switches existed in humans until 2001, but a big push in research has shown these molecules have potential to regulate full networks of genes, not just one gene or protein at a time, like most conventional drugs. The microRNA strategy is thought to have promise in treating complex diseases like diabetes, cancer, or autoimmunity, where multiple genes can get thrown out of whack. This is all very early stuff—back in the summer of 2009, Xanthopoulos called it “bleeding edge” in an interview with Xconomy.
Most of the research at Regulus to date has been about developing specific microRNA silencing molecules against certain targets, and seeing what kind of effect they have in mice. Several times during our chat, Xanthopoulos talked about “therapeutic effects” that have been seen in mouse models of microRNA drugs in the pipeline, as opposed to merely showing a drug can hit its intended biological target. Work is now advancing into primates, with an eye toward mounting an initial clinical trial in another 12 to 18 months, he says. Xanthopoulos didn’t say which program is furthest along in development, although Regulus lists four disease categories on its website—cancer, autoimmunity, hepatitis C, and cardiovascular disease.
Any time you plow ahead in a new field of biology, with all its complexity, an almost infinite number of things could go wrong. There are hard methodical steps that must be taken to win over academic peers, regulatory agencies, partners, and, yes, public investors. But enough of those methodical steps have happened in the past couple years that Regulus is in position to dream very big, and maybe even go public before it has a drug showing promise in clinical trials.
“This will be about us going into humans, targeting a specific microRNA we know is dysregulated, injecting patients with a specific oligonucleotide, and seeing whether this injection correlates with a return to normal,” Xanthopoulos says. “That’s the challenge we put in front of 55 brilliant people in the next three years. It’s an aggressive, but not an unrealistic goal.”
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