Amira Pharma on How it Beat the Odds, and Sold an Early Stage Drug to Bristol-Myers for $325M

9/7/11Follow @xconomy

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the $5-billion-a-year blockbuster montelukast sodium (Singulair) for asthma. No major innovations have come along to really improve the quality of life for pulmonary fibrosis patients—and it’s traditionally been a disease that’s hard to diagnose because of its similarity to other lung diseases. But the biology of the LPA1 pathway (which I wrote about here in March 2009) made it look like an intriguing target for drug development. As a niche market, this also looked like an area that a small company like Amira could pursue with a modest amount of cash, Baltera recalled.

So Amira’s team went through its methodical paces like they did at Merck, screening a number of small-molecule drug candidates. And true to their Big Pharma roots, they spent extra resources continuing to invest in backup compounds in case the first one failed, and alternative compounds designed to hit closely related biological targets. It’s a rigorous approach that many cash-strapped biotechs often can’t afford to follow, as most of the resources go toward one lead drug. But the process that Amira followed, which some might consider a luxury or a belt-and-suspenders approach, was critical in creating an auction among pharma companies for the Amira program, Bolzon says.

“As a small company, you have to almost be better than the programs out of Big Pharma. You don’t have the ability to muscle it through with greater resources,” Bolzon says. “And if there are any warts on it, someone in a 30-40 person Big Pharma diligence team will pick it up.”

Financially, Amira was able to pursue this broad and deep understanding of its compounds and their LPA1 target, partly thanks to a sugar daddy—GlaxoSmithKline. The London-based pharma giant helped support Amira starting in February 2008, and helped float it during the Great Recession years, by agreeing to co-develop drugs for asthma against the FLAP target. That partnership still remains intact, Baltera says.

While the Glaxo deal mitigated Amira’s cash burn rate, Amira was still losing money like all startup drug developers. It toyed with the idea of going public to raise more cash once it had some Phase I clinical data. But the markets have shown no interest in companies with that still-risky profile. Instead of raising another round of venture capital that would have diluted existing investors and made it more difficult to get a big return, Amira made a tough decision to cut costs. It cut loose about half of its workers right before Thanksgiving 2010, reducing its staff to just 25 people.

“I don’t think any CEO or board enjoys making decisions like that,” Baltera says. “We had our ups and downs.”

Hard as it might have been for Baltera—and even harder for those affected—the layoff was strategically important for the company. By cutting the payroll, Amira never ran dangerously low on cash, so it was able to maintain a strong bargaining position. It essentially meant no Big Pharma acquirer could hold it over a barrel, offer some stingy deal terms, and wait for Amira to cave in just to get enough cash to keep the lights on. “We could stand on our own two feet and tell potential bidders we’ll be go forward independently,” Baltera says.

The financial independence meant that Amira was in good shape by the spring of 2011, just as Big Pharma started getting a lot more interested in pulmonary fibrosis. Amira had started gathering data from its first trial of healthy volunteers, which showed its drug was safe at a variety of doses. Meanwhile, another company, Brisbane, CA-based Intermune (NASDAQ: ITMN) enjoyed a stroke of good fortune when European Union regulators approved its new drug for pulmonary fibrosis, sparking a frenzy of investor interest in this disease category. As pharma companies looked around for other alternatives in this emerging drug category, there wasn’t a whole lot to pick from. Amira was one of the few startup companies out there with a serious program, along with Cambridge, MA-based Stromedix.

Brad Bolzon

Apparently, the due diligence teams at Bristol and at least a few other companies (Baltera wouldn’t say how many bidders there were) liked what they saw in the Amira pulmonary fibrosis program. And by getting maximum bang out of a small research team, Amira was able to deliver the kind of returns that can actually help biotech VCs justify their existence.

While there’s no way Amira could have predicted back in 2008 when it started that Big Pharma would fall in love with pulmonary fibrosis in 2011, it did run its program to pharma’s usual standards, and stayed in the game long enough, and watched its pennies carefully, so it was in position to capitalize when the clouds parted.

“If this deal hadn’t happened, it wouldn’t have been the end of Amira,” Bolzon says. “This company was well prepared. It’s a real blueprint for companies going forward.”

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