VentiRx, Evangelist for Lean, Mean Virtual Way, Makes Progress With Cancer, Allergy Drugs

9/17/09Follow @xconomy

Virtual companies have been all the rage for some time with biotech venture capitalists, but I’ve been wondering whether this lean-and-mean outsource-darn-near-everything model is really a better way to develop drugs than the traditional soup-to-nuts approach at companies like Genentech. I haven’t seen a good academic paper on this question, and until I do, I’m going to keep asking people who live with this idea on a daily basis, like VentiRx scientific co-founder Rob Hershberg.

VentiRx, as I first described in this space back in January, personifies the trend toward small teams of experienced drug developers who rely on contractors to do a lot of the work. The company, which has a team of just a dozen people in Seattle and San Diego, raised $29 million in its Series A funding in March 2007 from Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates. VentiRx still has money left in the bank, so it’s apparently sipping fuel like a Honda Civic Hybrid, but the big question I had for Hershberg was this: What has this small team of committed people really accomplished?

The company hasn’t done anything to win headlines at a major medical meeting, but it has made a lot of the step-by-step progress that companies must make on the long slog to FDA approval. VentiRx now has two drug candidates whose safety has been demonstrated at a variety of doses in clinical trials for cancer and allergies. And prospective partners are starting to take a closer look, just as the VentiRx business model called for, Hershberg says.

At least one other virtual company, Brisbane, CA-based cancer drug developer BiPar Sciences, has proven that a virtual company can deliver bang-up results for a new drug, and made windfall profits for its investors when it sold to Sanofi-Aventis for $500 million earlier this year.

“There is really something to be said for focus,” Hershberg says. “I’m not saying the virtual model works in taking a drug all the way from the laboratory to the market. But in going from late-stage preclinical to proof-of-concept in people, like with a Phase Ib or Phase IIa clinical study, you can create a lot of value. It’s really an ideal structure. When you get into the later stage studies, that’s when bigger companies need to get engaged.”

The concept at VentiRx is that it could hit a goldmine if it can prove that cancer and inflammatory diseases like allergies can be treated by stimulating a target on cells of the innate immune system, called TLR8. Stimulating these cells may amp up the immune system to start killing all sorts of cancer cells alongside traditional chemotherapy. It also ought to work for allergies by creating a diversion of sorts for the immune system, so it doesn’t overreact and cause itchy eyes, and stuffy, runny nose when encountering all the usual microbes and particles people encounter everyday, Hershberg says.

Berkeley, CA-based Dynavax Technologies and Cambridge, MA-based Idera Pharmaceuticals are a couple of competitors who are pursuing similar ideas with other members of the TLR family, although VentiRx says it is the first to introduce a TLR8 stimulator into clinical trials, Hershberg says. More and more academics are writing papers about this target, providing validation for the work that VentiRx started here in 2005.

VentiRx has enrolled 18 patients in its first clinical trial of its drug candidate for cancer, and so far it appears safe. There is also some biological evidence that the drug is acting as desired, even at less-than-optimal doses. The company will keep dosing at least six more patients at a couple of higher doses before moving to the next step with this product, dubbed, VTX-2337.

The second drug does the same thing, stimulating TLR8, but it in a completely different way. VentiRx has created a new drug for this condition that is given in much lower doses, in a nasal spray given once a week. It’s supposed to create the diversion in the mucosal membranes of the nose as a way of essentially tricking the immune system in that sensitive place into not going berserk when encountering common allergens that cause allergies. About 30 million people complain of allergies in the U.S., so the market for a treatment that’s safe, effective, and convenient is potentially huge.

The company started a trial back in April in Europe, enrolled 37 healthy volunteers, and found its nasal spray was safe and well-tolerated. Now it’s getting ready for a more rigorous study in the first quarter of 2010, with about 60 patients who get a variety of doses of the VentiRx drug, VTX-1463, or a placebo. These people will be kept inside an enclosed chamber and exposed to allergens, to see if the VentiRx treatment really protects them or not.

That will cost money. While Hershberg won’t say how much gas VentiRx has left in its tank, he says it has enough to finish that study, which has potential to boost the company’s valuation a lot higher than it is now.

What will happen if VentiRx reaches it goal and finds a big partner to pick up one or both of its two drugs and take them through later stages of development? The obvious answer is that it would get acquired, like BiPar. Whether that happens eventually, or it forms a partnership, Hershberg says he can imagine similar scenarios playing out. Either way, he likes the idea of keeping his team together, prowling around for some other cancer or allergy drug that Big Pharma hasn’t yet fully appreciated, and building up its value through the early phases of development. He sees it as a way to achieve something big, while keeping the company itself small.

“We really have a good little engine,” Hershberg says. “I like our size and nimbleness.”

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