Allozyne Raises More VC Cash, Looks to FDA Meeting After Poniard Deal Fizzles
Seattle-based Allozyne wasn’t able to go public this year, so it has fallen back on Plan B, tapping its existing venture capital backers one more time in a bid to create more value around its lead multiple sclerosis drug candidate.
Allozyne, which has spent about $50 million since its founding in 2005 and was down to its last $1.3 million in cash at the end of June, has raised an undisclosed amount of new venture capital from its existing investors, according to CEO Meenu Chhabra. The money from Arch Venture Partners, MPM Capital, and OVP Venture Partners will be used to help the company push ahead with a plan for 2012 to move its lead multiple sclerosis drug into the third and final phase of clinical trials normally required for FDA approval, Chhabra says.
“The syndicate is extremely excited that we are on a Phase III trajectory in 2012,” Chhabra says.
Allozyne remains a private, independent company after it pulled the plug on a six-month effort to merge with San Francisco-based Poniard Pharmaceuticals (NASDAQ: PARD), which was supposed to turn Allozyne into a public company. Selling the proposal to shareholders took longer than expected, and the deal ultimately fizzled because Poniard had fallen out of compliance with NASDAQ listing requirements that say a company must have a minimum market capitalization of $15 million. That was the whole point of the transaction—getting a NASDAQ listing in order to tap large funds that invest in public companies—so it no longer made sense to go through with the deal, Chhabra says.
Moving on, Allozyne turned to additional private financing, and continues to talk with partners and mull other options, like another reverse merger or a conventional initial public offering of shares, Chhabra says. The company has about 20 employees, and hasn’t made any staff cutbacks, she says.
Allozyne’s next strategic move depends heavily on an aggressive clinical development plan for its lead asset, AZ01. Allozyne is looking to leapfrog from Phase I trials all the way to Phase III—skipping the usual intermediate step, Chhabra says. The company believes that is possible because it isn’t blazing a completely new trail with a new molecular entity, but rather is taking an existing drug the FDA knows well—interferon-beta—and packaging it in a new way so it can be injected less frequently than the existing products on the market. Weston, MA-based Biogen Idec (NASDAQ: BIIB) has established this quicker-than-usual regulatory pathway with its own version of a long-lasting version of interferon-beta.
The Allozyne proposal, which it plans to make to the FDA at a meeting in early 2012, will be to enroll 700 patients who will be randomly assigned to get AZ01 once a month, AZ01 once every two weeks, Biogen’s existing interferon-beta (Avonex), or a placebo, Chhabra says. The primary goal of the study will be to see if the Allozyne drug is roughly equal (non-inferior in regulatory parlance) to the Biogen drug in terms of reducing brain lesions on MRI scans over a 12-month period, Chhabra says. While the FDA has often asked for two Phase III trials to confirm the benefit of novel MS drugs before clearing them for sale in the U.S., Allozyne is wagering that a single pivotal trial will satisfy regulators because they are familiar with interferon-beta, which has been marketed since 1993. It’s also betting that the FDA won’t require extra measurements of whether brain lesion reduction correlates with reductions in disability of MS patients—which the FDA has sometimes asked for from other drugmakers with novel drugs.
What the FDA says about the proper trial design will have a big influence on Allozyne’s next financing and strategic moves, Chhabra says. If the FDA agrees to Allozyne’s slimmed-down Phase III trial plan, it will be a “bombastic win” for the company, and raises the possibility that the company could finance the trial by itself and see results as soon as early-to-mid 2014, she says. If the FDA responds with a more difficult trial plan that includes something like 1,200 patients, the company will probably look to corporate partners or other ways of finding more financing, Chhabra says.
The multiple sclerosis market is a lucrative one, with more than 400,000 patients in the U.S. who suffer from a chronic disease that slowly robs people of their ability to walk, their ability to see, and manual dexterity to do things like get dressed or brush teeth. The disease is caused by an overactive immune system which attacks the fatty coating around nerve fibers, and it is controlled by drugs that suppress this overactive immunity.
Biogen Idec, Teva Pharmaceutical, Merck KGaA, and Bayer are dominant players in this $10 billion dollar market, and a new generation of the first oral pills has started to arrive, with one now on the market from Novartis. Patients with MS often complain about “injection fatigue” because they usually have to inject themselves more than once a week for a period of many years. So companies like Biogen Idec, Allozyne, Ambrx, and others have sought to engineer these injectable protein drugs to last longer in the bloodstream, and therefore control the disease with fewer injections.
Allozyne spent much of the fall outlining this pitch to investors on Wall Street, and Chhabra says it was “very well-received.” It’s impossible to verify that for certain through looking at Poniard’s stock price from this past fall, because investors who agreed to hear Allozyne’s story had to agree not to invest speculatively in Poniard shares until after the merger was supposed to be completed, Chhabra says.
When I remarked that she and the team must be disappointed to have spent so much time on an IPO plan that didn’t work out, the ever-upbeat Chhabra dismissed that notion. She said it was a “wonderful opportunity” to tell the Allozyne story to so many savvy, deep-pocketed public investors.
“No one here is in fact at all disappointed. We are very much looking forward to 2012. We are invigorated about the challenge ahead,” she says.