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Proteon, Moving on From Ill-Fated Novartis Deal, Files IPO Pitch

Xconomy Boston — 

It wasn’t too long ago that Proteon Therapeutics looked to be a piece of Novartis’ portfolio. That deal flamed out, however, leading the Waltham, MA-based biotech to retrench, find some new investors, and—as the company as just disclosed today—chart a course for Wall Street.

Proteon has unveiled plans to go public, aiming primarily to finance the ongoing clinical development of PRT-201, a drug that’s supposed to boost the success rates of a surgical procedure often used to prepare kidney failure patients for dialysis. The SEC filing isn’t necessarily a surprise—Proteon raised a big $45 million round four months ago and added a few “crossover” investors to its syndicate like Abingworth and Deerfield Management. All told, Proteon has raised more than $120 million in venture cash since its inception in 2006.

TVM Capital holds the biggest piece of Proteon’s equity, a 19.4 percent stake. Other major shareholders include Abingworth Bioventures VI (19.1 percent), Prism Venture Partners (15.6 percent), Skyline Venture Partners (15.3 percent), Deerfield (10.5 percent), and Intersouth Partners (10.4 percent).

Proteon would trade under the ticker symbol “PRTO” should it complete its IPO.

For those unfamiliar with the Proteon story, the company was formed based on work that interventional radiologist Nicholas Franano did at Johns Hopkins University. (Franano has since gone on to found a second company, Novita Therapeutics.) The concept behind Proteon was to use an engineered form of a human enzyme called elastase to help improve the outcome of a surgical procedure—the creation of an arteriovenous fistula, or AVF—often used to prepare patients with kidney failure for hemodialysis.

In AVF surgery, a connection is created between an artery and a vein in a person’s arm, which boosts the blood flow through the area and thickens the blood vessel wall, making it stand up better to being pricked constantly by the big needles used in dialysis. AVFs often fail in the first year, however, largely because while the blood vessel is healing, a bunch of cells head to the area and stay there, clogging up the vessel and cutting blood flow. PRT-201 is designed to prevent that from happening.

The concept attracted the attention of Novartis, and after Proteon wrapped up an early-stage trial the two companies cut a big deal that gave the pharma giant an option to either buy Proteon outright or license PRT-201 after a Phase 2 trial. Proteon was to receive up to $550 million in upfront and deferred payments in return. That never happened, however: CEO Timothy Noyes told Xconomy earlier this year that Proteon and Novartis couldn’t come to terms on an acquisition deal structure after the study, and the deal fell apart. Noyes contended at the time that Novartis’ decision had nothing to do with Proteon’s data. (Though the Phase 2 trial did produce somewhat mixed results, Noyes cited an “imbalance” in the study’s placebo group.)

With Novartis out of the picture, Proteon moved on to Plan B. It still had a big Phase 3 study to fund for PRT-201, but no big backer. So it rounded up a group of investors, announced a $45 million round, and positioned itself for an IPO. Proteon says in its prospectus that it has gotten access to the first $25 million tranche of that financing, and already started the first of two Phase 3 trials of PRT-201 in the third quarter of 2014. (It’ll begin a second study early next year.) Proteon expects to produce data from that study in 2017.

Stifel, Nicolaus & Co., JMP Securities, Robert W. Baird, and Oppenheimer & Co. are Proteon’s underwriters.