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Alkermes Spinoff Civitas, Poised for IPO, Sells to Acorda for $525M

Xconomy Boston — 

Civitas Therapeutics was all set to become the latest in the long line of biotechs in 2014 to go public. Then, apparently, it got an offer from Ardsley, NY-based Acorda Therapeutics (NASDAQ: ACOR) that it couldn’t refuse.

Acorda today agreed to pay $525 million in cash to acquire Civitas, the Chelsea, MA-based company developing an inhalable version of the decades-old Parkinson’s drug, levodopa (or L-dopa), called CVT-301. The deal also gives Acorda rights to the technology Civitas was founded on—the old Alkermes (NASDAQ: ALKS) technology that can deliver a precise, high dose of a drug through an inhaler.

CVT-301 is on the verge of Phase 3 trials. Acorda CEO Ron Cohen said on a conference call with analysts this morning that the company is aiming to begin a late-stage trial of the drug in early 2015, and, assuming all goes well, file a new drug application with the FDA by the end of 2016.

Wall Street applauded the deal for Acorda, sending its shares up more than 17 percent in early trading.

The deal is a big haul for Civitas’ investors, which include Longitude Capital Partners (19.9 percent as of the filing of Civitas’ IPO prospectus), Canaan Partners (19.8 percent), Fountain Healthcare Partners (10.2 percent), Bay City Capital (10.5 percent), RA Capital Management (9.6 percent), Alkermes (7 percent), and Wellington Management (6.5 percent).

The acquisition ends an unusual biotech path for Civitas. The story started with a big investment by Alkermes years ago in a Chelsea facility built to make inhalable insulin for diabetics. That program was part of a partnership with Eli Lilly, but Lilly scrapped it in 2008. Alkermes then spun out the technology that was to be used in the program by forming Civitas, which secured $20 million in financing led by Canaan and Longitude to get going.

Civitas didn’t try to continue the inhalable insulin effort. Instead, it turned its attention to using its technology to developing inhalable L-dopa, known as CVT-301, as an adjunct therapy to the pills a majority of Parkinson’s patients take to manage their symptoms.

Those pills, while a mainstay of care, have the drawback of producing erratic levels of the drug in the bloodstream. Large protein molecules from food can block L-dopa before it is absorbed in the intestines, and this can lead to what’s known as “off episodes,” when patients’ medications stop working and their symptoms reappear. Civitas’ pitch was to give patients the option to take a puff of CVT-301 when those episodes occur—the idea being, by delivering the drug through the lungs and avoiding the gut, Civitas could circumvent the absorption problems. Co-founder and former CEO Glenn Batchelder told Xconomy last year that the plan would be to ultimately show that the technology could apply to a number of other therapies (Mark Iwicki stepped in for Batchelder in January).

So far, Civitas has produced enough encouraging results to get close to a Phase 3 test. It completed a Phase 2b trial of CVT-301 in April, and then raised a big $55 million round on Aug. 25 and turned around two days later to file for an IPO. Civitas was on the cusp of pricing that offering. Just last week, it revealed its intent to sell 5 million shares at $14 to $16 apiece. At the midpoint of that range, Civitas would’ve had a fully-diluted market capitalization of $403 million, according to IPO research firm Renaissance Capital. The Acorda deal, however, wipes that all away.

“We were working the last few days literally night and day to get this done,” Cohen said on the call this morning.

Now Acorda, best known for dafampridine (Ampyra, the drug that helps improve walking in multiple sclerosis patients), will take on the responsibility of seeing CVT-301 through and getting a return on its investment. Cohen said the FDA has indicated Acorda will have to run one additional efficacy study, and additional safety studies to win approval. The drug, which is self-administered via a pen-sized device, hasn’t been shown any significant safety signals to this point, such as troublesome dyskinesia (involuntary muscle movements), though Acorda will have to show those good signs continue in an additional trial.

Cohen said that Acorda has been following Civitas closely since the fall of 2012, and that it gives the company a late-stage asset “squarely within Acorda’s scientific focus,” the chance to begin generating revenue outside the U.S. (Civitas owned worldwide rights to CVT-301, and Biogen Idec has non-U.S. rights to dalfampridine), and a technology it can use to develop other therapies.

“This is something that is potentially applicable wherever you have drugs with similar quantities that are required and which for whatever reason are not optimal when delivered through an oral route,” Cohen said, without identifying specific opportunities. “You can load far more drug substance into it for delivery then you can for other inhalable technologies.”

Cohen said there are about 350,000 of the roughly 1 million Parkinson’s patients in the U.S. that could benefit from CVT-301, and is projecting about $500 million in U.S. peak sales for the drug—should it succeed in Phase 3 and ultimately win regulatory approval. He declined, however, to specify how Acorda came to those numbers.

RBC Capital Markets analyst Michael Yee was “lukewarm” on the deal for Acorda, noting “some clinical but mostly regulatory risk for inhaled old drugs.” He cited the challenges Valencia, CA-based Mannkind (NASDAQ: MNKD), for instance, had in winning FDA approval of its inhalable insulin, Afrezza.

“Inhaled drugs like this may require specific pre-clinical and clinical data related to [pharmacokinetics], consistency, long-term chronic lung safety in animals and humans, and other regulatory data specific for inhaled drugs that sometimes aren’t always clear until during or end of regulatory reviews, which makes it particularly tricky,” he wrote in a note to investors. “Granted this is a long term risk that should be manageable.”