VentiRx Pharmaceuticals has raised a venti-sized load of new cash. The San Diego and Seattle-based company that’s developing drugs to amplify the body’s innate immune system to fight cancer and allergies has pulled in $25 million through a new round of financing.
The deal is technically described as an extension of a $26.6 million Series A financing that VentiRx received in March 2007, meaning the company has now raised $51.6 million in the total round. The extension, which allows investors to buy VentiRx shares at the same price as they did before, was led by new investor MedImmune Ventures, while existing investors Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates all participated again. Maggie Flanagan LeFlore of MedImmune Ventures is joining the VentiRx board in connection with the deal.
The big idea at VentiRx, which I described in a detailed feature almost exactly one year ago, is to create conventional small molecule drugs that stimulate Toll-like receptors (TLRs), particularly one called TLR8. The family of TLRs are key components of the body’s innate immune system—the first-line defense that recognizes foreign invaders at their point of entry under the skin, in the mucus linings of the nose, and in the gut. VentiRx has developed one candidate for cancer that’s finishing an early-stage clinical trial, and another candidate for allergies that has passed an initial safety study. The new money is being used to move ahead with a pair of more rigorous, mid-stage clinical trials of both drugs this year which should establish whether they have proven this new concept of fighting cancer and allergies by stimulating TLR8.
“We view this as the last financing we’ll need before liquidity at VentiRx, whether it comes through an acquisition, an IPO, or a Big Pharma partnership,” says Michael Kamdar, the company’s executive vice president and chief business officer.
VentiRx hasn’t come out publicly with hard data to support its scientific approach, but the findings will be available this year, Kamdar says. The company was able to secure the new round of funding after seeing signs that its cancer drug appears to stimulate an effect known as antibody dependent cellular cytotoxicity, which means it could help improve upon with antibody drugs for cancer like rituximab (Rituxan) or cetuximab (Erbitux), Kamdar says.
He noted that AstraZeneca, the parent company of MedImmune Ventures, has a longstanding interest in TLR biology, and has internal programs that look at different TLRs, such as TLR7 and TLR9, but not the same target as VentiRx, Kamdar says. Flanagan LeFlore added in a statement that VentiRx has potential to create “first-in-class drugs for significant diseases.”
“We hit all of our Series A milestones, and we’ve also had significant interest from potential partners,” Kamdar says.
Rob Hershberg, VentiRx’s chief scientific officer, told me a year ago how VentiRx found some hidden gems when it licensed in small-molecule drug candidates from Boulder, CO-based Array Biopharma (NASDAQ: ARRY). The drugs were made to hit TLR8, but at the time VentiRx got started in 2006, most scientists weren’t interested in that target because it wasn’t something that could be tested adequately in mice, the dominant animal model in most biology. VentiRx theorized that if it could prove the concept of TLR8 stimulation in primates, it could offer a more compelling body of evidence that this idea could work in people.
While the first drug candidate is thought to help stimulate the immune system to kill cancer cells, VentiRx had a completely different idea in mind for another application—allergies. The company reformulated a TLR8 stimulating compound into a low-dose nasal spray, which essentially creates a diversion of sorts in the mucus lining of the nose so that people don’t get the strong immune response that leads to runny and stuffy nose, watery eyes, and all the telltale symptoms that about 30 million people endure in the U.S.
That second VentiRx compound has passed a safety study of 37 healthy volunteers in the Netherlands, Kamdar says. The company expects additional results from a more rigorous study from Switzerland in which 72 patients were randomly assigned to get the VentiRx drug or a placebo, and then sent into a controlled environment in which they were directly exposed to allergens, Kamdar says. That data is expected by the end of March.
Some important questions still need to be worked out with both compounds, Kamdar says. The 72-patient study was designed with a weekly nasal spray formulation in mind, and the company needs to assess what happens when people get multiple repeat doses. VentiRx also wants to know what will happen if it gives patients its allergy drug as a preventive medicine, in which maybe three to six doses will be given before seasonal allergy season arrives, Kamdar says.
VentiRx was built from the start to stay lean, as a “virtual” organization, and that’s not going to change with this new round of financing, Kamdar says. The company has 12 employees, and plans to keep its headcount in that range, while putting most of the money toward clinical trials of its cancer and allergy drugs, he says.
It sounded like a sign of the times when a company hits all of its milestones laid out in a Series A round—obviously enhancing the value of the company—yet it was still unable to command a higher price for its shares from investors. This made me wonder about the investment community mood, especially since Kamdar and I met in San Francisco, where we are both attending the JP Morgan Healthcare Conference, a big annual fundraising meeting.
Kamdar kind of shrugged off the valuation question. “They say now that flat is the new up,” he says. “I’ve heard stories of people getting offered 50 cents on the dollar even after hitting their milestones. We consider ourselves fortunate.”