Thursday, August 16, 2007

Seeing Double: Ophthotech's $36mm Series A

IN VIVO Blog has several different varieties of deja vu.

SV Life Sciences, HBM BioVentures, and Novo AS have just funded an ophthlamology start-up with a $36 million Series A that will pay for the acquisition of two interesting drug candidates. Didn't that happen last year? It sure did, in May 2006. The company was Lux BioSciences.

OK, how about this: David Guyer, MD, and Samir Patel, MD, have teamed up as founders of an ophthalmology specialist based on in-licensed aptamer drugs and hope to make headway in the tricky macular degeneration space. SV (then Schroder Ventures Life Sciences) was an early investor. No, no, no, that was way back in 2000. Eyetech, right? Absolutely.

Well, talk about getting the band back together: On Monday, BioCentury broke the news that SV and co. were launching Ophthotech with a $36 million Series A, which Patel will helm as CEO and co-founder Guyer (who is a venture partner at SV and also on the board at Lux) will chair. Everything old is new again. Next you'll be telling us the Spice Girls are getting back together. What? Nooooo!

The cash will pay for the in-licensing of two aptamer projects, each of which should be in the clinic by the end of the year, SV managing partner Lutz Giebel, PhD, told IN VIVO Blog.

The first asset comes from OSI Pharmaceuticals' troubled and for-sale ophthalmology group, which just happens to be Eyetech (!), Guyer/Patel's former outfit they somehow had convinced OSI to pay the better part of $900 million for back in 2005--to the market's, and now OSI's, chagrin. That deal brings in an old Eyetech anti-platelet derived growth factor (PDGF) aptamer program with the lead compound E10030, which Giebel calls "an IND in a box," for a familiarly undisclosed mix of up-front cash, milestones, and royalties.

The second deal brings in more aptamers, this time from Archemix. (Funnily enough, Archemix got its start by licensing in the therapeutic rights to Gilead Sciences' aptamer technology back in 2001, which Gilead had acquired along with NeXstar in 1999. The only therapeutic aptamer rights Archemix didn't get turned out to be Eyetech's Macugen.)

Ophthotech and Archemix are also not releasing terms of their deal, which gives Ophthotech worldwide rights to all ophthalmic uses of Archemix's aptamers targeting the C5 component of the complement cascade, a hallmark of many inflammatory diseases.

Beyond all the coincidences, what seems a little strange to us is that these products didn't wind up in Lux BioSciences, and that basically the same investor base felt the need to reinvent the wheel by starting up another company. At this point, Guyer, HBM's Axel Bolte, and Novo's Thomas Dyrberg all sit on Lux's board of directors as well as Ophthotech's.

True, Lux is for the moment focused on uveitis and corneal transplantation and is further along the value chain than these preclinical assets--LX211, the company's lead uveitis treatment in pivotal clinical trials, just received fast-track designation from the FDA. But Lux has told us before that it intends to get into back-of-the-eye diseases like AMD in the future, particularly as it contends that AMD is at least partially an inflammatory disease, which is in Lux's sweet spot.

Perhaps the firms' management and investors weren't so keen on diluting Lux's focus; a successful LX211 pivotal trial could provoke a quick takeout by Big Pharma, and keeping managment's eyes on the prize could have been a factor. "Lux had looked at the C5 aptamer from Archemix, and stage-wise, it just didn't fit," Giebel tells us.

He should know: he led SV's investment in Ophthotech but has not taken a seat on the board, since he remains on Lux's board (besides Guyer, SV's representative on the Ophthotech board is Henry Simon, PhD, partner at SV and former chairman of [you guessed it!] Eyetech). Giebel downplays the multiple potential conflicts of interest between the two companies, saying that while there's always potential for that sort of problem, there are many ways of managing it.

We reached Lux CEO Uli Grau, PhD, to get his take. "It is a bit of an unusual situation," he agreed. "And we share large parts of our boards and even though the two companies are positioned somewhat differently, there might be times where we'll have a tough time carving out exactly what is whose territory."

Nevertheless, he says, "I'm a little relaxed because we have a tremendous relationship with our board, the members are honest and trustworthy, and there's no indication that there is a problem."

Lux's take on the Archemix project? "You have to ask yourself," says Grau, "complementing a late stage pipeline with an interesting but early-stage approach, is that giving us value recognition by the time we are looking at a strategic exit?"

Lux can also take comfort in the presence of Prospect Venture Partners--the one investor in Lux that hasn't also invested in Ophthotech. The smiling guy on the right here is David Schnell, MD, managing director at PVP and on the board at Lux. IN VIVO Blog thinks of him as the enforcer. If Lux identifies new opportunities it doesn't want the competition to know about (and however nice everyone involved seems to want to play, the companies are competitors), Prospect provides that additional muscle.

Oddly enough, only a few years ago, it would have been a sure thing to keep all these assets under one corporate roof, because the VCs would have been hoping for an IPO exit, and investors like to see multiple clinical projects at IPO hopefuls. Now that M&A is the preferred exit, the assets are siloed. For now.

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