Published in Finance

Kalamazoo biotech raises $40 million to develop new drug

BY Sunday, April 16, 2017 12:46pm

KALAMAZOO — A $40 million venture capital investment in a company spun out of a Kalamazoo-based drug development firm comes with a new executive management team based across the country.

A trio of veteran biotech executives now run Cirius Therapeutics Inc. from San Diego, Calif., while the company’s research and development operations remain in Kalamazoo.

Today’s connectivity allows that type of long-distance operation while enabling companies like Cirius Therapeutics to gain access to the executive talent that Michigan’s life sciences industry generally lacks without moving the entire company.

“It’s all about finding the talent,” said Chris Rizik, founder and a partner at Renaissance Venture Fund in Ann Arbor, which helped connect new investors with Cirius Therapeutics. “Michigan is developing C-level talent here in many of the emerging biotech businesses, but we’re still developing. We don’t have the volume of C-level talent in certain industries that they have in other parts of the country.

“You’re seeing more companies, wherever they’re based, have offices in multiple places depending on where the talent is,” Rizik said. “That’s just kind of the nature of business now. In the old days, a lot of these stories would have been the wholesale move of these companies in another location. Now we see companies opening multiple locations.”

A fund-to-fund, Renaissance Venture Fund is an investor in Seattle, Wash.-based private equity and venture capital firm Frazier Healthcare Partners, which co-led the deal for Cirius Therapeutics with Novo A/S, a holding company in Denmark for a group of health care companies. They were joined by Chicago-based Adams Street Partners, a new investor in the company, and Grand Rapids-based Hopen Life Science Ventures.

Formerly known as Octeta Therapeutics, Cirius Therapeutics spun out last year from Kalamazoo-based Metabolic Solutions Development Co. to develop a new treatment for nonalcoholic fatty liver disease and liver fibrosis.

Cirius Therapeutics will use the capital to fund Phase 2b clinical trials and prepare for a subsequent study of its next-generation insulin sensitizer to treat nonalcoholic steatohepatitis, or NASH, which is connected to insulin resistance and affects an estimated 16 million people in the U.S.

New CEO Bob Baltera expects the Phase 2b clinical trial to enroll 200 people in the U.S. and expand to perhaps 300 to 350 people. A Phase 2b should take until 2019 to complete, Baltera said.

Pending a successful trial, the company would then move into a subsequent Phase 3 clinical trial in anticipation of seeking regulatory approval to go to market. The final commercialization of the Cirius Therapeutics compound could come in the early 2020s.

Left undetermined at this point is whether the company will seek to bring a new drug to market on its own, bring in a strategic partner, or sell the intellectual property to a pharmaceutical company.

“All options are on the table,” Baltera said. “What really matters now is we have to execute and have a robust, quality study that informs us, informs future potential investors, and informs potential strategic partners of exactly what the plan is to take the current assets into that really critical Phase 3 confirmatory study.”

Joining Baltera are chief medical officer Howard Dittrich and chief business officer Brian Farmer. The three are experienced biotech executives who worked together at a San Diego pharmaceutical company, Laguna Pharmaceuticals, which closed in December 2015. They were hired by Frazier Healthcare Partners in early 2016 as entrepreneurs-in-residence to seek out a company in which to invest.

The new executive teams give Cirius Therapeutics the business expertise needed to complete development and reach the marketplace.

“We’ve done it for many years and we’re going to do it with this program and really augment what’s in Kalamazoo,” Baltera said.

Baltera earlier was CEO of Amira Pharmaceuticals in San Diego, which sold to Bristol-Myers Squibb in 2011 for $475 million.

Cirius Therapeutics will operate “very lean” with 10 employees split between Kalamazoo and San Diego, Baltera said.

Operating “semi-virtual” companies with different teams in different parts of the country is “very common” today in the biotech industry, Baltera said. He’s been involved in other companies with a similar setup.

“It’s a fine way to work,” he said. “I found it to be a very fruitful way to do things if you commit yourselves to communicating regularly and really do a good job at it. It’s wonderful because you’re able to tap into different regions and different sorts of skillsets and expertise.”

Metabolic Solutions initially set out to develop a new drug to treat Type 2 diabetes and found its compound may work on other metabolic diseases. The company in February 2016 formed Octeta, which was changed to Cirius following the new capital investment, to focus solely on a drug for fatty liver disease. 

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