Emerging Drug Developer: Auspex Pharmaceuticals

Promise of deuterium lures biotech vet to Auspex

When Ajit Gill retired from Nektar Therapeutics after a 14-year stint, he was ready for something new. Nektar had swelled into a developer with a big payroll and huge prospects--the once-promising Exubera had then been approved--and its CEO decided to look around before deciding how he would spend the next chapter of his life.

After spending time in his native India, Gill returned to the U.S. And now he's running Auspex Pharmaceuticals, a biotech that is looking to use deuterium chemistry to engineer a new slate of safer and more effective drugs.

Gill likes life in an emerging biotech company. He was the seventh employee at Nektar (which got started as Inhale Therapeutic Systems) and the eighth at Auspex. The tiny biotech still only has 18 workers, but Gill doesn't plan to do a tremendous amount of additional hiring--not when there are so many different ways to outsource development work.

The main focus now is taking some of Auspex's preclinical programs into the clinic and gaining proof of concept data that can propel the company onto the next stage. And Auspex has $13.875 million in Series B money in the bank from a recent round led by Thomas, McNerney & Partners with participation from CMEA Ventures and Costa Verde Capital. That money is earmarked for clinical development work.

"You've never filed enough patents," says Gill with a laugh. "But the time has come to start extracting value of those patents we have by taking products into development."

Auspex has more than eight molecules in early stages of development.

"We'll be in the clinic by the end of the year," says Gill. But he doesn't have any hard numbers in mind right now. "Instead of telling people how many molecules will go into the clinic, once we have the data we can say, ‘here's another one.' From an investors' standpoint, what they want to see is data."

Gill's two-year journey from Nektar to Auspex covered a lot of territory.

"After ‘06 I spent a bunch of time looking at opportunities in India," he explains. Later he joined U.S. Venture Partners as entrepreneur-in-residence, and out of that experience came across Auspex, which had dumped its original research program and focused on deuteration.

The development model is a far cry from what he had been used to at Nektar, where years of effort and millions of dollars had to go into research at an early stage.

"With Auspex you can test the molecules very quickly and get an idea if deuterium makes a difference or not, and then use animal models to test these molecules to see how well does it work," says Gill. "You can attach deuterium to almost any small molecule, but the question is will it make it different. Deuterium extends half life. What we look for in early product selection are the products that might benefit from changing the metabolic profile. Our chief scientist brings a great knowledge of how these things get metabolized, which compounds would benefit from the approach--as opposed to starting in a random fashion. Molecules with a known problem are a good place to start."

Ironically, Auspex's announcement of its Series B closely followed the news that Concert Pharmaceuticals, another emerging biotech company, had closed a $37 million investment round to follow a very similar model of drug development focused on deuterium. But Gill isn't at all put off by Concert's work in the same field.

"What this says is that this is a pretty darn decent approach," he notes. "I really think there is going to be plenty of room for the two companies. At the end of the day, most of our money goes to product development. If in the world of deuteration we figure out that there are three or four products, then we all end up in the same space. If the number is 40 or 50, then there's plenty of room--not for two companies but even more. No one is going to develop 15 products, much less 50."

Gill's confident that Auspex can make the next hurdle in its development.

"With this round we'll absolutely get proof of concept data on at least one or maybe two or three molecules." And with a pipeline of prospects, it shouldn't be difficult to raise another round.

Says Gill: "For sure we're going to have to raise more money. We'd like to do that with real proof of concept data."

After that, he says, anything is possible.

"Even at Nektar, where we ended up going public and building the company, I was always very clear with the board that if we got a very attractive price for the company I would sell the company, because that's what you do, get a good price for shareholders.

"I said (to Auspex investors), let's build the pipeline and then you'll have lots of options. If you have some products that can be commercialized with a small sales force, then you can sell off other products and build a specialty pharma company. If we have blockbuster potential that's hard to commercialize for a small company, then we can partner. We are completely open--if you want to use the term exit--to an IPO or something else."