Emerging Drug Developer: Kythera Biopharmaceuticals

Kythera hopes to help shape the future of aesthetic medicine

Keith Leonard is an optimist.  

Mulling over the prospects of Kythera Biopharmaceuticals after its recent $40 million venture round [1], the CEO points straight at a possible IPO in the not-too-distant future - provided the market looks like it's ready to embrace developers again. 

"We think that this has the possibility of being our final round before potentially addressing the public market, assuming public markets exist again," he says wryly. "For sure this will get us out of Phase II with cash left over." Phase III can only really be sized up after the company has had a chance to sit down with regulators and assess mid-stage data. 

And that mid-stage data should start to flow later this year. 

The first of three Phase II studies for the biotech's lead aesthetic therapy, ATX-101, will be completed by the end of the third quarter or early part of the fourth quarter of this year, says the CEO. Researchers are looking for critical efficacy data on the reduction of submental fat and the reduction of subcutaneous lipomas in these studies. Two other experimental therapies, ATX-104 and ATX-202, should enter the clinic later this year as well. 

Calabasas, CA-based Kythera got off to a fast start after in-licensing key technology from Los Angeles Biomedical Institute at Harbor-UCLA Medical Center in the summer of 2005. Researchers at the institute were studying ways to eliminate fat in key areas of the body. And Leonard felt the technology put Kythera in a position to eventually rival the success of a company like Allergan, which developed Botox. 

"ATX-101 seems to quasi-selectively destroy fat tissues when you inject it into subcutaneous fat," says Leonard. "The product we're testing today is animal-derived. What we would love to demonstrate in Phase II is a nice reduction in submental fat. It should be able to be validated by physician assessment against a standardized scale and patient satisfaction. And we'll need to do that with local tolerability." 

Adds Leonard: "The idea that we have is that this would be applied by a physician, it's not a product that ends up in a spa." 

But it has worldwide potential. 

"The only licensing partners we're looking for are outside the United States," says Leonard. He believes that Kythera could build a small sales force to market the product inside the U.S. to plastic surgeons and subset of dermatologists.  

"Early partnering is a way to defray costs," notes Leonard. "We'd love to get a deal done like that this year." 

Kythera has the potential to set up a licensing deal for Asia--possibly inking a separate deal for Japan-and another partnership for Europe. And Leonard says there are a number of partners that could eventually be in the running - including a few players you may not expect to find in aesthetic medicine. After all, says Leonard, GlaxoSmithKline licensed Botox for the Japanese market. 

Leonard says some of those partnership doors may be opened by the company's new investors. JAFCO--Japan's biggest venture firm--led the latest round and has a history of helping broker biotech deals in Japan. Other investors include BBT Capital Management/Apothecary Capital and PFM. Also participating in the Series C were Versant Ventures, ARCH Venture Partners, Prospect Venture Partners, Altitude Life Science Ventures and Wilson Sonsini Goodrich and Rosati. 

Those investors were attracted by the prospect of a sizeable payback for success. 

"If you look at injectable products that are used for aesthetic purposes, the market is well over a billion dollars for Botox and fillers," says Leonard. "Their growth has slowed, but they're still growing. They are opening the market ahead of us. We consider ourselves very similar. 

"Reimbursability is not one of your issues," he adds. "This is an all-cash-pay market; a consumer medicine product as opposed to disease state driven. There are no other therapeutic products, pharmacological products, we know about that are in the same area." 

Leonard is keeping overhead to a minimum. A staff of 22--including a selection of professional alumni from Amgen and Allergan--is directing development efforts with a big assist from CROs. 

And Leonard plans to keep a tight rein on costs as Kythera positions itself for a possible public debut.

"It probably has a lot to do with the condition of the public markets and whether it likes biotech and specialty pharma companies again," says Leonard. "We would hope from an internal standpoint to go with an IPO. We're going to need to raise a lot of money for Phase III."