Serial NC startup team eyes another deal with latest biotech

Aerial BioPharma, the third biotech born from a North Carolina development team, has positive Phase IIb data under its arm and a mind to make a deal, looking to find a home for its investigational narcolepsy drug.

In a 93-patient study, the Morrisville, NC-based Aerial validated its earlier proof-of-concept study for ADX-N05, a narcolepsy therapy already granted the FDA's orphan drug designation. Now, Aerial wants to accelerate N05's path to market, and the company is in the middle of a strategic asset sale to get its drug to Phase III, retaining Piper Jaffray for advice.

If all goes according to plan, Aerial will be the third drug development success for Research Triangle Park-based trio Moise Khayrallah, Steve Butts and Gary Bream. In 2006, the three launched Addrenex Pharmaceuticals, working for three years before selling the company and its in-development ADHD and hypertension treatments to Shionogi for $29 million. Last year, the three flipped Neuronex to Acorda Therapeutics ($ACOR) in a deal worth up to $134 million.

But the founders are taking a different track with Aerial, Butts told FierceBiotech, stopping short of an all-out company sale and holding on to a novel biologic to treat acute and chronic pain. The treatment uses prostatic acid phosphatase, an enzyme produced by the prostate, and Aerial will devote some of the $5 million it raised in February to wrap up early studies of the drug, planning to file an IND by year's end and be ready to partner up by 2015, Butts said.

Looking around the industry, there's no shortage of drug developers looking to walk in with a molecule and exit with a bag of cash, but what makes Butts and his team stand out is their commitment to a pragmatic model. The trio has to be practical when picking assets, and that means ensuring a potential project can be sold within three years, has a pent-up commercial demand and presents a clear regulatory pathway, Butts said. The rest is a matter of personnel.

"Our team is absolutely the most efficient that I've ever seen from a drug development standpoint," he said. "We're angel-backed, so we don't have a lot of money, and that's forced us to be smart."

Take Aerial's structure, for instance: Butts and company set the operation up as an LLC, not a C corporation, allowing them to sell off individual assets without taking a major tax hit. The company is upfront with its investors about how far it plans to take each drug before looking to unload, and it has been rewarded for its model. Aerial has raised $9.5 million to date and expects to close out the final $2.5 million tranche of its $12 million Series A this year.

So far, it's been "a lot of fun for a little group of drug developers from North Carolina," Butts said, and, if everything works out with their in-development biologic, the three figure they'll just retool and keep the machine running.

"The plan is, either through Aerial or, more likely, through a new company, to keep the team together and continue to do drug development," Butts said.

- here's the press release

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