Emerging Drug Developer: KaloBios

KaloBios goes for breadth in antibody studies

For David Pritchard, the nation's financial crisis is more than a lead story in the evening news. The financial disaster created by soured mortgage-backed securities cost KaloBios Pharmaceuticals, where Pritchard is CEO, one of its primary investors when Lehman Brothers was allowed to go into bankruptcy.

South San Francisco-based KaloBios, though, isn't letting the crisis stop its work. Last week the developer reported a $20 million investment round--its fourth--that will be used to advance its antibody development work.

Pritchard, an experienced antibody player, says KaloBios is taking the antibody field one step further with its "humaneering" approach to development. By using a proprietary platform to create therapeutic antibodies that are a closer match to the body's natural template for antibodies, he says, the developer can improve its chance of achieving efficacy.

And rather than concentrate on one or two trials on the path to mid-stage data, like many other emerging biotech companies, KaloBios is opting for a range of Phase I/II studies that will plumb for data on a number of indications. More programs raise the possibility of a slate of partnership deals as the biotech weans itself off of venture capital and starts to generate its own funds needed to grow the company.

Pseudomonas aeruginosa infections are a primary focus. KB001 is in a clinical trial for ventilator-associated pneumonia. Data is expected by the end of the first quarter in 2009. The company's second indication in this area is for cystic fibrosis, where infections are a lethal threat to patients. Data from that study is expected in the early part of next year as well.

The company's anti-inflammatory programs--KB002 and KB003--involve four Phase I/II studies: one for persistent asthma, another in rheumatoid arthritis and two pharmcodynamic studies. Animal studies have demonstrated potential in asthma, COPD, rheumatoid arthritis, multiple sclerosis and psoriasis. The clinical work is aimed at determining which path has the most potential. KaloBios is also investigating an antibody for cancer and expects to file an IND next year.

Says Pritchard: "We have elected to do what I call proof-of-concept studies and go for breadth to determine the activity of the drugs rather than guess what is best and go for depth."

These are small studies, he adds, running with about 20 to 40 patients each. "So we don't expect to get clinical efficacy," he adds, "but we do hope to see activity that will help guide us to determine what multi-dose studies we do."

The trial work also lays the foundation for a round of partnering.

"We are planning to partner these programs starting early next year," says Pritchard. "We prefer co-development, co-promotion profiteering deals, where we retain some aspect of the development. But it could be small or significant."

At 50 staffers, Pritchard says there's likely to be modest staff growth at KaloBios, but nothing dramatic.

The latest venture round brings KaloBios' haul to $68 million, says the CEO, enough to reach the end of the first quarter of 2010. Mitsubishi UFJ Capital and Genzyme Ventures, both new investors, co-led the latest round with previous investors MPM Capital, Alloy Ventures, GBS Ventures, Sofinnova Ventures, Singapore Bioinnovations, Pte., 5AM Ventures and Lotus Bioscience Ventures participating. The biotech plans to go back to the investor crowd and look to raise a second tranche of $5 million to $10 million.

"We're really pleased with this financing. We've got a great valuation for it. At times of difficulty, there's a flight to quality," says Pritchard. "We expect this to be our last private round." Partnership money and possibly an IPO can finance the rest of the way. And Pritchard isn't about to rule out a buyout at some point.

"The antibody space is the hottest space for M&A activity," he adds, noting 13 acquisitions in the last three years of companies around the same size as KaloBios. "It's clear that pharma companies want to move into antibodies in a big way. So M&A is quite possible."

Pritchard knows a thing or two about value from personal experience. As CBO of Rinat Neuroscience, a Fierce 15 company, he helped arrange Pfizer's $500 million acquisition deal.