Ocera Therapeutics looks to a future IPO and potential partnerships

With the first crop of Phase III data on Ocera Therapeutics’ lead therapy due for harvesting by the end of this quarter, CEO Laurent Fischer, MD, felt that now was the time to wrap its biggest round of venture funding to date. Tapping a group of funds that have been behind Ocera from its inception in 2005, Ocera announced last week that it had also attracted some new venture groups to help pump in $35.5 million in new capital.

Ocera’s been on a modest roll recently. Just weeks ago the company announced it had obtained an orphan drug designation for AST-120 for Pouchitis, a painful gastrointestinal condition. And a slate of new trials is being pursued to prove the therapy’s efficacy for a range of indications, including more late-stage studies for Crohn’s disease and proof-of-concept studies for gastrointestinal diseases.

“We felt there was a good bit of momentum going on,” notes Fischer.

For now, at least, Ocera’s lean, “semi-virtual” staff of 15 is focused exclusively on AST-120, the therapy it in-licensed from Japan’s Kureha. Approved in Japan for chronic kidney disease, Ocera in-licensed the therapy just months after the company was formed in early 2005, snagging regional development rights in North America and Europe. Domain Associates, Sofinnova Ventures and Thomas, McNerney & Partners came together to fund the biotech’s early development. Montagu Newhall Associates led the Series C round, which also drew in InterWest Partners, AgeChem Venture Fund, Cross Creek, a subsidiary of Wasatch, FinTech and CDIB BioScience. To date, Ocera has garnered $62 million in venture money.

"This latest round takes us well into 2009," Fischer told FierceBiotech, "and we're anticipating positive data in Crohn's Phase III. This gives us the opportunity to evaluate partnerships and tap the public markets--if they open up."

San Diego-based Ocera’s regional marketing deal with Kureha gives it an opportunity to find its own partner for AST-120, a deal which Fischer would like to wrap in the second half of this year. The additional money would help fund the company’s development efforts and give it the cash needed to possibly in-license other therapies for development as well.

But he’s not willing to give up the store in any partnership in AST-120.

“We’d be looking at a minimum of retaining marketing or co-marketing rights in the U.S.,” says the CEO. A specialty focused group could target the IDB (inflammatory bowel disease) market, he adds. “We’re also looking at partners with a sales force that has a specialist focus.”

Ocera is likely to hire on a few more people for clinical operations, but there’s no plan to depart from a lean-and-mean business model that depends heavily on outsourcing a significant amount of the work.

“We’re semi-virtual, leveraging this model pioneered by investors at Domain,” says Fischer, which relies on a select group of experienced developmental and regulatory hands to guide the company through the start-up phase with maximum capital efficiency.

“We now have the capacity to initiate and complete trials that are ongoing, and initiate the next stage for Crohn’s,” he adds. “We still need to have discussions with the FDA on exactly what they want to see to get this drug approved for Crohn’s.” But he anticipates and NDA in 2010 or 2011.

“We’ll need to conduct at least one more Phase III and then a second, depending on discussions with the agency once we get data from the first pivotal trial. Conservatively, we’ll do two more Phase III trials.” And new studies are likely to look at significantly longer treatment periods. “The first studies are eight week studies. We may need to go to 52 weeks.”

“I think we have a very exciting pipeline drug,” offers Fischer, highlighting the recent orphan indication for Pouchitis. “And we’re looking forward to our other Phase II trials” as researchers explore the compound’s utility for other indications.

“This is a very unique compound,” says Fischer. “When we licensed the product we carefully reviewed all the preclinical data. It was definitely worth looking for a number of indications outside of Crohn’s. We believe that there are additional indications and we’re looking at best next step for this drug and we plan to start at least one for new indication in 2008.”