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Otonomy banks $46M VC round for PhIII programs on inner-ear drugs

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San Diego-based biotech Otonomy started with a bad case of vertigo.

Venture investor Jay Lichter--a familiar figure in the West Coast venture scene--was driving in La Jolla one day when he was hit so hard with an acute bout of dizziness he thought he might have been having a stroke. What it turned out to be, though, was an inner-ear affliction known as Ménière's disease. And the available treatment was so crude and unreliable, Lichter was inspired to fund a new company to come up with a much better commercial product for a slate of inner- and middle-ear afflictions.

Now, 5 years later, Otonomy has just completed its C round for $46 million, bringing its total funds raised to $94 million. And the biotech and Lichter's Avalon Ventures have won the support of a group of A-list investors which now includes OrbiMed, which led the latest round, along with Domain Associates, Novo Ventures, RiverVest Venture Partners and TPG Biotech.

This new money will extend Otonomy's runway by about 15 months, says CFO Paul Cayer, who related the story about Lichter and the company's origins. And by the end of that time Otonomy will complete the first of two planned pivotal studies for one of its lead drugs as well as a late-stage program for another drug that should leave the company ready to file an NDA. It will also fund the initial clinical work on a third drug for tinnitus, a persistent ringing in the ear that afflicts a large population.

Otonomy's claim to fame rests on a new delivery method, says Cayer. The company developed a thermosensitive gel that was used to deliver a sustained dose of a steroid as well as an antibiotic to the middle and inner ear. The current solutions injected to treat Otonomy's disease targets are generally quickly washed away by the normal workings of the human body, while the gel keeps the dose where it's supposed to be long enough to treat a variety of conditions.

In a Phase Ib study that reported out a few days ago, OTO-201--their sustained-release formulation for the antibiotic ciprofloxacin--reduced the risk of postoperative complications by 60% compared to the control group among pediatric patients undergoing tympanostomy tube placement surgery. Their other lead program, OTO-104, is a specially formulated version of the steroid dexamethasone that has successfully completed an early/midstage trial in Ménière's disease that can go straight into Phase III.

"We're going to have a great profile in 15 months," adds Cayer. At that point the company should be ready to seek its first approval, with an eye to launching commercialization work in the U.S. Partners can be brought in to take licensing pacts for Europe, Asia and other non-U.S. markets. And the company can explore the IPO market or a possible buyout deal with a Big Pharma interested in the space.

That wouldn't be a bad ending for a story that begins with a not-so-routine mishap on the road.

- here's the press release on the venture round 

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