Diabetes upstart Intarcia raffles a slice of future revenue for $225M

Intarcia CEO Kurt Graves

Intarcia Therapeutics has raffled off 1.5% of the blockbuster future net revenue it is hoping to see--provided its late-stage, extended-warranty version of exenatide can work as billed with a miniature pump. Unnamed investors have gambled $225 million on the Phase III therapy/device, the company says, acquiring notes with an option to convert debt to equity at a postvictory $5.5 billion company valuation.

As Intarcia was careful to herald late Monday, the debt deal brings its total public haul to $806 million, with some claimed and previously undisclosed bridge financings taking that figure past the $1 billion mark. And CEO Kurt Graves says that Intarcia now has the cash to start head-to-head trials of ITCA 650 against the top drugs in the field, with enough money in the bank to get through to an FDA approval and prep for a market launch in two short years.

That's a tall order.

The diabetes drug market is dominated by big pharma companies like Sanofi ($SNY), Novo Nordisk ($NVO) and Eli Lilly ($LLY), companies that are capable of funding massively expensive R&D programs in hopes of advancing new drugs that usually offer only modest advantages for patients. These companies tend to travel in packs, competing furiously in new drug categories. And regulators demand big and expensive trials to demonstrate safety and efficacy, a fact that has weeded out a slate of biotechs that have tried to take this path before and failed.

So far, Intarcia has only partnered with France's Servier on the ex-U.S. market, avoiding the IPO route that so many biotechs have opted on as it builds out a full-sized sales and marketing operation.

Its hopes are pinned on a device/drug that combines a stabilized version of exenatide that can be inserted into a miniature pump and automatically dosed through the course of a year, ensuring that diabetics stick with the program--a big issue in this huge patient population.

The biotech boasts of a $1.75 billion speculative valuation provided by Dow Jones VentureSource. And the biotech bannered the news that these new investors, whoever they are, were willing to take an option on exchanging their revenue stream for equity at a much larger valuation.

"Our aim with ITCA 650 is to deliver a once-yearly medicine that succeeds beyond the key efficacy and compliance shortcomings that the majority of patients experience when trying to stick with life-long pills and self-injections," said Graves in a statement. "This large and innovative financing announced today is another first-of-its-kind in our industry, and it shows investor confidence in our pivotal data, our partnerships and our overall approach to a huge unmet need and opportunity in type 2 diabetes. We've now secured the financial means to keep 100 percent control of the U.S. commercialization of ITCA 650, with funds needed all the way through the planned approval and early launch period in 2017. In parallel, we are also advancing our product pipeline more aggressively, including our recent Numab collaboration, aiming to develop new once- or twice-yearly antibody-based therapies and combinations for diabetes, obesity and autoimmune diseases."

- here's the release

Suggested Articles

The money will fund early-phase development of a CD47x4-1BB bispecific that Kahr plans to test with Roche’s checkpoint inhibitor Tecentriq.

Bicycle will apply its discovery platform to multiple targets, putting itself in a position to pull in up to $1.7 billion in milestones.

Harvard University scientists are teaming up with the Guangzhou Institute of Respiratory Disease with a $115 million boost from China.