BioGaia pumps cash into orphan drug subsidiary ahead of possible spinout

BioGaia (STO:BIOG-B) has funnelled SEK 35 million ($4 million) into the bank account of its subsidiary Infant Bacterial Therapeutics (IBT) to tide the unit over while it considers how to finance clinical trials of an orphan drug. The next move could be a separate listing of the subsidiary.

IBT CEO Staffan Strömberg

Stockholm, Sweden-based BioGaia has now invested SEK 82 million in IBT but, with a further SEK 100 million needed for a planned clinical trial, the parent company is considering turning off the funding faucet. A separate listing of IBT, in which BioGaia currently holds a 94.5% stake, is one possibility. The end goal of whatever happens next is to ensure IBT has the SEK 130 million it needs to take its drug to prevent necrotizing enterocolitis (NEC) in premature infants into the clinic. IBT plans to runs two trials of the drug, which has orphan status on both side of the Atlantic, in the next three years.

The speed with which the drug, IBP-9414, has advanced has taken BioGaia by surprise, necessitating the consideration of how to finance an initial safety and tolerability trial earlier than expected. IBT plans to start the placebo-controlled dose escalation trial by the end of the year. Once complete, IBT hopes the data from a small sample of premature infants will convince FDA the drug is safe enough to advance into a pivotal study. If everything goes to plan, IBT will embark on a NDA-enabling trial in 2017.

IBT is looking to the trial to generate data to back up its theory that a bacterial strain derived from human breast milk and delivered in the formulation IBP-9414 can prevent NEC. The idea is to tackle three of the major processes involved with NEC, a gastrointestinal condition that kills approximately 5,200 infants a year in the U.S. and Europe. NEC is characterized by the presence of pathogenic gut bacteria, malfunctioning of the gastrointestinal tract and unregulated inflammation. Consequently, IBT has picked an anti-inflammatory, anti-pathogenic bacteria that aids gut motility for IBP-9414.

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