AstraZeneca gambles on a $40M round for diabetes/cardio biotech PhaseBio

One of the toughest diseases in drug development is diabetes. Even drugs that offer only a marginal gain over existing remedies require huge and expensive late-stage studies, pit some of the biggest rivals in the industry against each other, and the regulatory bar on safety is set high. But even facing some admittedly big challenges in the clinic, Malvern, PA-based PhaseBio rounded up $40 million in Series C money to pursue its R&D dreams in the arena, bringing in pharma giant AstraZeneca ($AZN) as a backer in the process.

AstraZeneca, which has been staking out a big role for itself in diabetes as it plots a comeback, joined some A-listers in the round: New Enterprise Associates, Hatteras Venture Partners, Johnson & Johnson Innovation - JJDC and Fletcher Spaght Ventures. Together they're fueling a Phase IIa study of PhaseBio's once-weekly, long-acting basal insulin, PE0139, for diabetes along with a once-weekly "Vasoactive Intestinal Peptide" called PB1046, which is going into separate Phase IIa trials for heart failure and for cardiomyopathy in Duchenne and Becker muscular dystrophy.

"This gets us through the next set of Phase II trials," CEO Jonathan Mow tells FierceBiotech about the round, which covers costs until the end of 2016.

Diabetes giant Novo Nordisk ($NVO) has a once-weekly basal insulin in the pipeline, says the CEO, but AstraZeneca, J&J ($JNJ) and its others backers believe that the biotech still has the inside track on developing the first, best-in-class once-weekly. But Mow is also quick to acknowledge that it's going to take a major player to fund a late-stage program needed for any regulatory approvals.

"We don't see PhaseBio taking this all the way through development," he says.

The company's pipeline revolves around its elastin-like polypeptide (ELP) tech platform, which is designed to amp up a drug's half life and maintaining stability in circulation. The long-acting basal insulin was created by combining an ELP to native human insulin, making it work in animals in a once-weekly dose. Their cardio drug was built the same way, taking a peptide with a short half-life and using ELP tech to provide prolonged exposure in circulation.  

Not surprisingly, PhaseBio has had some setbacks to deal with. The biotech has a GLP-1 drug that went through a Phase IIb study with 350 patients, only to come out looking "good but not great," in Mow's words. Given that giants in the field have won approvals for a slate of GLP-1 drugs, that wasn't good enough to maintain it as the lead project. Mow says the company has set it aside for now, but still has hope that it may prove a good combo with their long-acting basal insulin.

The setback, though, does help illustrate why so few biotechs pursue programs for diabetes. Over the last few years Tolerx, Phenomix and Cebix all disintegrated in midair trying to make an advance in diabetes, only to fall short and crash. And they're not alone. But PhaseBio has raised a total of $105 million from some noteworthy investors who think the biotech has a good shot at beating the odds.

- here's the release

Special Report: The Top 15 Biotech Venture Investments in H1 2012 - PhaseBio Pharmaceuticals