Upstart Zavante raises $45M, takes aim at a pivotal antibiotic study

San Diego-based Zavante Therapeutics has raised $35 million--adding it to an additional $10 million from convertible debt for the Series A round--to back a pivotal study aimed at U.S. approval of an aging antibiotic.

Zavante in-licensed fosfomycin, a 45-year-old broad spectrum antibiotic that was widely used in Europe but never made it to a U.S. approval. That left the path open for Zavante's executive crew, which bagged rights to the antibiotic after starting with angel money and now has a shot at exclusive U.S. marketing rights on a novel product. The antibiotic is now dubbed ZTI-01.

Frazier Healthcare Partners, Longitude Capital and Aisling Capital co-led the round. Patrick Heron, managing general partner of Frazier Healthcare Partners' Life Sciences team, and Dr. David Hirsch, managing director and founder of Longitude Capital, will now join the Zavante board, while Dr. Andrew Schiff, managing partner of Aisling Capital, takes an observer seat.

The antibiotic lost patent protection in Europe years ago, says Zavante CEO Ted Schroeder. And that would likely have remained that, until Congress passed the GAIN Act, which lawmakers used to help incentivize development of new antibiotics. That act adds 5 years to the antibiotic's period of marketing exclusivity, making it attractive enough to pick up the rights and put it through a pivotal study.

"If it wasn't for the GAIN Act, we wouldn't be talking about this asset," Schroeder told me frankly.

The IV antibiotic is slated for use in a hospital setting, added Schroeder, who joined fellow Cadence Pharma veteran--and serial biotech exec--Cam Garner in recapitalizing the company last year. (Cadence, which was run by Schroeder, was bought out by Mallinckrodt in 2014 in a $1.4 billion deal.) The plan now is to start recruiting patients for a global study next quarter, with an eye to wrapping it up in mid-2017, when positive data will set the stage for a U.S. submission.

Schroeder and his staff of 7 plan to stay opportunistic about the program. It can be sold further down the road or advanced through to commercialization, he says, relying on an experienced team that knows how to run the gamut from development to marketing.

Zavante makes the second antibiotic startup to bag a crucial round in the past week. Just days ago Iterum gained a $40 million round, which was also led by Frazier and is also run by experienced veterans of the antibiotics business. They join companies like Cidara and Spero, which also jumped into existence recently. While Merck ($MRK), Roche ($RHHBY) and some others have been picking up the pace in antibiotic work in the past two years, the industry group collectively still lags far behind where the sector was more than a decade ago, before slim margins drove most of the big players out of the field.