Emerging Drug Developer: Aerovance

Aerovance lays it all on the line in IIb

It seemed like a good plan.

After coming off a series of meetings with some big pharma companies, Aerovance CEO Mark Perry decided last summer that his best shot at striking a rewarding partnership deal for the company's lead drug would come with Phase IIb asthma data in hand. A new venture round--$30 million to $50 million--would get him to that stage. And that was less than the $60 million he had raised in 2007.

So Perry hit the road in September, and a few weeks later, the venture groups slammed on the brakes as the economic crisis crashed into the biotech field.

"That was great timing," he says dryly.

But Perry didn't stop. Several months of discussions and some 50 meetings later, he had $38 million lined up in two tranches--$20 million of that from the company's still-loyal group of existing ventures. A new investor, ProQuest Investments, led the round and was joined by BB Biotech Ventures, which also came on board for the first time. Apax Partners, Clarus Ventures, Alta Partners, Lehman Brothers, NGN Capital and Burrill & Co. all came back to ante up for the recent round.

"As we expected, it was a down round," says Perry, who hasn't disclosed the valuation from the latest financing. "It was significantly down from our last financing. And that was mostly a function of the market today and the significant capital we needed to raise."

Another hard reality was that the round didn't deliver the kind of money that it would take to continue all of Aerovance's drug development programs. A year ago, Berkeley, CA-based Aerovance had two drugs in four programs, with the asthma drug--Aerovant--also being studied for eczema.

A second drug-a protease inhibitor inherited from Bayer Pharmaceuticals when the developer was spun out in 2004--has been studied for COPD and cystic fibrosis. In studies mounted in 2006 and 2007, the therapy missed its primary endpoints. But Perry is optimistic that a redesigned trial would deliver positive data. That, however, will have to wait.

"We're not really in a position to build a company with diversified products," he adds. So early talks have been started to find a partner on the protease inhibitor while the 20 staffers at Aerovance stay focused on the asthma program.

The Phase IIb trial started a month ago and should be finished in about a year. Aerovance recruited 500 asthma patients in the U.S. and Europe. And they're using a final, dry-powder formulation of the therapy in the study.

"We are looking for a difference in the exacerbation rates" between the drug arm and a group taking a placebo, says Perry. "The patients are on the edge of control, but still have attacks that require intervention with hospitalizations or a short-acting bronchodilator."

The developer's successful Phase IIa study was aimed at asthma patients with mild cases. They were treated for 28 days and given an asthma attack to challenge their system. Researchers measured their lung function to determine the drug's effectiveness.

Phase III would likely be designed much the same way as IIb, says Perry, but with a much bigger patient group. Some 1,500 patients would need to be treated over the course of a year, he adds, in order to give the FDA the kind of data it is looking for.

And that takes a lot of money.

"It would take $100 to $150 million in drug costs and study costs and you would want to run a number of other studies in parallel," says Perry, in order to qualify for the kind of "robust" product label Aerovant needs to be fully successful.

"So it clearly is a big pharma activity, in terms of dollars and successful execution," adds the CEO. "The plan all along was to go back to large pharma companies with a presence in the asthma market, and either license the drug before Phase III or sell the company.

"The more likely outcome is selling the company," says Perry. Because a Phase III trial would require a big financial commitment, there's really little that a small biotech can offer at that phase of development.

"We don't add much, frankly, in a collaboration, and most of those companies would like to get their hands not just on the asthma drug, but the eczema drug, because it's related."

Emerging Drug Developer: Aerovance

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