Even in a down market, the drumbeat for dollars continues to sound out

The 2015 BIO Investor Forum opens this morning at the Parc 55 San Francisco – a new venue that boasts “breathtaking views of Union Square, Twin Peaks and the Bay from every room and suite,” according to the Biotechnology Industry Organization (BIO). The metaphor might be strangely appropriate. As some 65 investors and more than 300 opportunistic biotechs meet up for 1,400 one-on-one sessions, an undercurrent of the talks is likely to be the unstable capital markets, which have seen the fortunes of some public biopharmas plummet from peak values to low water marks with equally breathtaking speed.

Still, they come, and optimism remains high this year despite the jittery markets.

The major draw of BIO Investor and other meetings of its kind is the incredibly efficient speed-dating environment. The “fireside chats” with venture capital (VC) and corporate execs and the educational panels – such as this year’s sessions on emerging oncology trends, precision medicine resources and policy and market outlooks – draw polite crowds, but most attendees save their energy for the two-day mad dash of face-to-face meetings. Many of those confabs started with dinner meetings last night, as participants streamed in to the city.

BIO Investor also will provide a platform for more than 180 company presentations by discovery companies – defined by BIO as those that have raised less than $25 million in seed or series A rounds – established private companies that have raised more than $25 million in series B and later rounds, and emerging public companies. As observed in this week’s BioWorld Insight analysis of the roiling capital markets, this group of companies will feel the pinch first if the bottom drops out for biopharma.

No one is lobbying for that outcome, but some don’t rule it out.

In the meantime, BIO Investor attendees are looking ahead. For many, advancing the pipeline and even keeping the doors open has been a long, iterative process. Although the biotechs that land major deals within months of a one-on-one at a BIO Investor or J.P. Morgan Healthcare Conference tend to grab the spotlight and most of the ink, the reality for most emerging drug developers is that partnering involves a long cycle of seeking out, refining and furthering discussions with VCs and pharmas.

That’s certainly been the case for Bob Linke, president and CEO of Embera Neurotherapeutics Inc. The company, with offices in Boston and Shreveport, La., is developing lead product EMB-001 to treat addictive behaviors through a different mechanism of action – suppressing the craving that drives addiction – instead of conventional approaches that block the effects of an addictive substance or substitute a safer compound. Relating the company’s story has required no small amount of hand-holding with potential partners over the years.

EMB-001 targets two components of addiction to break the neural pathways in the brain related to craving. The compound prevents overactivation of the stress response system while inhibiting circuits that are prone to hyperexcitability. In essence, EMB-001 takes the foot off the accelerator – the corticotropin-releasing factor – while boosting the brake of the gamma-aminobutyric acid system. The company’s goal is to develop a drug regimen that can be paired with psychosocial care to induce abstinence and prevent or reduce relapse.

In 2010, the National Institute on Drug Abuse awarded a $3.9 million grant to Embera’s partner, Louisiana State University Health Sciences Center, to support the next stages of development for EMB-001 to treat cocaine dependence and advance the compound into clinical testing. (See BioWorld Today, Oct. 8, 2010.)

That milestone started the company’s partnering journey, and although EMB-001 subsequently moved into the clinic, where a phase I study is under way, Embera still has miles to go, Linke said.

“I realized at the outset that we were too early, and the feedback we got was that we were too early,” he toldBioWorld Today. “But in the past four years we’ve continued to hold discussions and we continue to have good interest. We don’t have a partner yet, but the plan is still to partner our drug for late-stage development.”

Advancing EMB-001 into the clinic on its own, and attracting Paris-based HRA Pharma SA as a strategic investor in a $1.9 million series A-2 financing, has given Embera a bit more leverage in those conversations, both with investors and potential partners.

“Some of the pharmas I met four years ago I’ll be meeting again at BIO Investor and at BIO Europe a couple of weeks later,” Linke said. “Some have fallen off but we’ve attracted other companies in their place. I probably use three to four meetings a year as a very efficient way to update the companies that are interested in our work.”

Like the more conventional dating scene, forums like BIO Investor also offer unpartnered biotechs the opportunity to meet new people when other relationships don’t work out. Long-term business strategies change, key personnel move and resources are never guaranteed.

“The value we get out of these meetings is to understand each company’s strategy and interest,” Linke said. “If we’re not at a stage where it’s right for us to work together, what data does the company want to see to move the needle?”

‘SOMETIMES THE TECHNOLOGY IS JUST TOO EARLY’

For most biotechs, teasing out that information requires years of tedious work.

“With technologies like chimeric T-cell receptors and cancer vaccines – even monoclonal antibodies – true breakthroughs can take a very long time to come into their own,” observed Laura Vitez, principal business analyst at Thomson Reuters Recap, where her primary responsibility is to scrutinize deals and dealmakers. “Sometimes the technology is just too early in terms of ROI. But we need those trailblazers to go for it early, in order to make progress overall. Courage counts – a lot – in innovation.”

Changes in the macro environment also can alter the partnering dynamic, Vitez said. For example, “lots of interesting things came out of the recession,” she told BioWorld Today. “There were biotech-killing option deals back in the day, but now we have really interesting and high-functioning option structures that are helpful to both sides of the table. Also, build-to-buy and other options to acquire were unthinkable before, but now they’re important pieces of the puzzle.”

Increasingly, biotechs also are repurposing drugs that were shelved when they fell behind a competitor or failed to show sufficient efficacy in another indication. Advancing these candidates represents a whole new set of challenges in partnering discussions. But for companies that have examined the scientific underpinnings and can demonstrate the therapeutic rationale, Vitez said, the effort is worthwhile.

“Looking at failures matters,” she pointed out, “because it can teach us about the frontiers of what’s currently acceptable or doable and what’s not.”

Vancouver, British Columbia-based Delmar Pharmaceuticals Inc. is advancing VAL-083 (dianhydrogalactitol), a small-molecule chemotherapeutic, to treat various cancers, beginning with refractory glioblastoma multiforme (GBM). Despite being assessed by the National Cancer Institute (NCI) in more than 40 phase I and II trials, the asset has never advanced into a pivotal study in the U.S. In fact, it’s taken a circuitous route just to stay in play.

Most of Delmar’s development team, including Dennis Brown, chief scientific officer, came from Chemgenex Pharmaceuticals Ltd., of Melbourne, Australia, which developed Omapro (omacetaxine) to treat chronic myeloid leukemia refractory to Gleevec (imatinib, Novartis AG). Omapro received fast track and orphan drug status from the FDA but encountered headwinds in the approval process, finally getting across the line only after Chemgenex was acquired by Cephalon Inc., of Frazer, Pa., which subsequently went to Teva Pharmaceutical Industries Ltd., of Jerusalem, after a bidding war with Valeant Pharmaceutical International Inc., of Laval, Quebec. Delmar was spun out of Chemgenex during the process with the single asset. (See BioWorld Today, July 15, 2010, Aug. 17, 2010, March 30, 2011, and May 3, 2011.)

“We’re leveraging prior clinical validation and marrying that with modern understanding of mechanism,” explained Jeff Bacha, Delmar’s president and CEO. “This compound had some interesting activity that might not have been well understood or didn’t have an opportunity in a specific niche where there was an unmet medical need. Can we now solve a problem?”

Although Delmar also remains unpartnered five years later, Bacha is willing to be patient.

“We’ve kind of done this before,” he told BioWorld Today. Seeking to piggyback on “tens of millions of dollars in investment” in NCI-sponsored cancer studies, “we have a reasonable understanding, at least at a very high level, of the mechanism of this alkylating agent,” including evidence of activity in certain tumor types as well as dose-limiting toxicity.

“It’s like picking up the ball on the good side of the 50-yard-line,” he said.

Previous data demonstrated that VAL-083 crossed the blood-brain barrier and showed evidence of activity in central nervous system tumors, especially GBM. Delmar initially envisioned the drug as an option to treat GBM patients who were resistant to temozolomide, then a $1 billion product. In 2012, Delmar presented data on the drug’s mechanism of action in GBM at the American Association for Cancer Research annual meeting in Chicago, subsequently returning to the clinic to test VAL-083 in patients who had failed standard of care as well as Avastin (bevacizumab, Genentech Inc./Roche AG).

Since that time, the process of advancing the drug has been calculated and methodical.

“Part of the business model is to try to streamline the development process,” Bacha said. “Going into a refractory tumor type where there’s no available therapy certainly does that and creates opportunities for fast track treatment by the FDA and single phase III design.”

VAL-083 isn’t there yet; the company has a phase I/II trial in GBM under way that has nearly enrolled the phase II expansion cohort and expects to report the next interim data in November. The company soon hopes to begin planning a registration-directed phase II/III trial.

“We’ve been able to get the drug into patients in a little more aggressive way than the NCI had done, simply because the dose-limiting toxicity of myelosuppression can be managed better today than it could 20 or 25 years ago,” Bacha said. “We’re getting a higher Cmax and a higher exposure compared to what NCI was doing, so we think more drug into the tumor more often will be beneficial.”

Studies conducted to date have shown a strong dose-related response, he added. Delmar had the opportunity to watch that relationship carefully, starting at subtherapeutic doses, when it responded to the FDA’s request to repeat some safety work due to concerns about the risk of thrombocytopenia and the effect on patients who had previously been exposed to Avastin, a vascular endothelial growth factor, or VEGF, inhibitor.

Earlier this year, the company raised a small round, mostly from insiders, to fund the phase II expansion. BIO Investor gives Delmar the opportunity “to build awareness among the investment community, showcase where we are in our clinical study and the progress we’ve made and communicate the expansion of our clinical program plans into other tumor types,” Bacha said.

“Whether it’s an investor or a pharmaceutical partner, you look for a collaborative relationship as you go forward,” he added. “We seek feedback on our strategy. We have a very pragmatic approach about how we finance the company and how we plan to partner. If there’s no receptivity to that message, either we’re going to be doing it alone or we need to rethink.”

‘SET YOUR EXPECTATIONS APPROPRIATELY’

Despite the hype, big deals are rarely sealed at partnering forums, though relationships leading to a license or collaboration certainly may be strengthened. The hard work comes with follow-up phone calls and detailed presentations in the weeks and months afterward.

“You have to set your expectations appropriately,” Linke said, noting that one-third to one-half of his one-on-one meetings lead to additional talks.

This year, BIO Investor is the kick-off to Embera’s series B financing, designed to fund phase II trials in smoking cessation and cocaine dependence after the current study is completed later this year. Linke will meet with investors that have shown steady interest in the company as well as some new faces. Given that several biopharma efforts to treat addiction have fallen by the wayside, he’ll position EMB-001 as the leading product in development to treat cocaine dependence.

“Our goal is to get investors teed up and introduce the financing so that we can follow up with a shorter list of investors that have shown interest and complete the financing sometime in the first quarter of next year,” he said.

This year marks Delmar’s first major foray into pharma partnering – a process that began at the BIO International Convention and will continue at BIO Europe. However, the company has amassed years of experience from one-on-one meetings that have prepared Bacha for the tough questions.

“When we first started talking about deals for VAL-083, people would say, ‘Oh, it’s an old drug. Why wasn’t it commercialized before?’” he recalled. “Certainly, the clinical activity was interesting, but it was overlooked in the same way that a number of other drugs were overlooked in the treatment of cancer. We think this could be a very important drug. We’ve built new patents around it, we’ve got orphan drug protection in gliomas and our data show that we’re moving toward solving a very important problem in a major unmet medical need.”

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