Startups, Venture

A serial biotech startup team is back in business, armed with $40M and a focus on NASH

Bob Baltera

Bob Baltera’s last stint as a biotech CEO was brief. In less than a year at the helm of Laguna he and the company produced some interesting late-stage data and a troubling set of safety issues that scuttled their work on atrial fibrillation.

“We shut that down and gave about half of the money (which would have been about $15 million) back to the investors,” he tells me in an experienced tone that suggests some things in this business just don’t work out the way you want it.

Howard Dittrich

But out of that fast fail came a new opportunity. Frazier Healthcare Partners approached Baltera — who succeeded in turning Amira into a very lucrative M&A deal with Bristol-Myers in a $475 million deal back in 2011 — and two colleagues, Howard Dittrich and Brian Farmer, offering to keep the team together as entrepreneurs-in-residence. And today they’re stepping out with their next venture, armed with a $40 million Series A led by Frazier and Novo A/S.

The company is Cirius Therapeutics, formerly Octeta, a Kalamazoo, MI-based company that had been spun out of a local outfit to go after NASH and liver fibrosis — two big-market targets that have aroused a variety of late-stage tries with varying therapeutic strategies. At Cirius, the target is insulin sensitization, which has been a key focus in the field.

Brian Farmer

“If you look at NASH,” says Baltera, about half of all patients are Type 2 diabetics. “It appears that insulin resistance is really a trigger of liver disorder, and there’s been some clinical work that looks at first-generation insulin sensitizers, which showed a large impact on the disease.”

But there have also been safety issues that would threaten any drug headed for a mass market. Cirius will set out to create a next-gen insulin sensitizer without the safety issues driven by PPAR gamma. Co-founder Jerry Colca, who worked on Actos (pioglitazone), is behind the new effort to develop their experimental drug, MSDC-0602K. Back in 2013, he put a similar drug through mid-stage tests on Type 2 diabetes before switching focus.

There’s an ongoing Phase IIb of MSDC-0602K that will wrap in 2019, which should provide solid safety and efficacy data to show if they’re on the right track to Phase III.

Baltera and his crew are staying in San Diego, with a handful of research staffers remaining in Kalamazoo. Right now, they total about 10 and the CEO doesn’t ever expect that head count to get past 15.

Small company. Single asset. Potentially a major market drug with a huge Phase III requirement. That’s the profile of a company styling itself for a trade sale ahead of a pivotal program, which few private, venture-backed biotechs could ever afford to pay for.

Baltera is quick to concede that a post-Phase IIb sale could be one successful outcome. But he offers one other scenario: Mounting an IPO and using the money from that to pay for Phase III.

Sums up Baltera: “All options are on the table.”


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