After pandemic delay and a South Korean deal, Boston-area biotech raises Series B with sights on IPO
Two years after snaring a $45 million Series A from a couple of top-flight investors, Neurogastrx was finally ready to put its lead molecule into the clinical trials when the world shut down in March 2020.
The small, GI-focused biotech’s plans were, like many that spring, derailed.
“A lot of institutions were not allowing patients into hospitals or testing centers,” CEO Jim O’Mara said. “That delayed us for months.”
Eventually, though, the company was able to rejig the trial to minimize patients’ doctors visits, shifting with much of the industry to a remote-as-much-as-possible model. At the same time, one of those investors looped them in with Vivo Capital, which was trying to develop a South Korean GI drug in the US.
Now, three and a half years after launch, Neurogastrx has a new Phase III-ready drug in a deal with Daewoong Pharmaceutical brokered by Vivo and a new $60 million crossover Series B led by Vivo. Original blue-chip investors 5AM Ventures, venBio and OrbiMed joined Thursday’s round, among others.
The moves will give Neurogastrx, a 12-person biotech based outside Boston, two clinical candidates and position it for an IPO. The deal with Daewoong, announced in June, included an equity investment that will convert to a 13.5% stake if the company goes public. According to the Korea Herald, that was an initial 5% stake, plus an additional 8.5% when the company files.
“If we are fortunate enough to be successful over the next six months, we may have two Phase III assets next year, and we have to make sure that they’re funded appropriately,” O’Mara said. “So we’ll find the right mechanism to raise money and move forward.”
The first asset is NG101, the molecule the company launched around. A dopamine D2 antagonist, it is designed to treat gastroparesis, a common condition — 10 million Americans, by some estimates — where the stomach can’t properly clear food. The pandemic-delayed Phase II trial is still recruiting, although O’Mara said the company planned to have data in the first half of next year.
The second is fexuprazan, a drug Daewoong already brought through Phase III trials in Korea for erosive esophagitis, a subset of acid reflux caused by inflammation damaging the esophagus. The goal is for it to be an alternative to the proton-pump inhibitors that have long dominated reflux treatment but don’t work for all patients.
It is part of a class of drugs called potassium-competitive acid blocker, or P-CABs. Takeda spinout Phathom Pharmaceuticals is developing its own P-CAB for a subset of GI disorders, including erosive esophagitis, called vonoprazan.
“Even though PPIs are terrific drugs, there are still somewhere between 7 and 9 million patients who suffer from symptom breakthrough,” O’Mara said, referring to proton-pump inhibitors. “And P-CABs are just better drugs. We don’t think P-CABs are going to replace PPIs. But for those patients who have breakthrough symptoms, there’s definitely a need for more efficacious therapies.”
Neurogastrx will run Phase III trials to try to prove fexuprazan is no worse or just as good — non-inferior — than proton-pump inhibitors at treating the disease’s initial symptoms and preventing them from recurring.
If those prove successful, the company will then try to market the drug itself in the US. The strategy amounts to a bet they can succeed in an area, commercialization, where many other small biotechs have failed.
But O’Mara thinks GI disorders, a specialty market, will prove more tractable for a company of his size than, say, heart disease. He noted that only about 7,000 GI specialists write 85% of GI prescriptions in the US.
“And that is a group that we can very efficiently market to as a small company,” he said. “That is very different than primary care.”