Biotech Values

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Alnara Pharmaceuticals flourishes from Altus demise
By Julie M. Donnelly
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http://www.masshightech.com/stories/2010/03/01/daily48-Alnara-Pharmaceuticals-flourishes-from-Altus-demise-.html

Alnara Pharmaceuticals Inc. stands ready to send its drug target to treat cystic fibrosis to the U.S. Food and Drug Administration, a mere 16 months after the company raised its first venture capital round of $20 million.

The pharma couldn’t have done it without the demise of another local biotechnology company, Waltham-based Altus Pharmaceuticals Inc. Alnara executives, scientists and intellectual property all have roots at the failed company.

At least five Massachusetts biotechs — Dynogen Pharmaceuticals Inc., Epix Pharmaceuticals, Oscient Pharmaceuticals, Biopure Corp. and Altus — have more or less ceased operations since the stock market meltdown in September 2008.

But the fall of 2008 turned out to be a great time to launch Alnara.

“The investors didn’t flinch. Putting money into a preclinical company on Oct. 3 took guts,” CEO Alexey Margolin said.

Margolin left his job as chief scientific officer at Altus in 2007 and said there was no indication at the time that Altus would go under. Margolin said he had been with the company since 1993 and was looking for a change.

But Altus then suffered a number of blows. Investors were puzzled when in December 2007 California-based biotech giant Genentech Inc. ended a partnership with Altus — worth a potential $280 million — to develop a human growth hormone.

In October 2008, investors reacted unfavorably to the results of the first Phase 3 trial for the company’s CF drug target, then called Trizytek. This followed closely on the heels of the stock market meltdown that crushed the company’s market value and made it difficult to raise capital.

Altus went into a tailspin, laying off 107 workers in January 2009. Soon after, the company decided to abandon its CF drug candidate, then in a second Phase 3 trial, to focus efforts on the human growth hormone target.

Trizytek landed in the lap of the Cystic Fibrosis Foundation, with which Altus shared a partnership since 2001. It quickly found its way to Alnara, at very beneficial terms, Alnara officials said. Already, $200 million had been invested in the compound’s development.

“We never thought we would work on this drug program again, but the CF Foundation felt that our 10-person company was best positioned to move it forward quickly,” Chief Business Officer Bob Gallotto said.

Alnara quickly changed gears, convincing investors it could become a commercial-stage company. It promptly raised a $35 million venture capital round led by Boston and San Francisco-based MPM Capital. Cambridge-based Third Rock Ventures, Frazier Healthcare, with offices in Seattle and Menlo Park, Calif., and Bessemer Venture Partners, with global offices, also participated.

Alnara picked up 35 to 40 of Altus’ former scientists and got to work on completing the second Phase 3 trial.

Gallotto, who was recruited by Margolin from Altus in October 2008, said Altus’ financial troubles were not the reason for his departure. But, he said, Alnara has learned some lessons from Altus. One is that you have to run lean.

“You have to make sure that the organization is structured around the life cycle of the product. After we file with the FDA, all those scientists don’t need to stay, we have to be flexible,” Gallotto said. So the former Altus workers were hired on a contract basis, and now the company will turn to building the commercial structure of the company.

The company hopes the CF drug target, now known as liprotamase, will be approved six to 10 months after the application is submitted to the FDA in the coming days.

“Absolutely, luck plays a role. But we deserve this luck. I started this program 10 years ago with a government grant of $100,000. I was happy because I thought that’s all I would need,” Margolin said.

But there was no shortage of losers when Altus finally declared bankruptcy in November, including Margolin himself. Margolin owned 135,204 shares of Altus stock when the company went under, regulatory filings show.

Among the company’s other major investors included U.S. Venture Partners, SV Life Sciences, Warburg Pincus LLC, and Nomura Europe.