$60 million infusion for Corus Pharma
The deal, being announced today, is bigger than the last two initial public offerings in Seattle combined. It is being led by a new Corus investor, Bear Stearns Health Innoventures. Other familiar names on the IPO circuit are participating: H&Q Capital Management, AIG SunAmerica, MPM Bioequities, Carnegie Kapitalforvaltning of Sweden and Corus Chairman Kirby Cramer, a former Immunex director who is investing personal money.
The company also received re-investments from all 10 venture firms in its last financing a year ago, and the company expects to receive $4 million to $5 million more in the next several weeks.
Corus snapped up the cash without touting technology that professes to revolutionize medicine, like many biotechs do. Investors said Corus looks like a safer bet because it takes drugs that have been proven safe and reformulates them into aerosols for respiratory diseases.
Corus has not seen solid evidence that its treatments are effective in large numbers of patients, but small trials have shown that they are safe in highly concentrated aerosols and have hinted that they are effective. Those preliminary results, combined with some renewed bullishness in biotech and the reputation Corus leaders established at Seattle-based Pathogenesis, was enough to bring in the venture money, investors say.
Corus plans to use the cash to hire 20 people this year in clinical development and manufacturing and to grow in its offices near Pike Place Market. Most importantly, it will have enough money to push its inhaled antibiotic for cystic fibrosis through the final stage of clinical testing by the end of 2005 and run large human trials on a drug for severe asthma. If the drugs begin to show that they are effective, company officials said, Corus will consider going public.
Rod Ferguson of JP Morgan Partners said Corus has drawn attention because drug development is expensive and risky, and Corus CEO Bruce Montgomery has become "a rock star" by his role in developing four drugs.
Montgomery, a media-savvy executive, deflected credit to his employees. If investors are so infatuated with him, he says, "Where are the groupies?"
Thong Le, a business development associate with WRF Capital said investors aren't gambling entirely on Montgomery.
"You don't get this kind of support from investors like this, unless you're doing the right things," Le said.
Montgomery founded Corus with his own money after running drug development at Pathogenesis, which was sold to Chiron for $720 million in 2000. He and his team were able to cash out by developing Tobi, an inhaled antibiotic for cystic fibrosis, which had $172 million in sales last year.
Tobi is hailed by doctors for its ability to reduce the symptoms and prolong lives of cystic-fibrosis patients, but its developers saw its weaknesses: It takes patients an hour a day to take it, and many doctors worry that if patients take it too much, the bacteria will develop antibiotic resistance. Montgomery hired away many who worked on Tobi, and built Corus around a different antibiotic that could be turned into an aerosol spray and taken during spells when patients aren't using Tobi.
Montgomery, who said Corus represents a "do-over" for the Pathogenesis crew, said he has learned not to bet a company on one drug after Pathogenesis, which had few drug candidates left once Tobi was approved.
Corus has tested — and dumped — a program that didn't work for snoring and sleep apnea. It quickly branched out further, licensing the asthma drug from the Mayo Clinic, where it had been tested in patients for years. The treatment improved lung capacity and strength for many patients, and weaned some off corticosteroids, but it numbed patients' mouths. Corus figured that if aerosol technology could be improved to make smaller particles, the drug could burrow deep into the lungs and not cause numbing.
In a mid-stage clinical trial with the new aerosol form, Corus found that the asthma treatment was safe but did not reach its goal of improving lung function in mild to moderate asthma patients. Montgomery said the company isn't giving up, though, because it is more difficult to show dramatic improvement in patients with mild problems. He said it has a better chance of showing improvement in severe patients, as seen at the Mayo Clinic.
The drug also has a better chance of finding a business niche in severe asthma, Montgomery said, because the large mild-to-moderate patient group is dominated by big companies like Merck and GlaxoSmithKline.
In the smaller groups of severely sick patients, Corus' treatments could command big prices. There are about 30,000 cystic-fibrosis patients in the nation. Corus Chief Financial Officer Guy Seaton said the treatment could cost $14,000 to $15,000 for each course of treatment, slightly more than Tobi.
There are about 175,000 patients with severe asthma who depend on corticosteroids. If Corus' alternative works, it could cost each patient $1,500 to $1,800 a year, Seaton said.
One of Montgomery's past research collaborators, Dr. Arnold Smith of Seattle Biomedical Research Institute, said Montgomery has a knack for spotting opportunities and recruiting skilled people to tackle them. Lung specialists are already buzzing about the cystic-fibrosis drug, Smith said.
Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com
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