Drug Startup Raises $15M in Extended First Round
By VITA REED
Irvine drug developer Kadmus Pharmaceuticals Inc. has raised $15.3 million in venture capital funding.
The 6-year-old company, which has raised $21 million to date, makes a topical drug for neuropathic pain, such as with shingles, a disorder also called herpes zoster and caused by the same virus that brings on chicken pox.
Kadmus’ products are related to compounds called endocannabinoids. Those are signaling molecules that occur in the brain. They regulate pain, emotion and body weight. Endocannabinoids also resemble chemicals found in marijuana.
Kamdus Chief Executive Patrick Walsh said he didn’t believe the company will have a public relations issue when its drugs are ready to come to market.
“We’re not working on what would be considered marijuana derivatives,” Walsh said. “It’s chemically different from what you would see for medicinal marijuana. This company doesn’t handle marijuana, and we’re not using it as a starting substance.”
A synthetic marijuana derivative is Marinol, a prescription drug that’s made by the Unimed Pharmaceuticals subsidiary of Belgium’s Solvay SA and is approved by the Food and Drug Administration and the Drug Enforcement Administration.
Kadmus plans to use its latest round of funding to expand into Canada and advance its products. The company just set up its Canadian operation in Toronto, Walsh said.
The drug maker also is looking at using its compounds to treat obesity, liver disease, anxiety, depression and acute and chronic pain, Walsh said.
VenGrowth Advanced Life Sciences Fund, a Toronto-based investor, led Kamdus’ funding. Softbank Life Science Ventures, part of Japan’s Softbank Corp., joined VenGrowth as a new Kadmus investor.
Returning investors included Sanderling Venture Partners, NeuroVentures Capital LLC, CDP Capital, Gray Ghost LLC and Bio*One Capital, part of Singapore’s EDB Investments PTE Inc.
The funding actually is the third infusion in Kadmus’ first round, Walsh said. The company’s returning investors had put in money to get Kadmus up and running in two separate stages before, he said.
“The company had made good progress, and when a larger amount of money was required to go through the next phase of development, instead of doing a new round, they just did an extension,” Walsh said.
Kadmus, which has 10 workers, is aiming to hire another 15 people in the next six to 12 months, Walsh said. The company doesn’t have sales yet, and Walsh said it was “tough to say” when the drug maker would need new funding.
“We’re obviously well funded today,” he said.
The next step, Walsh said, could be an investment from a big drug maker or other healthcare company.
“We’ve been very fortunate to have tremendous corporate partner interest,” he said. “We’ve been contacted by companies on all four of our major projects. So it’s likely that you would see a corporate partner deal or two emerge over the next 12 months, which would add significantly to the bank account for the company.”
Kadmus still is a few years away from selling its products and needs to complete more studies before going to third-phase trials on its topical drug KDS-2000, Walsh said.
“The goal is to get to market as soon as possible, but depending on the patient enrollment that would be required, it could be an additional three to four years,” he said.
Down the road, the company expects an acquisition by a potential corporate partner or a possible initial public offering, Walsh said.
“Right now, the pharmaceutical industry lacks an abundance of late-stage product opportunities, and that’s one of the really valuable pieces for our company,” he said. “We have a platform that has a number of products that would be late-stage product candidates in another 12 to 24 months.”
Kadmus’ products are based on work performed at the University of California, Irvine, according to Walsh. That includes work out of the laboratory of Daniele Piomelli, a UCI professor of pharmacology whose work Kadmus has licensed.
“If you’re on the business side, you want to be able to address markets that are addressing large, unmet needs, and that’s exactly the platform (our) technology is addressing,” Walsh said.
Walsh joined Kadmus about a year ago. Before coming to the drug maker, he was chief executive of Atairgin Technologies Inc., an Irvine-based biotechnology company that targeted ovarian and breast cancer. Atairgin, now LPL Technologies Inc., moved to Cleveland last year.
“Atairgin had made a decision,they were going to relocate the company to Cleveland, Ohio,” Walsh said. “That was obviously not something I would be interested in.”
Before Atairgin, Walsh was president and chief operating officer of what became Sicor Inc., the Irvine drug maker that was bought for $3.4 billion last month by Israel’s Teva Pharmaceuticals Industries Ltd. He oversaw what then was Gensia Sicor Inc.’s move from San Diego to Irvine.
As part of Kadmus’ funding, Jeff Courtney, a VenGrowth general partner, is joining the company’s board. Walsh said he and Courtney had worked on a business development deal during the time Walsh ran Gensia Sicor.
