Novus Therapeutics Inc. (Nasdaq: NVUS) has its eyes—and ears—open for more funding.
The Irvine-based specialty pharmaceutical company, which is developing products to treat disorders of the ear, nose, and throat, filed plans this month with the Securities and Exchange Commission for a secondary offering of shares.
It’s seeking to raise more than $34.5 million, most to be used to help fund two clinical trials.
Novus’ lead drug candidate, OP-02, is being evaluated as a treatment for otitis media, or middle-ear infection.
Proceeds will support two separate second-phase clinical trials costing about $10 million each.
Specific terms of the offering haven’t been disclosed. Company executives didn’t respond to email inquiries about the proposed fundraising, which is being underwritten by Piper Jaffray.
Company shares currently trade at about $5, down from $7.20 on July 27, before the filings. Novus has about a $57 million market capitalization.
The company hasn’t gotten regulatory approval for any of its products. In late June, it had an accumulated deficit of about $33.5 million, and had $19.2 million in cash. It reported a net loss of $3.2 million in the past quarter.
Pediatric Market
Disorders of the ear, nose and throat span a variety of symptoms and issues. The National Institutes of Health said ear infections are the most common reason parents take their children to a doctor.
While anyone can get an ear infection, children get them more often than adults—five out of six children will have at least one by age 3.
Upper respiratory tract infections can occur in the middle ear, causing pain and fever. Allergies can also cause fluid to build up in the middle ear, leading to painful pressure. If left untreated, chronic ear infections can cause temporary or permanent hearing loss.
The worldwide ear infection treatment market is projected to reach $22.3 billion by 2023, according to a report by Market Research Future.
Novus estimates that in the U.S. alone, over $5 billion is spent annually on management of the condition.
Its lead drug candidate is a combination drug and device product, the drug suspended in a propellant and sprayed into the nostrils.
The company plans to evaluate the drug for two indications: treatment of middle-ear infection with effusion, or uninfected liquid in the middle ear, and a treatment to prevent recurrent acute otitis media, or middle-ear inflammation with infectious fluid.
Before tackling the pediatric indications, Novus will start a first-phase clinical trial in healthy adults to evaluate product safety. The company hopes to complete the trial by the middle of next year and upon completion initiate multiple second-phase clinical trials to evaluate the drug as a treatment and preventer of middle-ear infection in children.
The company announced in June that its meeting with the Food and Drug Administration confirmed “no additional preclinical or clinical studies beyond our planned phase 1 safety study in healthy adults will be required before initiation of phase 2 studies in children 6-months of age or older with otitis media,” Novus President Catherine Turkel said in a press release. She was promoted from the chief development officer role in November.
Swimmer’s Ear
Novus also has foam-based drug delivery technology OP-01, which was originally developed as an improved treatment for acute otitis externa, or swimmer’s ear.
The company completed four clinical trials of the product in 353 adults and children, including a second phase-two study. It paused the development program last year to focus on OP-02 because of the greater market potential of ear infection therapies.
Current treatment for ear infections involves use of antibiotic drops, which is effective for middle-ear infection with infectious fluid but not that with uninfected liquid.
Overuse of antibiotics can also lead to growth of antibiotic-resistant bacteria.
The company said it may still develop the swimmer’s ear product.
Otic Reverse Merger
Novus got its start in 2004. It previously operated as Tokai Pharmaceuticals Inc. and was based in Cambridge, Mass. It went public in 2014, raising about $97 million in an initial public offering.
It licensed OP-02 from Scientific Development and Research Inc. and Otodyne Inc., both based in Morristown, N.J., as well as Irvine-based Otic Pharma Ltd., securing exclusive worldwide rights to develop and commercialize the drug candidate.
Otic is a privately held, clinical-stage pharmaceutical company focused on developing products for disorders of the ear, nose and throat. It played a big part in Novus’ current ownership structure.
Its shareholders took over a 60% interest in Tokai’s stock last year via a reverse merger, renamed the company Novus, and moved its headquarters to Irvine.
Gregory Flesher, who was Otic’s chief executive, took over the president and chief executive titles following last year’s transaction.
An affiliate of New York-based healthcare investment firm OrbiMed Advisors LLC was the largest shareholder in Novus as of this past April, with a 27% stake, regulatory filings show. Novus’ executive team had a 4.3% stake at the time.
Novus leases about 5,200 square feet at its headquarters at the Newport Gateway office complex, according to the company’s latest annual report. It had seven full-time employees at the start of the year.
