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Firm Looks to the Sea to Fight Cancer

Many people think of the ocean as a source for food.

For Nereus Pharmaceuticals Inc., a new injection of $42.6 million in venture capital funding gives it the needed boost to try to translate ocean-derived microorganisms into cancer-fighting drugs.

The small San Diego-based biotechnology company announced Jan. 4 that a large international investor syndicate, HBM BioVentures (Cayman) Ltd. and HBM BioCapital LP, two funds managed by HBM BioVentures AG of Baar, Switzerland, led the $24.3 million first installment.

“It’s a fair valuation consistent with market conditions,” said Kobi Sethna, Nereus’ chief executive.

The second tranche of $18.3 million will come when Nereus’ two lead cancer compounds, NPI-2358 and NPI-0052, will be ready to make their way into human testing, he added.

The first experimental drug, NPI-2358, could be tested in cancer patients in the second quarter, provided the Food and Drug Administration gives permission.

Sethna said that NPI-2358 works by attacking the tumor cells on the inside rather than on the periphery, which is generally the target for other types of chemotherapy and radiation.

This could make the compound potentially useful as a stand-alone drug as well as in combination with chemotherapy or radiation.

“When you combine it, you get a more synergistic effect, but the compound itself will also have anti-cancer effects,” Sethna said.

NPI-2358 targets solid tumors that have a lot of blood flow, such as colon, prostate, stomach and thyroid cancers.

Nereus’ second lead compound, NPI-0052, may also target solid tumors, but its initial focus will be on treating multiple myeloma — cancer of the plasma cells in the bone marrow.


Excitement Mounts

Sethna said he’s excited about this drug, because animal studies have shown that the compound is active in multiple myeloma cells resistant to existing treatments, including Millennium Pharmaceuticals’ drug Velcade.

Velcade was first approved in 2003 for relapsed or refractory multiple myeloma.

Myeloma, which is Greek for “holes in the bones,” accounts for less than 1 percent of all cancers in the United States, according to the American Society of Clinical Oncology.

The FDA recently accepted an application to use Velcade as a second-line treatment in multiple myeloma, granting it priority review, according to BioWorld, an industry trade publication.

“The longer the drug is on the market, the more resistance you will see,” Sethna said. “This could be an interesting product for patients resistant to Velcade or other compounds.”

Sethna hopes to start human trials by year-end.

The fourth round of financing will support continued research in animals and the hoped-for first phase of dosing and safety studies in humans.

New investors include Advent International Corp. of Boston; InterWest Partners of Menlo Park; Genavent Partners (Sonofi/Aventis); and Red Abbey Venture Partners of Baltimore.

Prior backers who also participated in the new round are Forward Ventures of San Diego; Alta Partners of San Francisco; GIMV NV of Belgium; Novartis Bioventure Fund of Basel, Switzerland; Pacific Venture Group of Redwood Shores; First BioVentures of Taiwan; and Lotus BioScience Ventures of Hong Kong.

These firms supplied $38 million in three rounds of financing and a seed round dating back to 2000.

The new round comes a year after a small bridge round of about $5 million and a second round of $23.6 million led by the Pacific Venture Group in 2001.

Guy Nohra, co-founder and director of Alta Partners, which raised between $5 million and $10 million on behalf of Nereus, said he’s happy about the firm’s progress.

“Having been early investors, it’s gratifying to see that the technology we backed has come up with pre-clinical compounds,” Nohra said.

Though, he estimated that it could take five to eight more years before the investment will pay off into a commercial product, if at all.


Hiring Plans

Sethna said he plans to hire eight to 10 more employees this year, including chemists, biologists and industrial fermentation experts.

That small firm now has 26 people.

But Sethna said the firm’s drug portfolio is anything but small. It has six compounds that also show promise for further development.

Once the two lead compounds win permission to be tested in humans, Sethna plans to explore partnering opportunities with drug firms.

Small biotechs often look toward bigger drug makers to help fund the costly development in return for commercial rights. The further along the drug is in development, the easier it is to negotiate more favorable terms, Sethna said.

“We look for long-term relationships that are truly synergistic rather than pure outlicensing,” Sethna said.

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