San Diego Business Journal

Local biopharmaceutical firm Regulus Therapeutics Inc. has the ability to delve deeper into development of therapeutics that target microRNAs with $80.9 million raised in the only life-sciences initial public offering in San Diego this year.

Trading on Nasdaq under the symbol RGLS, shares initially were offered at $4 and rose to the $4.87 range as of closing Nov. 14. Altogether, $50.9 million was raised from the sale of common stock in the IPO, $25 million was raised from the sale of common stock in a private placement to partner AstraZeneca AB, and $5 million was raised from the sale of a convertible note in August to research collaborator Biogen Idec.

Regulus President and CEO Kleanthis G. Xanthopoulos said the total IPO that closed Oct. 10 represents the highest amount raised by a pre-clinical company nationally during the past decade. Xanthopoulos said the IPO builds independence and could help propel Regulus’ five lead programs in microRNA technology to the clinic in a more meaningful way than if it remained private. Regulus has set a goal to file the company’s first Investigational Drug Application with the U.S. Food and Drug Administration in 2014.

‘A Big Opportunity’

“We have such a big opportunity. This idea is so big we wanted to raise substantial capital to continue its progress,” said Xanthopoulos. “We can’t raise as much private capital as we can in the public domain.”

In its quest to develop therapies for several diseases including fibrosis, hepatitis C, cancer and metabolic diseases, Regulus focuses on microRNAs, or ribonucleic acids. With 500 microRNAs identified in humans, each one has the ability to control multiple messenger RNAs. MicroRNAs control how quickly and when a messenger RNA will be translated into a protein, said Xanthopoulos. In a disease state, the microRNAs become deregulated and that’s where Regulus’ therapies can step in to bind with excess microRNAs to inactivate them and prevent the messenger RNAs from overproducing protein. Inhibition of a single microRNA has the potential to regulate the expression of multiple proteins and possibly even entire cellular and disease pathways.

“MicroRNAs control the translational pace of the messenger RNAs, which controls protein regulation,” Xanthopoulos said. “For the first time ever we have the ability to control an entire pathway that would regulate a disease.”

Regulus was formed in September 2007 by Alnylam Pharmaceuticals of Boston and Isis Pharmaceuticals of Carlsbad, two publicly traded companies studying microRNAs that realized the opportunity was so big that it couldn’t be tackled by them separately. Regulus, whose staff has grown to 62, got off the ground with a staff of three under the leadership of Xanthopoulos. His prior experience as a serial entrepreneur began at Aurora Biosciences Corp. where a drug for cystic fibrosis was developed before the company was acquired by Vertex. Xanthopoulos then led Anadys Pharmaceuticals Inc., a clinical-stage biopharmaceutical company developing medicines in hepatitis C and oncology treatments, from its inception in 2000 until it went public in 2004. Last year, Anadys was sold to Roche for $230 million, according to Xanthopoulos.

Regulus’ first big break came in April 2008, when the company signed a deal with GlaxoSmithKline for a $20 million upfront payment plus $600 million in potential milestone payments. The relationship formed around the potential of microRNAs to be used to treat immune inflammation and expanded in February 2010 to include research into treating the hepatitis C virus for an additional $150 million in milestones. By June 2010, Regulus signed a deal with Sanofi for $40 million upfront to study microRNA use in treating liver or kidney fibrosis. The collaboration expanded in June this year to include oncology.

By the time Regulus decided to go public, the company had already added two more partners, AstraZeneca, which committed $500 million in milestone payments, and Biogen Idec, a research partner that contributed $7 million toward multiple sclerosis studies.

An added benefit of the IPO, Xanthopoulos said, is enabling Regulus’ partners to acquire equity in the company.

The Percentages

Garry Menzel, chief operating officer and executive vice president of Regulus, said while the public owns 25 percent of the company; Isis owns 19 percent; and Alnylam owns 17 percent; the partners are not far behind. AstraZeneca owns 17 percent; Sanofi owns 10 percent; GlaxoSmithKline owns 5 percent; and Biogen Idec has a 4 percent stake in the company. Regulus, itself, owns 1 percent of the actual shares with the remaining outstanding.

Menzel said the enthusiasm shown by investors is due in part to the great potential of the product platform, which can be applied to a variety of diseases. Even though investors might shy away from early stage development work, the broad applicability of the technology takes some of the risk out of the equation, he said. Then, too, investments from strategic partners that total more than $100 million in upfront money and eligibility to receive up to $1.7 billion in potential milestones reflect well on the company.

“What that did for investors was it said there’s a tremendous new idea that is being backed by smart people within the pharmaceutical industry,” Menzel said. “Then they looked at the pedigree of the management team and what they had executed on business plans in the biotech, pharma and finance space.”

In addition to Menzel and Xanthopoulos, the management team is comprised of Chief Scientific Officer Neil W. Gibson and Senior Vice President of Human Capital Mary M. Glanville.

Simos Simeonidis, senior biotechnology analyst with Cowen and Co. in New York City, said the recent capital raise could help advance Regulus’ pipeline as the company can afford to conduct clinical trials. He said the funding will help the company provide more evidence of its molecules’ ability to treat the various diseases they’re targeting and the various molecular targets they’re going after with their microRNA inhibitors.

Simeonidis said that as more investors have access to investing in the publicly traded company, there’s potential for Regulus to access more capital and increase its market capitalization, especially if the clinical trials are successful.

“MicroRNA itself is potentially transformational in treating disease,” Simeonidis said. “In terms of medicine, pharma and drugs are pretty boring science, but this is a combination of science that can become really exciting medicine and exciting drugs.”