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La Jolla Biotech Company Targets China for Arthritis Drug Trials

RuiYi Inc., a biotechnology company split between La Jolla and Shanghai, has received $15 million in Series B financing from existing investors to further its uncommon business model.

Instead of starting in the U.S., the company’s aim is to conduct its research, development and market entrance in China, CEO Paul Grayson said.

“It’s like that old Wayne Gretzky quote: ‘I skate where the puck is going to be, not where it has been,’” Grayson said, referring to the hall of fame hockey player. “There’s a lot of interest from companies, as well as governments, in developing markets to start creating novel medicines.”

The privately held company, founded in 2008, has a class of drugs in development called monoclonal antibodies that help treat autoimmune disease. The funding will be primarily for the company’s lead asset, RYI-008, which treats rheumatoid arthritis.

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Investors include 5AM Ventures, Versant Ventures, Apposite Capital, Aravis SA, Merck Serono Ventures and SR One, the health care venture fund of drugmaker GlaxoSmithKline PLC (NYSE: GSK).

RuiYi employs about 20 people, with most of its strategy and intellectual property work done in La Jolla and the research done in China. The rationale behind the decision to conduct the bulk of pharmaceutical development in China is multipronged, Grayson said. First, the timeline and cost of conducting later-stage clinical trials is much less in nations with emerging markets like China, Brazil, India and Russia.

Andy Schwab, co-founder and managing partner of 5AM Ventures, described RuiYi’s strategy to develop novel drugs in emerging markets as “a unique opportunity to address a large and underserved patient population.”

Citing rheumatoid arthritis — a common condition with many therapeutic options in the U.S. — as an example, Grayson said far fewer people in China have access to top-flight treatments and are more willing participants in clinical trials. This ease in enrollment can help reduce costs of late-stage clinical trials, which require thousands of participants, to a fraction of the cost of conducting the same studies in the U.S.

“A rheumatoid arthritis clinical trial in the U.S., as part of a global development plan, can easily run past $120 million to $150 million,” Grayson said. “The same clinical trial in a developing market can be about one-tenth of the cost.”

One negative is that it’s difficult to navigate the regulatory policies of two countries, particularly one like China that is only now getting experience in developing new drugs. Regulatory authorities abroad don’t have the same expertise as agencies like the Food and Drug Administration, Grayson said.

“There are lots of subtleties, and pluses and minuses to developing a drug in China,” Grayson said.

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