With Diminishing Cash, Aryx Seeks Pharma Partners For Mid-Stage Assets

Management expects clarity from FDA on the clinical development program for two drugs that will help finalize a deal.

Additional insight from FDA on Aryx Therapeutics' clinical programs should help the company secure a sale of assets or partnership with a pharma partner in an expeditious manner, management said during a first quarter sales and earning call May 13. The firm is looking to offload its three mid-stage pharmaceuticals to optimize shareholder value and to do so quickly, before its coffers run dry.

The Fremont, Calif. biopharma had only $6.3 million in cash and equivalents on hand at the end of the first quarter, enough funds to operate until September, time enough, the company hopes, to see it most of the way through the process of selling its assets. Aryx announced that it had retained Cowen & Co. to explore strategic options for the company Feb. 18 after it said advanced licensing discussions with one potential partner for its oral antiarrythmic agent, budiodarone, fell through. As a result, the firm said it would aim to capture the "full near- term value" for the three lead programs rather than pursue licensing deals.

The company also reduced its workforce at the same time to all but 17 employees, with those workers who were retained focusing solely on either the sale of assets or discussions with FDA. Chief Operating Officer John Varian said the company is evaluating additional ways to access cash, including "market-based options" and extracting cash from existing investors, to further fund the company, should it require more time to close an acceptable deal. If a deal doesn't materialize, it would likely need another $6 million to $7 million through the end of the year, he estimated.

"An impressive number of pharma companies have begun to actively review our assets," CEO Paul Goddard assured investors. "The process is dynamic, with some companies deciding not to pursue our product candidates while some are accelerating their efforts."

Aryx management wasn't available for comment after the call, so it was unclear why the company has had difficulty attracting a partner. It has backing from several heavyweight venture capital firms, including MPM Capital, which owns 21 percent of the stock, Growth Equities, which holds 20 percent of shares, and Nomura Phase4 Ventures, which owns 8.9 percent.

In addition to budiodarone, a compound for atrial fibrillation that has completed Phase IIb testing, Aryx has two drug candidates ready for Phase III, the anticoagulant tecarfarin and a chronic indiopathic constipation candidate ATI-7505. Aryx provided regulatory updates on these during the call.

FDA provided additional clarity on the development path for ATI-7505 during an end of Phase II meeting in April, information Aryx says will make the drug more attractive to suitors. Based on existing safety data in 1,000 patients, the agency confirmed that no special cardiovascular safety monitoring requirements would be needed for an NDA submission. In addition, the agency offered information about the length of the trial, which would need to be 12-weeks, and the primary efficacy measures.

ATI-7505 is a serotonin type-4 agonist that improved bowel function in a Phase IIb study Aryx initiated with then-partner Procter & Gamble; however Procter & Gamble backed out of the partnership in August 2008, just before the consumer products giant exited the pharmaceutical business area altogether .

On tecarfarin, Aryx recently submitted to FDA a proposed protocol for the remaining Phase III trial that would be required to support the safety and efficacy of tecarfarin compared to warfarin in a real-world clinical study. Should FDA agree on the protocol, the company said it would likely enhance the value of tecarfarin. Earlier this year, Aryx announced that the agency is asking for only one additional Phase III clinical trial to support an NDA for tecarfarin . That demand came after tecarfarin failed to demonstrate superiority to warfarin in an initial tightly-controlled Phase III study, EmbraceAC, in which warfarin demonstrated an unusually high benefit on anticoagulation.

Budiodarone has been studied in a Phase IIb trial in patients who suffer from repeated episodes of atrial fibrillation, or paroxysmal atrial fibrillation, treatment resulted in a significantly reduced atrial fibrillation burden, up to 83 percent compared to baseline in the third month of treatment.

Aryx was formed on the basis of its ARM (Aryx RetroMetabolid Drug Design) technology, which is designed to take drugs that work through known therapeutic mechanisms and make them safer by engineering out metabolic problems that cause toxic and dangerous side effects. Tecarfarin is designed to have the same therapeutic benefits as warfarin. For example, budiodarone is designed to have the efficacy of amiodarone, and ATI-7505 is designed to have the same benefits as cisapride. Johnson & Johnson' removed cisapride, branded Propulside , from the market in 2001 due to cardiovascular side effects.

-Jessica Merrill ([email protected])