BioCryst Joins HCV Race With $101M Presidio Merger

BioCryst’s proposed merger with Presidio will give the company an instant HCV pipeline. Albeit early-stage, the variety of the drugs could give the company a strong hand against other players in the field.

The proposed merger between BioCryst Pharmaceuticals Inc. and privately held Presidio Pharmaceuticals Inc. could mean the entrance of another player to the hepatitis C race to develop an all-oral combination of direct-acting antiviral drugs for the infectious disease. Both companies bring HCV candidates to the table; two from Presidio and one from BioCryst.

The two companies announced Oct. 18 that they have agreed to merge, pending approval from shareholders. The deal, which is expected to close in the first quarter of 2013, is an all-stock transaction that values Presidio at $101 million based on BioCryst’s closing share price of $4.11 on Oct. 17, the day before the deal was disclosed publicly. Closing conditions of the deal include a $60 million capital raise, including $25 million that Presidio shareholders already have committed.

Upon close of the deal, 24.5 million BioCryst shares will be issued to Presidio investors. The merged company will take on a new name and trade on the public market under a new ticker symbol. The yet-to-be named company will be located in North Carolina with facilities in San Francisco and Birmingham, Ala.

The tie-up will give the new company three early-stage HCV compounds that potentially could be used in combination with each other or with compounds being developed by others in the field like Abbott Laboratories Inc., Gilead Sciences Inc. and Vertex Pharmaceuticals Inc. The players in the HCV field have yet to determine which oral drugs or mechanisms of action are going to make the best combination to offer HCV patients a 100% cure rate without the use of injectable interferon, the current standard of care.

While Gilead arguably is the furthest along in this pursuit (with Abbott close on its tail), the variety of sub-populations within the disease and the potential for multiple combination therapies leave plenty of room for multiple players to enter the market (Also see "Start-Ups Look For Places In Future HCV Combo Regimens" - Scrip, 1 Nov, 2010.).

The most developed asset in the new company’s pipeline is Presidio’s PPI-668, a Phase II-ready NS5A inhibitor. For all doses evaluated in earlier trials, sharp drops in viral load were observed with a greater than 3 log reduction achieved within 30 hours for each of the doses, including the lowest dose of 40 mg per day.

Presidio also brings a preclinical pan-genotypic non-nucleoside polymerase inhibitor, PPI-383, to the table. The drug currently is in IND-enabling studies and is expected to enter the clinic as both a monotherapy and in combination with ‘668 in the beginning of 2013. The company claims that ‘383 is unique amongst “non-nucs” because it is active across genotypes 1 through 4 of the disease, whereas other candidates in this class only show activity in genotype 1 (there are six primary genotypes of HCV, with genotype 1 most prevalent in North America).

A Must-Watch Drug

The third drug in the company’s HCV arsenal is its nucleoside analog BCX5191, which was developed by BioCryst. The drug is expected to enter Phase I before the end of the year and will be studied in various combinations with ‘668 and ‘383.

“Nucs,” as this class of drugs is called, were thought to be the powerhouse needed to fuel an all-oral combination of drugs, and eye-opening, early-stage data led to high-priced buyouts. Gilead’s November 2011 purchase of Pharmasset Inc. at the highest price ever for a clinical-stage biotech ($11 billion), was followed quickly by Bristol-Myers Squibb Co.’s $2.5 billion acquisition of Inhibitex Inc. and INX-189, viewed as the second most-promising nuc in clinical development (Also see "High-Premium Buyouts Continue In Hepatitis C Space; Are Idenix And Achillion Next?" - Pink Sheet, 16 Jan, 2012.).

Gilead’s development of ’7977 continues apace, but Bristol ended development of ‘189 in mid-2012 due to cardiovascular toxicity issues (Also see "Bristol Discontinues Development Of Inhibitex Nuc, Will Take $1.8 Billion Hit" - Pink Sheet, 24 Aug, 2012.). The nuc class endured a further blow when both of Idenix Pharmaceuticals Inc.’s nucs were placed on clinical hold by FDA because of safety concerns due to their similarity in chemical structure to the Inhibitex/Bristol candidate (Also see "Hep C Nucleoside Scare: FDA Wants Idenix’s CV Safety Data After BMS Event" - Pink Sheet, 16 Aug, 2012.).

BioCryst insists that its nuc is safe and not expected to face the problems seen with Bristol/Inhibitex nuc. “We recognize that safety concerns for HCV nucs have been heightened by recent clinical findings for BMS-986094 and we will proceed with appropriate care and caution with the ‘5191 clinical program,” said BioCryst Chief Medical Officer William Sheridan during an Oct. 18 conference call.

“It is very clear that safety of dosing that levels that are effective against the target virus is the key success factor for nucs including ‘5191. ‘5191 has a very different chemical structure compared to BMS-986094, the ability to measure apparent drug levels of ‘5191 and a correlation with liver levels should aid in careful dose finding in clinical studies. ‘5191's high potency and the results of non-clinical safety testing indicate that low oral doses of 5191 are likely to be in a safe dose range,” he added.

A Competitive Playing Field

BioCryst/Presidio’s biggest advantage at this point – considering how far behind the competition the company is – is its wholly-owned pipeline; possessing three drugs that activate different targets and could potentially could be used in combination gives the company a leg up. This allows the company to test the drugs in various combinations.

“And while there are a lot of players in the space, it seems like every other week there is new information about new approaches to treating the disease. And we also know there is a lot of diversity in this patient population and so we believe that remains to be a lot of opportunity for multiple players in the space,” said Jon Stonehouse, CEO of BioCryst and slated CEO of the new entity, during the call.

While some investors and analysts thought there might be greater potential for BioCryst to license out its nuc to one of the bigger players that don’t have one – like Abbott or Achillion Pharmaceuticals Inc. – BioCryst believes there is greater value for shareholders if they keep the drug completely in-house. “Having the ability to do these [combination] studies creates greater value than out-licensing our new nuc after, say, Phase Ib. That was really the rationale for doing this,” said Stonehouse.

Beyond its HCV pipeline, the new entity will have a Phase I-ready asset for the orphan disease hereditary angioedema (HAE), as well as two late-stage assets. BioCryst also has peramivir, a Phase III influenza drug, and ulodesine, a Phase III-ready gout drug.

The company currently is looking for a partner for ulodesine that will be able to finance the late-stage development of the gout drug. It sees these products as near-term opportunities to provide cash that could help further fund the HCV program. Stonehouse left the possibility open that BioCryst will make further acquisitions or licensing agreements for other HCV compounds.

Presidio raised $6 million of a planned $13 million venture round in Nov. 2011, according to an SEC filing. The company raised a $53 million series B round.

At June 29, BioCryst had $37.1 million in cash and a first half 2012 operating loss of $15.1 million.