AbbVie Joins Avaxia Board, Becomes An Early Investor In The Gut Therapy Biotech

AbbVie has been filling out its pipeline with small deals that could result in a follow-on drug to its blockbuster Humira; it’s most recent investment is in a small company doing further work in the space.

Avaxia Biologics Inc. may have gotten a lucky break in its latest investor; AbbVie Inc. has chosen to become the first institutional investor in the company by joining its Series B round. The 14-person biotech is developing gut-targeted therapies that could be a safer, more efficacious follow-on to AbbVie’s blockbuster biologic Humira (adalimumab).

Avaxia CEO Barbara Fox made it clear in an interview that AbbVie has not gotten any product rights, but the company did take a seat on the biotech’s board. “These are just the beginnings of establishing a relationship,” said Fox of AbbVie, “but there’s a very logical degree of mutual attraction.”

While it’s rare for a parent company to ultimately become the partner or acquirer of a company in which its venture capital arm invests, these relationships are set up in theory because the parent company is interested in the technology.

According to Elsevier’s Strategic Transactions database, from 2006 to 2011, only two private companies that were backed by corporate venture funds eventually were bought out by the parent companies of the venture investors.

In November 2010, Eli Lilly & Co. bought Avid Radiopharmaceuticals Inc. for $300 million plus earn-outs [See Deal]; Lilly Ventures participated in a financing in 2006 [See Deal]. The other acquisition took place in September 2006 when Amgen Inc. bought out Avidia Inc. for $290 million plus $90 million in earn-outs [See Deal]; Amgen Ventures was part of the company’s Series B round in 2005 [See Deal].

Validating A Platform

The Lexington, Mass.-based biotech is using the $11.4 million from the Series B it closed on June 7 to fund a Phase Ib trial of AVX-470, an orally available localized tumor necrosis factor (TNF) blocker that is being studied for the treatment of irritable bowel syndrome. The current trial is a 28-day dosing study that will include 24 to 30 active ulcerative colitis patients by the time it wraps up.

Fox anticipates obtaining data from the study, which will evaluate safety and drug activity, by the end of the year. “We hope to have data to present at JPMorgan next year,” she said.

AVX-470, Avaxia’s lead product and only clinical-stage candidate, blocks the same target as AbbVie’s Humira, which brought in $9.3 billion in 2012 sales. TNF blockers like Humira are approved for a swath of indications and work by blocking the inflammatory immune response throughout the body. They generally are given as an injection or infusion.

Avaxia’s products, including several preclinical assets, are administered orally and work locally in the gastrointestinal tract. “The challenge is to come up with something that is stable in the hostile environment of the gut,” Fox explained.

While AVX-470 looks like any other pill, it is uniquely manufactured – the antibodies used in the drug are made from cow’s milk, making them naturally stable in the GI tract and relatively cheap to manufacture, she added.

Avaxia is hoping that the Phase Ib trial shows the potential the drug could offer in treating conditions in the gut like ulcerative colitis and Crohn’s disease. If results are positive, the company hopes to license out the drug. Fox said partnering discussions already are underway but that none of them have reached a serious stage at this point. She believes that positive results for AVX-470 and a partnership for the candidate will serve as a validation for the rest of the company’s platform, which currently is all preclinical.

The Series B financing was led by Cherrystone Angels and Golden Seeds, and included new investors AbbVie Inc., Ariel Southeast Angel Partners and Tech Coast Angels. They were joined by existing investors Beacon Angels, Boston Harbor Angels, Launchpad Venture Group, Mass Medical Angels, North Country Angels, the Beta Fund, Granite State Angels, the Keiretsu Forum and Maine Angels.

As part of the Series B, Avaxia raised $6.4 million in December [See Deal], after raising a $3.44 million Series A in November 2011 [See Deal].

Building On Its Humira Franchise

Humira is not only the best-selling drug in AbbVie’s portfolio, but the best-selling drug in the world currently. Yet, AbbVie, which became a standalone company in January after being spun out of Abbott Laboratories Inc., has been trying to diversify its portfolio. Investors and analysts worry that the company is too dependent on Humira; the $9 billion blockbuster set to go off patent in 2016. The drug may not face generic competition right away due to a difficult manufacturing process, but AbbVie clearly has been preparing to bring a variety of follow-on products into its pipeline.

In March, It entered into a co-development agreement with Receptos Inc. for its Phase I anti-interleukin-13 antibody [See Deal]. RPC4046 currently is being developed for the orphan disease eosinophilic esophagitis (EoE), but it also has shown activity in various other immunological conditions.

In mid-May, AbbVie agreed to pay $70 million upfront for an option to Alvine Pharmaceuticals Inc.’s mid-stage celiac disease treatment. Should AbbVie opt into the program, it will have the right to acquire the company outright or all of the assets associated with ALV003 (Also see "Alvine Hopes To Bring The First Celiac Drug To Market With New Partner AbbVie" - Pink Sheet, 14 May, 2013.). AbbVie’s VC arm was an early investor in Alvine.