Metabasis Grabs $19.2M Series D

With its glucose inhibitor in clinical trials and other liver-targeted products on the way, Metabasis Therapeutics Inc. recently returned to the venture capital market for a $19.2 million fourth round infusion.

Sprout Group led the deal, and was joined by Series C backers MPM Capital Management and Interwest Partners. Previous private equity funding had come both as part of a 1998 spinout agreement with former parent company Gensia Sicor Inc., and through a joint research and development agreement with Sankyo Co. Ltd.

The company does not currently have any plans for additional private financing, and hopes its next inbound capital will come from the public markets.

“Metabasis has what we think is a potential blockbuster drug for Type II diabetes,” said Kathleen LaPorte, a general partner with Sprout Group. “Most of the existing drugs work by increasing the body’s sensitivity to insulin, but this new drug attacks the problem [of chronic glucose elevation] at the source by actually reducing the production of glucose.”

That inhibitor, named MB6322, is at the heart of Metabasis’ agreement with Sankyo. The former is responsible for drug discovery and initial valuation, while the latter conducts the actual clinical trials and development.

“Diabetes is expensive and requires a high amount of specificity, and Sankyo is one of the two companies in the world with a leading diabetes franchise,” said Luke Ervin, a general partner with MPM Capital Management. “Metabasis could have never matched their resources.”

A similar partnership seems to be developing between Metabasis and ICN Pharmaceuticals Inc., in regard to a pro-drug indicated for the treatment of hepatitis type B. That product, named MB6866, is slated for clinical trials in the first half of next year, and is based on a proprietary liver-targeted technology platform tentatively titled HepDirect. The HepDirect technology could prove to be the lynchpin of Metabasis’ future fortunes, as it is designed to permit certain drugs into the liver despite the fact that the organ normally functions as a toxin filter.

If the trials succeed and the IPO market still seems receptive to biotech offerings, look for Metabasis to take a stab at the public markets within the next two years.

“I think it is plausible that in a good market Metabasis could go public on Phase I data, which they are actually almost done with [on MB6322],” Sprout’s LaPorte said. “Biotech companies almost always go public without having commercialized products… because of long FDA cycles.”

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