Small La Jolla, Ca,-based Auspex Pharmaceuticals (NASDAQ:ASPX) is a successful fund-raiser.
In January, it raised $35 million in venture and loan financing. Then in February, it planned to issue 5,500,000 shares in an IPO priced between $10.00 and $12.00 per share, but the offering was increased and eventually ended up issuing 8,050,000 shares at an initial offering price of $12.00 per share.
Auspex's principal product, SD-809, is an improved version of an existing drug for Huntington's disease to treat abnormal involuntary movements such as chorea associated with the disease.
SD-809 is in a Phase 3 registration clinical trial for the treatment of chorea.
Auspex is employing its deuterium chemistry approach to optimize other deuterium-containing compounds in its pipeline that are at various stages of development.
Auspex's basic idea is fairly simple.
If a small molecule drug is exposed to metabolic enzymes in the body that break down its hydrogen bonds, wouldn't substituting some of the hydrogen atoms with something stronger make those bonds stronger and longer-lasting?
Deuterium is a stable and naturally occurring hydrogen isotope with a nucleus that is twice the mass of ordinary hydrogen. Replacing some hydrogen atoms with deuterium does not change the shape or electronic structure of the molecule, but it can make a big difference in how it behaves.
The concept of substituting deuterium has been generally accepted, but the clinical effects have to be tested on a case-by-case basis.
SD-809 is a deuterium-based analog of Xenazine, a drug the FDA approved in 2008 for treating the involuntary movements, or "chorea," associated with Huntington's disease, Tourette syndrome and tardive dyskinesia. Xenazine is made by Lundbeck, a Danish company.
Xenazine or SD-809 are not a cure, they simply help control hyperkinetic movements by depleting dopamine, a neurotransmitter that, if it is at abnormally high levels, causes chorea.
Replacing some of the 27 hydrogen atoms in Xenazine with deuterium makes it more difficult for metabolic enzymes to break the molecule down. SD-809 will stay in the body longer because it doesn't require as high doses or as many doses as Xenazine. The interaction with other drugs is also improved.
Huntington's disease is a progressive brain disorder that causes uncontrolled movements, emotional problems and loss of thinking ability.
The adult version of the disease usually appears in a person's thirties or forties. Early signs and symptoms include irritability, depression, small involuntary movements, poor coordination and trouble learning new information or making decisions.
Huntington's disease affects an estimated 3 to 7 per 100,000 people of European ancestry. The disorder appears to be less common in other ethnicities, like people of Japanese, Chinese and African descent.
Genes involved: Mutations in the HTT gene cause Huntington's disease. The HTT gene provides instructions for making a protein called huntingtin. Although the exact function of this protein is not known, it appears to play an important role in nerve cells of the brain.
The HTT mutation that causes Huntington's disease involves a DNA segment known as a CAG trinucleotide repeat. This segment is made up of a series of three DNA building blocks (cytosine, adenine and guanine) that appear multiple times in a row. Normally, the CAG segment is repeated 10 to 35 times within the gene. In people with Huntington's disease, the CAG segment is repeated 36 to more than 120 times. People with 36 to 39 CAG repeats may or may not develop the signs and symptoms of Huntington's disease, but people with 40 or more repeats almost always develop the disorder.
Many people with Huntington's disease develop involuntary jerking or twitching movements known as chorea. As the disease progresses, these movements become more pronounced. Affected individuals may have trouble walking, speaking and swallowing. People with this disorder also experience changes in personality, and a decline in thinking and reasoning abilities. Individuals with the adult-onset form of Huntington's disease usually live about 15 to 20 years after signs and symptoms begin.
A less-common form of Huntington's disease, known as the juvenile form, begins in childhood or adolescence.
The company plans to report data from the ongoing Phase 3 trial in the second half of 2014.
About 90 patients are enrolled and are given SD-809 extended release tablets in three dose strengths: 6, 9 and 12 mg, all of which are identical in size, shape and color or placebo.
The patients are divided into two arms, splitting them half and half between drug and placebo. The trial is conducted in 26 locations in the U.S. and Canada.
Possible improvements from the new drug include:
Convenience: Xenazine is a pill that needs to be taken up to 3 or 4 times a day to effectively control chorea. The extended release form would reduce this to one or two.
Smoother action: Drug levels of Xenazine vary greatly with every pill taken: from very high shortly after taking the pill, to very low before the next one. The result is a "roller coaster" effect, with too much drug just after taking a pill and too little before the next one. SD-809 is aiming to even out this roller coaster effect by preventing the extreme highs and lows and keeping the drug at the same effective level throughout the day and night.
Potentially fewer side effects: While SD-809 poses similar side effects as Xenazine, which include restless pacing, depression, dizziness or drowsiness, it should have fewer and milder side effects.
Experience shows that fewer side effects occur for many, although not all, extended-release drugs. High levels of many drugs, like the high level of Xenazine just after taking the short-acting pill, is often associated with more side effects. The peak level of SD-809 is substantially lower than the peak level of Xenazine.
Abnormal involuntary movements can arise from a variety of causes, and typically are either genetic or drug-induced. Huntington's disease, tardive dyskinesia and Tourette syndrome are three conditions that prominently feature hyperkinetic movements.
In the U.S., an estimated 30,000 people have Huntington's disease. One of the first symptoms of this disease is chorea, which occurs in 90 percent of patients, and is moderate-to-severe in approximately 70 percent of these patients.
Since Xenazine's launch in the fourth quarter of 2008, annual sales in the U.S. have grown to approximately $238 million for the four quarters ended September 30, 2013. The treatment costs about $60,000 to $70,000 annually for each patient.
Auspex believes SD-809 can outstrip that sales figure, if approved.
The reason for that is that lower side effects can lower or eliminate the FDA-mandated Risk Evaluation and Mitigation Strategies, or REMS program that exists for Xenazine.
Another reason is that Auspex believes that it can possibly expand SD-809 to treat tardive dyskinesia and Tourette syndrome.
In the U.S., an estimated 500,000 patients have tardive dyskinesia.
Tardive dyskinesia is a hyperkinetic movement disorder that typically manifests as rapid, repetitive, stereotypic movements that are induced by certain drugs, such as antipsychotics, which are used for treating psychiatric conditions, as well as by drugs, such as metoclopramides, which help with gastrointestinal problems.
These patients are managed largely by psychiatrists and movement disorder neurologists. There are no FDA-approved treatments for tardive dyskinesia.
Another disease is tics. In the U.S., an estimated 100,000 to 350,000 children have tics, which are abnormal involuntary movements or vocalizations and associated with Tourette syndrome.
Peak severity of the disorder is around 12 years of age, with an estimated 13 to 22 percent of affected children continuing to take medications for tics as adults.
There have been no new drugs introduced for treating tics associated with Tourette syndrome in 30 years, and the antipsychotics used are inadequate. The treatments carry, among other adverse events, the risk of causing permanent neurologic deficits, such as tardive dyskinesia.
It is believed that Xenazine is used off-label by physicians to treat patients suffering from tardive dyskinesia and tics associated with Tourette syndrome. However, only about 3,500 to 4,000 patients are currently on Xenazine therapy in the U.S. The limited usage of Xenazine is probably due to its dosing frequency, poor tolerability and side effect profile.
The lack of patent protection for Xenazine and its uses may have discouraged investment in developing Xenazine for treatment of tardive dyskinesia and Tourette syndrome.
If approved, SD-809 will compete primarily against Xenazine and its generic versions when they appear.
Exclusivity, as a new chemical entity expired for Xenazine in August 2013, and as an orphan drug, will expire on August 15, 2015.
Exclusivity means exclusive marketing rights granted by the FDA and can run concurrently with a patent or not.
Some of the potential competing products being developed for Huntington's disease include:
Procysbi, made by Raptor Pharmaceuticals (NASDAQ:RPTP). The drug has been approved for the treatment of nephropathic cystinosis, and is now in a Phase 2&3 trial for Huntington's disease under the name of RP103.
OMS824, is being developed by Omeros Corporation (NASDAQ:OMER). The company recently reported positive data from its Phase 1 program, and was awarded Orphan Drug and Fast Track Designations by the FDA.
OMS824 is a PDE10 inhibitor. PDE10 is an enzyme that is expressed in areas of the brain linked to diseases that affect cognition and psychomotor functions, including Huntington's disease and schizophrenia.
Back in April of 2013, Roche excited the Huntington's disease community by announcing a deal with Isis Pharmaceuticals (ISIS), a California company working on gene silencing drugs.
Like the antibodies drug companies have developed for Alzheimer's disease, the gene silencing drugs that Isis and other companies are developing for Huntington's disease are large, and will have trouble crossing the blood-brain barrier. The hope is that future studies might prove that Roche's brain shuttle can speed antisense drugs, and perhaps others, into the brain, where they're needed for Huntington disease.
What's next: Based on the results of the ongoing clinical trials, Auspex plans to submit an application to the FDA in the fourth quarter of 2014 for SD-809 and, if approved, will launch commercial sales in 2015.
The application will use a Section 505(b)(2) regulatory path, which allows a company to use clinical safety findings obtained by other companies in their clinical trials.
Auspex plans to spend about $29 million on getting SD-809 onto the market, budgeting $18 million for clinical development.
For marketing, Auspex is planning to use a small specialty sales force, since there are a limited number of neurologists nationwide who treat movement disorders and need to be contacted.
The company owns composition of matter patents for SD-809 with a U.S. expiration in 2031 and a European expiration in 2029. Additional patent applications for SD-809 are pending, and if issued, will cover composition of matter, methods of treatment, manufacturing, formulations and broader applications of SD-809.
Financing: From the IPO in February, Auspex took in $96 million, which includes the exercise in full by the underwriters of their option to purchase up to 1,050,000 additional shares of common stock.
Prior to that, in January, two separate financings generated $35 million. $20 million of that was a Series E equity financing led by Deerfield Management Company and supported by existing investors, Thomas, McNerney and Partners, CMEA Capital, Panorama Capital, BioMed Ventures and Costa Verde Capital; and a $15 million, four-year venture loan that was issued by Oxford Finance.
Strategy: Auspex follows a clever, if not especially spectacular strategy. But it is a strategy most suitable for a small upstart. Making important but not necessarily revolutionary improvements to existing, currently-marketed products could be a winner for a small company.
SD-809 is not a cure, nor was its predecessor Xenazine. But making incremental steps in medicine is very important and should not be underestimated. A small success can draw attention to a neglected disease, stimulate competition, and competition is the secret ingredient that will possibly lead to the final goal.
In the medical field, the final goal is, of course, finding a cure.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.