Deal focus: XW wins backing for better drugs

Teva Pharmaceuticals announced in April that the US Food & Drug Administration (FDA) had approved Austedo, a treatment for Huntington’s disease. This means the Israel-based drug developer can start to recoup some of the $3.5 billion it paid two years ago to acquire Auspex Pharmaceuticals, which created what is now known as Austedo. The decision is also significant for any other company with a remit to take existing drugs and make them better, including China’s XW Laboratories.

Drugs are metabolized and destroyed in the body when they reach the liver, which breaks down the carbon-hydrogen bonds. An existing treatment can become more effective if the hydrogen atoms are replaced by deuterium, which forms a stronger bond with carbon atoms. Austedo is the first deuterated product approved by the FDA: a new version of an approved drug that has none of its predecessor’s deficiencies in absorption, distribution, metabolism, and excretion.

A more efficient drug can make a huge difference to the patient, as evidenced by one of two programs targeting nervous system disorders that XW currently has under development. The original drug has a PK [pharmacokinetic] profile of 25%: for every 100 units consumed orally, only 25 units enter the bloodstream, and it clears out of the system within three hours. This means a patient must take two pills per day – one before bed and another a 4 a.m. – for the treatment to be effective.

“XW is creating an improved version – but it’s a new molecule so a new 20-year patent applies – with a PK profile of 50%,” says Johnson Lin, a healthcare-focused partner at WI Harper. “The drug has a much better chance of staying in the system and the functionality is superior because you don’t have to take it twice a day.”

WI Harper and Elements Capital recently led a $17.5 million Series B round for XW, bringing the company’s total funding to $23 million. Several existing investors re-upped, including Kleiner Perkins Caufield & Byers (KPCB), WuXi Ventures, and Johnson & Johnson Innovation. The Series A round in 2014 represented the latter’s first investment in an Asia-based drug R&D company.

Lin describes the company, which was co-founded by former GSK research executive Jia-Ning Xiang, as the most capital efficient biopharma business he has ever seen. XW specializes in pre-clinical work and looks to bring in a partner to fund the clinical stages. The logical partner is the creator of the original drug: it is familiar with the area, has a distribution network, and may want an equity interest in a treatment that would otherwise eat into its own sales.

Talks are already underway with potential partners for XW’s two existing programs, and the latest funding will go towards launching a further three. “You have to choose a drug that is already selling but has a huge deficiency,” Lin adds. “Can you make a better version of it? How promising does your initial pre-clinical candidate look? XW’s strength is in answering those questions.”

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• Topics
• Greater China
• Early-stage
• Healthcare
• China
• WI Harper Group
• Kleiner Perkins Caulfield & Byers