Thursday, November 10, 2011

Avaxia Biologics raises $2.2M angel round

By Lori Valigra, Mass High Tech correspondent

Avaxia Biologics Inc., a Lexington-based developer of oral antibody drugs for the gastrointestinal tract, completed its first close of $2.2 million of a Series A financing led by angel investors, its CEO and founder Barbara Fox told Mass High Tech.

Of the total, $1.2 million was convertible debt, most of which came in in May, and $1 million was new funding that closed last Friday. The company is looking for $1.5 million to finish the Series A round by the end of the year, Fox said. She added that the company is in advanced discussions with several other qualified investors.

Cherrystone Angels of Providence, R.I., led the round, with participation from Boston Harbor Angels and other undisclosed individuals. Robert Manning, co-chairman of Cherrystone, will join Avaxia’s board. He has served as a senior executive at Citigroup and on a number of early-stage company boards, including SmartCells Inc. of Beverly.

Fox said the investment will let the company aggressively pursue development of its AVX-470 anti-tumor necrosis factor oral antibody and prepare to start a clinical trial. The funds will be used to manufacture the drug for the trial and to conduct final preclinical studies. The company hopes to file an investigational new drug application next July and to start the Phase 1b trial in patients with inflammatory bowel disease in September 2012.

The company had raised $4.3 million in non-dilutive financing prior to this equity round, including a loan from the Massachusetts Life Sciences Center and several federal Small Business Innovation Research grants. Included in the total is a $2.9 million, two-year contract with the Biomedical Advanced Research and Development Authority (BARDA) that fully funds the initial research and development of the company’s other therapy, an oral antibody that mitigates the gastrointestinal damage from radiation exposure after a nuclear incident such as a dirty bomb. That drug also is preclinical, but since it does not require clinical trials, it could get to market as early as 2016, she said.

According to Fox, about 1 million patients in the United States and 2.5 million worldwide have inflammatory bowel disease, an autoimmune condition with genetic predispositions. The disease is treatable, but not curable, so medication must be taken for the rest of the patient’s life. She said Avaxia’s treatment stays in the gut, so it doesn’t cause the systemic immunosuppression of currently available drugs. “It’s a protein, so there is little systemic absorption, which we used to our advantage,” she said.

In the face of tight venture funding, Avaxia chose an alternative approach to financing by going to angels, Fox said. “Funding a therapeutic company with angel and non-dilutive funding is not typically done,” she said. “The timeframe is long for angels, but there is so little venture capital going into preclinical areas, so angels are stepping up.”

What helped draw in angel investors, she said, is that the company had the BARDA contract, had hit its milestones, and showed potential for an early-stage exit. It helped that SmartCells, which makes an insulin formulation for diabetes, was bought by Merck last December, she said, adding that the company also was entirely funded by angels. “It helped them to see there is an exit path.”