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Cequent Nabs Additional $3M in Series A; Novartis Takes Option to IBD Program

Cequent Pharmaceuticals this week announced that Novartis Option Fund has invested $3 million into the RNAi drugs startup, bringing to $9 million the total value of Cequent’s Series A round of financing.
In conjunction with the investment, Novartis has also taken an option to in-license Cequent’s nascent inflammatory bowel disease program in exchange for an undisclosed upfront cash payment.
"Our first closing investors asked Cequent to keep the financing open for six months to include an additional fund,” Cequent CEO Peter Parker said in a statement. “Given the profile of Novartis in the RNAi research community, we could not have conceived of a better outcome.”
The investment marks the latest effort by Novartis to expand its footprint in the RNAi therapeutics space. Most notably, the big pharma formed a broad alliance with Alnylam Pharmaceuticals in late 2005 in which it bought a 19.9 percent stake in the RNAi drug shop, although that stake has since fallen to around 14 percent (see RNAi News, 9/9/2005).
The Novartis Venture Funds, of which Novartis Option Fund is a part, has also invested in RNAi drug firms Intradigm and Silence Therapeutics.
“What Cequent provides is a very unique solution” to RNAi delivery, Steven Tregay, a managing director of Novartis Option Fund and newly appointed director of Cequent, told RNAi News this week.
Cequent’s core technology, called transkingdom RNAi, involves engineering non-pathogenic bacteria to express shRNAs.
“It’s a technology that can be broadly applicable” to a number of indications, he noted, and since it is “unique and different” from other RNAi technologies, Cequent has a freedom to operate that many other small RNAi therapeutics firms do not.
“We’re well in-tune with the opportunities in the [RNAi] space, and this [investment] complements very well what else we’ve seen out there,” he said.
GI Grow
Taking an option to Cequent’s IBD program also fits in with Novartis’ focus on gastrointestinal disorders, Tregay added.
“GI is … a kind of growth area for us,” he said. “Novartis has really made a big investment in building out research in this area, [and the deal with Cequent] was a perfect combination of an area [with] very exciting emerging therapies [and] where sequence technology is well-suited.”
As for Cequent, the option gives it the financial wherewithal to pursue an indication it might not have been able to on its own, at least in the near term.
Parker said that although his company had done some work in IBD, the bulk of its resources have been focused on its lead program

"Our first closing investors asked Cequent to keep the financing open for six months to include an additional fund. Given the profile of Novartis in the RNAi research community, we could not have conceived of a better outcome.”

in familial adenomatous polyposis, an inherited colorectal cancer syndrome characterized by the growth of polyps on the colon, and an earlier-stage program in human papillomavirus.

Nonetheless, IBD, which comprises Crohn’s disease and ulcerative colitis, is “something that we really wanted to work on, and the option allows us to do that,” he said.
With financing from Novartis, Cequent is planning to start screening experiments that will help it choose a target for the IBD program. Meanwhile, the company remains on track to file an investigational new drug application in the second quarter of 2008 to begin phase I testing of an FAP drug (see RNAi News, 1/25/2007).
According to Parker, money from the Series A, in addition to the extra $3 million that Cequent’s initial investors have committed to invest once the company files its first IND, will primarily support its FAP efforts. Cequent’s existing investors include Ampersand Ventures, New England Partners, and Pappas Ventures.
Although specific terms of the option were not disclosed, Parker told RNAi News that the arrangement gives Novartis three timepoints in the IBD program’s development in which to take a license.
“They can opt in after proof of concept in animals, they can opt in just before preclinical [toxicology studies, or] … they can opt in when we get [US Food and Drug Administration] approval for phase I studies,” he said.
Parker said that Cequent stands to receive additional payments if the option is exercised, but the size and nature of these will depend on when Novartis does so. Additionally, timing is expected to determine how involved Cequent will be in the IBD program once it is in Novartis’ hands.
“If they opt in earlier as opposed to later, I think they’d look to us to do most of the work,” Parker said. “If they’re opting in when we have a phase I product that is ready to go … into man, I suspect they will [develop] it.”