Lpath Therapeutics, a biotech working on a first-in-class S1P inhibitor for solid tumors, and imaging company OptoSonics are the first recipients of a new SBIR award from the National Cancer Institute that is stepping into the early clinical stage funding gap left by retreating venture capital. NCI made public the names of the two awardees June 8.

The three-year, $3 million awards are an extension of the traditional Phase II Small Business Innovation Research awards designed to make the company attractive to other funding sources, such as venture capital, venture philanthropy, state programs or, as with Lpath, a pharma partner, Michael Weingarten, director of NCI's ¹ SBIR Development Center, explained in an interview.

Twenty-three companies applied in the first funding round of the NCI Bridge grants, with another 19 applications set to for review; those winners should be announced in September. Altogether NCI is ready to commit $10 million in 2009 to the new program.

The Bridge grant program requires the grantee to leverage the NCI funding one-for-one with a third-party source to match the $3 million over three years.

Lpath far surpassed that requirement by inking a licensing deal with Merck Serono for its lead compound, ASONEP, that garnered the San Diego-based biotech $4 million up front plus another $500,000 a month for a year in research support, with another $2 million attached to Phase I milestones. Merck Serono also has an option to pick up the tab on further development of the anti-angiogenic compound in October for $28 million plus another series of research support and milestone payments, as well as a royalty arrangement upon commercialization.

The Bridge funds will support some Phase I research on the therapeutic as well as biomarker studies to use as assays in selecting indications to go after for later stage trials, the SBIR center's program manager, Andrew Kurtz, explained in an interview. ASONEP is a monoclonal antibody that targets sphingosine-1 phosphate, a bioactive lipid that stimulates tumor-cell migration, invasion and survival, as well as promoting angiogenesis.

Weingarten believes SBIR affirmation made a difference for Lpath. "The arrangement really sets them up to hand the baton off between their government-funded work that started this whole project and then really take it to the next level," he said.

OptoSonics, in Oriental, N.C., is developing a new photoacoustic computed-tomography scanner to be used in preclinical molecular imaging applications, Kurtz explained. According to the announcement, the scanner has the potential to accelerate the development of preclinical cancer drug development while lowering associated costs.

Whereas Lpath took the big pharma partnering route to leverage its SBIR grant funds, OptoSonics is instead partnering with an industry collaboration of sorts - Enlight Biosciences. Boston-based Enlight was created in July 2008 by PureTech Ventures together with several big pharmas, including Merck, Eli Lilly and Pfizer, to advance breakthrough technologies that can speed the way drugs are found and developed (² Also see "Enlight: Pharmas Collaborate on Novel Start-up" - Scrip, 1 July, 2008.).

By partnering with Enlight, Kurtz commented, OptoSonics is following a different development model, one that puts increased importance on early input from potential end users of the technology - the pharmaceutical companies themselves. In addition to matching NCI funds dollar-for-dollar, Enlight "provide[s] commercialization guidance," he said. "In this case, the investors have a great deal of experience from the perspective of the types of folks that would be consumers of this technology."

Government collaboration a new third-party funding model?

With early stage risks mitigated by the rigorous process involved in winning Phase I and Phase II SBIR funding, companies are in a position to "strike deals with investors who might be a little outside their comfort zone," said Weingarten. They might "come in a little bit earlier than they usually do," he said.

The same sort of affirmation can come with funding from venture philanthropy, which is moving out of its own comfort zone - supporting mostly basic academic research - to fund vulnerable biotechs during the translational phase ( ³ Also see "With Capital Scarce, Charities Emerge As A Stronger Force On Start-Up Scene" - Pink Sheet, 1 March, 2009. , p. 9).

Looking to do some leveraging of their own, the NCI center and the Leukemia and Lymphoma Society, one of several foundations broadening its mandate to include venture philanthropy, may soon partner on some of the Bridge awards, Weingarten said.

Weingarten noted growing interest among the financial community in the Bridge award as a model for filling the vacuum in funding for translational companies as venture capital has changed its definition of "early" to mean later and later stages. The award is "a really nice model because it has the government in effect collaborating with investors or strategic partners like big pharma in trying to help move these companies through really key inflection points in the development of their technologies," he said.

Coming soon for all NCI Phase II companies: regulatory advice

A separate program set to come online this fall will give all Phase II SBIR grantees access to a regulatory consultant. The program, still in the planning stages, was highlighted by the center's program director for therapeutics development, Ali Andalibi, during a breakout session at the recent Biotechnology Industry Organization meeting in Atlanta (⁴ IN VIVO blog, May 21, 2009).

The center is in the process of hiring an outside consulting firm to offer regulatory expertise to NCI's Phase II SBIR companies "so they can put together their regulatory plans as they're getting ready for bringing their drug, diagnostic or device through the FDA approval process," Weingarten said.

The service will be consultative and limited to "a certain number of hours per company," Weingarten said. "We won't be doing all the work for them."

-Shirley Haley (s.haley@elsevier.com)

Lpath, OptoSonics First To Win New Bridge Grants From NCI’s SBIR Center

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