Azelon Pharamceuticals was able to raise more than $65 million in its former iteration as Zelos Therapeutics. Now the Pennsylvania-based company has raised another $4.5 million in a Series A that will help it move its new lead compound through mid-stage testing.

The company announced in September that it had finished a restructuring in August. Along with changing its name, for reasons that it won't discuss, Azelon has shifted its focus from its former lead compound, ZT-031, an injectable next-generation parathyroid hormone (PTH) analogue meant to treat osteoporosis to ZT-034, a nasal spray version of the PTH analogue. The company has also gained new management; Joan Lau has replaced Brian MacDonald as president and CEO and Bristol-Myers Squibb Co. veteran Don Hayden has taken over as executive chairman. MacDonald remains senior clinical advisor.

Lau was formerly the president and CEO of Locus Pharmaceuticals, a Blue Bell, Pa.-based biotech that develops cancer and inflammatory drugs. The 20-year veteran of the industry was previously part of the business development team at Merck & Co.

The restart financing, led by Prospect Venture Partners, will carry ZT-034 through Phase IIa testing. Prospect, which announced in early October that it would stop efforts to raise a $250 million fund, was one of the original investors in Zelos. Covington Capital Corp. and Lighthouse Capital Partners, which previously provided debt to Zelos, also participated in the restructuring. The investors were not available for comment, however, and did not disclose details of how the restructuring will affect Azelon's equity structure.

Previous backers of Zelos -- including Alta Partners, Frazier Healthcare Ventures, Seaflower Ventures, and S.R. One -- did not participate in the restructuring and also were not available to comment. Since it was founded in 2003, Zelos has raised $16 million in a Series A and another $55 million in a Series B, which consisted of two parts: a $42.5 million financing, which was extended to include another$12.5 million. Lau would not comment on why previous investors did not participate in the recent Series A.

The Phase IIa clinical trial will compare ZT-034 to Eli Lilly & Co.'s Forteo (teriparatide), a once-daily injection of PTH analogue. Patients will be tested for levels of P1PN, a biomarker of bone formation. Lau expects the company to announce data from the trial in the third quarter of 2012. "We are focused on moving ZT-34 through this Phase II trial. Once we arrive at the data, we will take a look and see what our options are," said Lau in an interview. Lau added that Azelon is open to partnering, but wants to assess the data before seeking deals.

The company has been looking at alternative delivery systems for several years. It didn't say what intranasal delivery device it is using with ZT-034, but in 2008, as Zelos, it in-licensed from Aegis Therapeutics Inc. an intranasal device for delivering peptide and protein drugs. And in 2005, it signed a deal with Nektar Therapeutics Inc. to develop a dry powder inhalable formulation of the PTH analogue.

"We think the product we are intending to bring to market would provide an effective and convenient alternative to what already exists," said Lau.

ZT-034 would be an alternative to Forteo, which brought in sales of $830.1 million in 2010. While that's not quite blockbuster status, it's not bad considering the drug carries a black box warning due to osteosarcomas found in rats during pre-clinical trials. Lau argues that Azelon could offer a more patiently-friendly alternative because it is a nasal spray instead of a once-daily injection, which some believe has kept Forteo sales from climbing higher (Also see "After D-mab: Next-Generation Osteoporosis Drugs Focus On Building Bone" - Pink Sheet, 3 June, 2009.).

Several other companies are developing new formulations of teriparatide as well that use different delivery systems, like transdermal patches, to administer the drug.

- Lisa LaMotta (l.lamotta@elsevier.com)

Zelos Becoms Azelon; Restructures To Close A Series A

More from Archive

More from Pink Sheet