As it moves toward its Phase I regulatory trials, Halifax-based biotech DeNovaMed is showing admirable flexibility in its financing options.

The company, which is developing compounds that can battle “superbugs”, sprang to prominence in January when it won Innovacorp’s I-3 competition for innovation. The four co-founders have been working on the project for five years and believe they have isolated compounds that can battle these viruses, which are resistant to antibiotics currently available on the market.

During its presentation at the I-3 competition, the team made the potential of this drug overwhelmingly clear. It has been 30 years since anyone in the world has developed  a treatment for superbugs, even though they have mutated and proliferated greatly during that time.

It seemed clear that DeNovaMed had launched itself on a familiar path in drug discovery. It had already begun to finance its early years through grants and seed funding (A I-3 win comes with a total investment of $120,000) and looked set to raise funding as it moves through the approval process.

It typically takes about $1 million to $2 million to go through Phase I clinical trials, in which authorities make sure a drug is safe for human consumption and as much as $20 million for Phase II, in which the drug is tested on a select group of people. Phase III, in which it is tested on large groups of people, can cost hundreds of millions of dollars, and it’s accepted wisdom that by that point a small drug discovery company will sell out or license the product to a multinational pharma giant.

But, during a recent interview at the company’s headquarters at the IWK Drug Discovery Lab, Chief Operating Officer Christopher Barden said the company is willing to partner with a large company well before the start of Phase III, assuming the right offer comes along.

“We have had several fruitful discussions with larger pharma companies on the direction this business is taking,” said Barden. “Our sweet spot for partnering would be on or about Phase I.”

Phase I?

Just to be clear, DeNovaMed is now in the pre-clinical phase of its development, learning which of its compounds show the most promise and can be reproduced in mass quantities at a commercially viable price. The company has raised a bit of money and now has nine shareholders, including Innovacorp, and will not have to raise its Round A for another year.

The company plans to begin Phase I trials late this year or early next year, at which time it will have to hire additional staff. That means that sometime in the next year or so, the company’s directors will have to decide whether to strike a partnership with a large pharma company, which could take the form of a sale, partial sale, or licensing agreement. Barden said the company would need to strike a deal that rewards shareholders and provides the funding and flexibility to develop a series of drugs in Halifax. 

If the company does not strike a deal in that time period, Barden believes it will raise money through its network of funding sources within the region. “It would be no more than $3 million and maybe as little as $2 million,” he said, describing it as a reasonable ambition for an A Round.

Regardless of which route the company takes, Barden is confident of the success and its prospects for efficiently moving through the trial process. Because DeNovaMed is developing treatment for infectious diseases, it needs less time to test its compounds than if it were developing, for instance, a cancer drug. (The thinking is that a patient would only take a drug for a virus for a few weeks, so there’s no need to monitor the buildup of toxins in the human body for a period longer than that.) What’s more, regulators feel incentives to process this sort of research promptly because society and the medical system would benefit greatly from treatments for antibiotic-resistant viruses. With a fair tailwind, DeNovaMed could have a product on the market in five years, said Barden.

He also hopes the company will be a cornerstone for a burgeoning biotech segment in the region. “The pharmaceutical community in Halifax is quite small right now,” he said, “But I think we’re moving toward a critical mass.”