U-M Spinout Diapin Therapeutics Attracts Chinese Investment

Xconomy Detroit/Ann Arbor — 

When Bruce Markham worked as a research fellow for Pfizer, in the building that now houses the University of Michigan’s North Campus Research Complex, he spent his time developing clinical candidates for the treatment of metabolic diseases.

Then, in 2007, came what AnnArbor.com characterized as “the gut punch”: Pfizer announced it was shuttering facilities in Ann Arbor and Kalamazoo, laying off 2,100 employees and rattling the state’s life sciences community.

“I saw it coming,” Markham admits. Months before the announcement, Pfizer had gathered a group of researchers that included Markham in the conference room and offered everyone there a buyout. Markham took them up on the offer.

When asked how it feels to be back working in the same building, which has since been repurposed by the university as the headquarters of its technology transfer office and venture accelerator, a bit of post-traumatic apprehension flashes across Markham’s face before he wearily smiles. “It’s a good facility with excellent lab space, so in that sense I’m happy.”

Still, anyone who has been suddenly dropped from a job can probably relate to how strange it must have felt when Markham returned to the facility—this time, as a mentor-in-residence at U-M’s venture accelerator. He began working with Eugene Chen, a doctor at the university who had spent 12 years developing peptide-based therapies for treating type 2 diabetes. Chen had discovered that certain foods, particularly gelatin, helped control blood glucose.

Chen looked at the amino acid makeup of gelatin and found five combinations that helped keep glucose under control. He began developing a therapy that not only lowers blood glucose, but also has the potential to lower body weight, lower blood pressure, and improve lipid profiles. Because it’s derived from three naturally occurring amino acids, Markham says it’s also safer.

Chen set about commercializing his discovery with the help of  U-M’s tech transfer office, which is where he and Markham crossed paths. “I helped Eugene get to the point where he wanted to start a company, and now he needed a CEO,” Markham says. “He said, ‘Why not you?’ I was ready to do something else, so I said I’d do it for a while.”

Markham officially became the CEO of Diapin Therapeutics in January 2012.

He soon discovered that Chen was “very well connected” in China. One friend, Ming Bo Xu, owned Bejing SL Pharmaceutical, the largest pharmaceutical corporation in Bejing. Xu invested $2 million in seed funding in Diapin in return for 20 percent ownership in the company and the rights to the Chinese market. As part of a sublicensing agreement, Bejing SL Pharmaceutical will pay Diapin 20 percent of any revenue it makes from the Chinese market.

Bejing SL Pharmceutical’s interest in Diapin Therapeutics soon attracted the attention of other Chinese investors. “There’s sort of a Chinese billionaire’s club,” Markham points out. “They have plenty of of money, but they don’t know a lot about investing in the United States. Bejing SL Pharma’s investment lends a lot of creedence to our company.”

Markham says in addition to growing interest from Chinese investors, large pharmaceutical companies in the U.S. and Europe have also taken notice, and he anticipates that Diapin will have a corporate partner or significant venture funding by next year—not bad for a company so new that it has yet to build a website.

In the meantime, Markham says Diapin is in the process of applying for an SBIR grant and will soon initiate a study comparing its compound to market leaders like Januvia, Actos, and metformin. “We’re trying to create value with the $2 million in seed funding we got,” he says.