Otonomy Closes $38.5M Round to Fund Trials of Hearing-Disorder Treatments

Xconomy San Diego — 

Follow-on funding for Otonomy that Luke presaged in June has been disclosed by the San Diego biotech, a two-year-old startup developing drug treatments for hearing loss and balance disorders.

Otonomy says today it has closed a $38.5 million Series B round of financing that was co-led by Novo Ventures and RiverVest Venture Partners, with Avalon Ventures, Domain Associates, and TPG Biotech participating. The financing follows Avalon’s $10 million Series A round in June, which converted the early stage loans that Avalon provided into equity.

The company says the new capital will be used to fund pivotal clinical studies of Otonomy’s first two drug candidates, and to expand its pipeline of locally delivered treatments for treating disorders of the ear. The startup’s lead product candidate, OTO-104, is currently in an early stage trial for patients with Meniere’s disease, a fluid imbalance of the inner ear that can cause dizziness and gradual hearing lost. Luke described the drug candidate as a long-lasting steroid gel that can be injected into the ear to suppress inflammation.

Otonomy also is developing OTO-203 for the treatment of ear infections, which is expected to enter clinical trials in 2011.

Otonomy, which has eight full-time employees, also plans to expand its team this year, according to CEO Jay Lichter. “The research team is actively working to identify a third clinical candidate,” Lichter told me by e-mail this morning. Other product candidates are expected to target acute and chronic forms of hearing loss, balance disorders, and tinnitus.

Otonomy was founded in 2008 after Lichter had his own bout with Meniere’s disease, and learned the FDA has not approved any drugs specifically to treat hearing loss. Yet almost 30 million Americans suffer from hearing loss and balance disorders.