Elcelyx Closes on $20M to Advance Appetite-Control Compounds

Xconomy San Diego — 

It’s Valentine’s Day, and San Diego’s Elcelyx Therapeutics is feeling the love.

The startup, focused on obesity and diabetes, says today it has closed on $20 million in Series C financing led by the GSM Fund, a dedicated fund managed by former Eastbourne Capital Management portfolio manager Rick Barry. Existing investors Morgenthaler Ventures, Kleiner Perkins Caufield & Byers, and Technology Partners also joined in the round.

Elcelyx was founded in 2010 to advance development of compounds that boost the signal along the appetite-control pathway that tells your brain your gut is full. The company sees opportunities in both pharmaceutical and consumer markets for weight-loss drugs. So it might have been just as apropos for Elcelyx to announce the deal a couple of days ago—on Fat Tuesday.

With the new capital, founder and CEO Alain Baron says Elcelyx plans to advance its two first-in-class “Gut Sensory Modulator” (GSM) compounds through mid-stage patient studies.

Alain Baron, Elcelyx CEO, Morgenthaler EIR

Alain Baron

One GSM product, Lovidia, is a proprietary mix of dietary ingredients that Elcelyx plans to introduce in a variety of consumer products, including an over-the-counter product for weight loss and metabolic health, and as a food additive intended to boost the body’s production of natural satiety and gluco-regulatory gut hormones. By using dietary ingredients already designated as Generally Recognized As Safe (GRAS), Baron says the company could roll out its first Lovidia-based products next year.

Elcelyx says an early version of Lovidia demonstrated statistically significant progressive and sustained weight loss without diet or exercise. In nutritional studies, Elcelys says the people who got Lovidia as a dietary supplement felt twice as full with the same number of calories.

Baron says the other GSM compound is a pharmaceutical product candidate called NewMet—a delayed-release formulation of generic metformin, the No. 1 diabetes product in the world. A delayed-release formulation enables the GSM to reach the lower gut and avoid systemic absorption, Baron says. In a recently completed mid-stage clinical study in patients with Type 2 diabetes, Elcelyx says NewMet met the primary endpoint of lowered glucose and demonstrated improved tolerability, compared with the nausea that some diabetic patients experience with generic metformin.

Both studies should be completed by the last three months of 2013, Baron says.

Including today’s funding, Elcelyx says it has raised a total of $43 million in venture capital since 2010.

Today’s statement from Elcelyx includes a comment from Barry, the GSM fund manager, who also is joining the company’s board. “Elcelyx is that rare winning trifecta in healthcare: Low-risk products that address large populations, experienced leadership and blue-chip investors,” Barry says. “It is a pleasure to support and advise an organization that can make a profound impact on the lives of people struggling to manage their diabetes and weight.”

Barry retired in 2010 as the managing member and portfolio manager of Eastbourne Capital, the investment firm he founded in 1999 in San Rafael, CA.