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San Diego Life Sciences Roundup: Otonomy, Verdezyne, and IPOs

Xconomy San Diego — 

It was another busy week for San Diego’s life sciences sector. Here’s my roundup.

—The federal Jumpstart Our Business Startups (JOBS) Act that was enacted two years ago has made it easier for life sciences companies to “test the waters” with potential investors in stealth mode before launching their IPOs. A record-setting 23 life sciences companies went public during the first three months of 2014, including San Diego’s Celladon, before the markets pulled back. As Xconomy’s Alex Lash put it, “The JOBS Act has provided more space for conversation about companies with complicated stories, and biotech CEOs say those conversations have elicited valuable information.”

—A Burrill analysis of trends in the life sciences sector says IPO deals are continuing to get done, but the generalist investors who were seeking a quick return have moved on. Investors who specialize in the life sciences sector remain committed, but they have tightened their purse strings, forcing many life sciences companies to lower their expectations and offer their IPO shares at reduced prices.

—San Diego-based Otonomy raised $49 million in a new financing round that moves the six-year-old startup closer to commercializing its lineup of specialized drugs for treating diseases and disorders of the ear. The company’s lead drug candidate, OTO-201, is a formulation of the antibiotic ciprofloxacin in a gel. It is intended to treat various types of inflammation of the middle ear in children who are 6 months to 5 years old, and who undergo tympanostomy tube placement surgery.

—With San Diego’s Zogenix (NASDAQ: ZGNX) in the middle of a controversy over Zohydro, its pure hydrocodone pain-killer, Stamford, CT-based Purdue Pharma said it has filed a New Drug Application seeking authorization to market its own pure hydrocodone pain-killer. Unlike Zohydro, Purdue says its version incorporates abuse-deterrent properties that make it more difficult for illicit drug users to crush its tablet for snorting, chewing, or intravenous injection. Zohydro has come under fire as a potential drug-abuse threat.

—Meanwhile, back at Zogenix headquarters in San Diego, the company said it has agreed to sell its proprietary Sumavel DosePro needle-free injection delivery system, which was developed as a way to quickly treat migraine headaches. Endo International (Nasdaq: ENDP) of Dublin, Ireland, agreed to pay $85 million in cash and milestone payments of up to $20 million for the drug-and-device combo. Zogenix CEO Roger Hawley said the sale allows the company to have greater focus on its commercial launch of its Zohydro, its hydrocodone pain-killer, and to continue the development of abuse deterrent formulations of Zohydro.

—The Malaysian agricultural conglomerate Sime Darby Berhad became the lead investor in a $48 million funding for Verdezyne, the Carlsbad, CA-based industrial biotech. Verdezyne and Sime Darby executives signed the agreement in the Malaysian capital of Kuala Lumpur in a ceremony attended by President Barack Obama and Malaysian Prime Minister Dato’ Sri Najib Razak. Verdezyne, founded in 2005, genetically engineers various strains of yeast to produce key industrial chemicals like adipic acid and dodecanedioic acid (DDDA) that are currently made from petroleum-based intermediates.

Domain Associates said it has invested $6.5 million through its Beijing-based partnership, Domain Elite, in Smart Medical Systems, an Israeli company with an innovative design for endoscopes and colonoscopes. Domain Elite plans to introduce the device, which uses a flexible tube equipped with a camera to look at the inside the human digestive tract, in China.