ViaCyte Raises $80M to Prep for the Clinic Now, Perhaps an IPO Later

Xconomy San Diego — 

ViaCyte is recruiting patients for clinical trials testing its experimental stem cell-based diabetes treatment. Now it has $80 million to support that work, and also prepare for something more: a possible IPO.

The financing, a Series D round of investment, includes so-called crossover investors that back both public and private companies. CEO Paul Laikind told Xconomy that these investments set up his San Diego company to consider going public in the future.

“These investors that we did end up working with here … all represent multibillion dollar funds, all represent groups that have put a lot of focus on the healthcare space, and are all groups that could cross over and help support the company not only with this round of funding but in the future as well,” he said.

The financing round announced late Wednesday was led by Boston’s Bain Capital, which last year raised $720 million for its first-ever life sciences fund. Another Boston-based PE firm, RA Capital Management, also invested, as did TPG Capital, which is headquartered in San Francisco and Fort Worth, TX.

Earlier investor Sanderling Ventures, which is based in San Mateo, CA, also participated, as did some individual backers, ViaCyte said. The company said it will receive the $80 million in two parts, but declined to provide further details.

The latest financing brings the total amount ViaCyte has raised in the second half of 2018 to more than $100 million.

ViaCyte has two clinical-stage product candidates that it plans to advance.

Each is intended to treat diabetes patients who require regular injections of insulin to manage their disease. That includes all type 1 diabetes patients, who aren’t able to produce insulin, and some type 2 diabetes patients, who produce too little insulin or aren’t able to process it appropriately.

The product candidates ViaCyte is testing are meant to replace the insulin-producing pancreatic cells in the organ’s islets that, in patients with diabetes, no longer function properly.

In 2015, more than 100 million adults in the U.S—9.4 percent of the population—were living with diabetes or pre-diabetes (which if untreated can lead to type 2 diabetes within five years), according to a report released last year by the Centers for Disease Control and Prevention. About 1.5 million people in the U.S. are diagnosed with diabetes annually, according to the American Diabetes Association.

ViaCyte’s PEC-Direct is a membrane-bound device containing implanted stem cells engineered to grow into insulin-producing pancreatic cells. The device is intended as an option for patients who would be candidates for an islet transplant, a procedure that is dependent upon the availability of a donor pancreas. Patients—as if they had received an organ transplant—would still need to take immunosuppression drugs (which come with some risks, such as a higher susceptibility to infection), so ViaCyte is developing PEC-Direct specifically for type 1 diabetes patients who are at high risk for complications. The product is in the second stage of a Phase 1/2 trial, with initial data expected in mid-2019.

Its other clinical-stage candidate, PEC-Encap, incorporates a device that is meant to defend the cells being delivered from the patient’s immune system, thereby negating the need for anti-rejection drugs. It is being developed for use by all type 1 diabetes patients.

A Phase 1 clinical trial evaluating the product was previously paused, but ViaCyte says it anticipates the study resuming next year. ViaCyte has been working with earlier investor W. L. Gore & Associates, the privately held company that makes Gore-Tex fabrics, medical devices, and other products, to improve the device. In September, Gore invested another $10 million.

ViaCyte has been partly funded for years by the California Institute for Regenerative Medicine (CIRM), which has invested a total of more than $70 million, and JDRF (formerly the Juvenile Diabetes Research Foundation), which funds type 1 diabetes research and has put in about $15 million, according to Laikind.

“As we move forward into the clinic and are looking towards proving efficacy and potentially commercialization, the costs are going up significantly, so while we’ve greatly benefited from that funding [from CIRM and JDRF), we really needed to take the next step,” Laikind said.

ViaCyte said the new funds will also go toward moving ahead its recently announced $15 million collaboration with Switzerland-based gene editing company CRISPR Therapeutics (NASDAQ: CRSP), through which it aims to develop a beta-cell therapy that doesn’t trigger an immune response (without needing encapsulation).

“You can think of that as the next generation, the one that we think is probably the long-term solution for this disease,” Laikind said.