ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the March 2013 issue


Chiasma teams with Roche

Chiasma Inc., which develops oral versions of biological drugs, has signed a strategic development agreement with Roche AG (SWX: ROG). The deal is extraordinary in terms of the financing: a $65 million down payment for Chiasma, followed by $530 million in milestone payments and double-digit royalties on net sales.

The deal is Roche's largest commercialization agreement with an Israeli drug development company to date. Chiasma's product, Octreolin, is a biological drug for the treatment of acromegaly, which is caused by excessive excretion of the growth hormone, resulting in abnormal growth of bones and internal organs, which can lead to heart problems, increased perspiration, and sleeping difficulties. The excess excretion is caused by a benign tumor in the pituitary gland. The tumor can sometimes be surgically removed to cure acromegaly, but not always.

The global acromegaly market is estimated at $1.8 billion, of which $1.4 million is for a drug made by Novartis AG (NYSE:NVS; LSE: NOV; SWX: NOVZ). Octreolin is an oral version of Novartis's drug, and if it is commercialized, Roche will compete with it against Novartis.

The drug is currently administered by frequent and very painful injections deep into the muscle or beneath the skin, with a long, thick needle. The injection requires up to 90 seconds to deliver, because the substance is very viscous. Chiasma COO Roni Mamluk said "You see the needle and get chills. You usually have to receive the injection once a month from a nurse, because it very hard to administer the injection at home."

Mamluk says that Octreolin replaces the drug with an oral product, which was made possible by Chiasma's proprietary technology, which briefly opens tiny gaps in the intestinal wall allowing the absorption of the drug. Biological drugs, such as peptides, cannot usually be absorbed through the intestinal wall, because they dissolve in transit. Chiasma's capsule is administered twice a day. The product is undergoing a Phase III clinical trial. The company found no side effects of the drug, after nine months. Mamluk believes that the drug can be launched in 2015, at which point the company will see double-digit royalties.

Chiasma was founded in the early 2000s, but went through several crises before being reinvented in 2008 under Mamluk and CEO Frederic Price, an American. Price and Chiasma's legal adviser are based in the US, and the company has 50 development staff in Israel.

Chiasma's investors, most of whom have been with it from the beginning, include MPM Ventures, Abingworth, Arch Venture Partners, F2 and F3 Ventures, and 7 - Med Health Ventures LP. Ofer Hi Tech Ltd. invested in the company's early rounds, but not in subsequent ones. Chiasma raised $38 million in its last financing round.



Reprinted from the Israel High-Tech & Investment Report March 2013

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