Sometimes a canny entrepreneur has to turn on a dime when a promising business opportunity opens up. When NephroGenex, a drug development company with a focus on kidney disease, was incorporated in 2004 its focus was on new diagnostics that help determine which drug is appropriate for a patient, in what dose, and whether it is safe for a particular individual. “An R&D company like us tends to focus on areas where there are new things,” says founder and CEO J. Wesley Fox, “and molecular profiling is in its infancy.”

But when NephroGenex got the opportunity to license Pyridorin from BioStratum, a company Fox had helped found, NephroGenex purchased the partially developed drug and ran with it.

BioStratum had taken Pyridorin, intended to fight diabetic kidney diseasse, as far as it could with the $95 million it raised in 2001 — before the dot-com bubble burst, and the company’s value plummeted. “The price of the stock got so low that in order to raise the money they needed, they would have had to give up control of the company to new investors,” says Fox. Instead the company arranged a deal with NephroGenex that gave BioStratum a significant equity position in the company. “They preferred that over trying to raise money at a low valuation,” he says.

When NephroGenex acquired the commercial rights to Pyridorin for a combination of stock and cash in 2006 the company’s first order of business was to tackle two problems with Pyridorin that financially strapped BioStratum could not fix.

First of all, Pyridorin had an intellectual property issue. It was covered only by a “method of use” patent, which meant it was protected only for treating the specific disease state noted in that patent. But big pharma, the only entity that will be able fund Phase III trials, would require much stronger patent protection before investing in NephroGenex.

Secondly, potential investors would be scared off by the prospect of a Phase III trial likely to extend for three or four years. “Diabetic kidney disease develops slowly and it takes that long for you to be sure a drug is working to slow the disease,” says Fox. Pyridorin had already successfully completed a Phase I trial to test safety and two Phase IIa trials for safety and efficacy. But significant funding was still needed for Phase IIb and Phase III trials.

Because Pyridorin was a known compound, NephroGenex could not get a “composition of matter” patent that would have protected it for any use over the life of the patent. Instead it successfully broadened its patent protection by filing additional methods claims about how Pyridorin is used to treat diabetic kidney disease.

NephroGenex also had to find a way to shepherd Pyridorin through trials more quickly. The company approached the Food and Drug Administration with a proposal to use the subpart H strategy for its Phase III trial, an approach created in the 1990s as a way to move certain anti-HIV drugs to market more quickly. This approach measures the effectiveness of a compound via a proxy — the levels of certain chemicals, called biomarkers, in a person’s blood at the end of a one-year treatment period that have been proven to correlate strongly with effective treatment.

Most trials, by contrast, are outcome-based and must continue until their clinical endpoints, when a sufficient number of patients have reached the end stage of the disease.

Here’s how the strategy works: After the Food and Drug Administration says it is agreeable to accepting a biomarker for a one-year treatment period, the company runs two trials in parallel. The Phase III trial, on which approval will be based, runs for a year; and the Phase IV trial runs the three to four years necessary to reach the clinical endpoint, which in the case of Pyridorin is end-stage kidney disease that requires dialysis.

NephroGenex proposed using as a biomarker of kidney disease the level of serum creatinine, which generally follows a progression during diabetic kidney disease. The company had to present strong evidence that serum creatinine will predict the results at end stage before the FDA would say it was agreeable to the subpart H strategy.

NephroGenex was able to analyze clinical data from a long Phase III trial for Irbesartan, one of the compounds already approved for this patient population, and present it to the FDA.

In the fall of 2007 NephroGenex presented this data and got the word that the FDA was agreeable to this strategy. “Knowing that they are very supportive and agreeable is usually enough for investors,” says Fox.

The next step will be to get formal approval of the strategy after Phase IIb is complete. NephroGenex expects to finish its Phase IIb trial, which incorporates this methodology, in August or September of 2010, because it is nearly finished enrolling the 300 patients it needs. “The reason why this trial is so significant,” says Fox, “is that if it works we will demonstrate a provable endpoint.”

What will remain to be done if the Phase IIb trial is successful is to demonstrate safety in approximately 1,000 additional patients who have been exposed to the drug for a significant time period. The earlier phases will have treated about 500 patients, and the requirement for approving a compound to become a drug for the first time is demonstrating its safety in approximately 1,500 patients.

Another important reason that the FDA is agreeable is the public health need for improvements in the treatment of kidney disease. “Diabetic kidney disease is a very serious disease and there are very few candidates in advanced clinical trials for it,” says Fox. “They want to be as flexible as they can as long as they feel they are being responsible.”

Diabetic kidney disease afflicts an estimated 20 percent of all diabetics in the United States — about 1.2 million patients have the overt disease and another 5.1 million are showing signs of developing it. Approximately 30 to 40 percent of these patients are expected to advance to end-stage renal disease.

As NephroGenex was working to improve its patent position and put in place the subpart H strategy, it was able to secure funding from Care Capital, a venture capital firm on Hulfish Street, as lead investor and Rho Capital in New York City as co-investor.

Even though NephroGenex had not yet resolved Pyridorin’s two problems, it had started to take care of them, and Care Capital put its bet on their successful resolution. The venture capital firm, whose partners were formerly top executives at SmithKline Beecham, Novartis, and Aventis, had already improved the prospects of other drug candidates by simplifying their regulatory pathways and knew it would be able to shepherd the process along for NephroGenex.

After NephroGenex established its relationship with Care Capital last March the company moved to Princeton from Cary, North Carolina, near the Research Triangle. Care Capital likes to have its companies close by, says Fox, but the Princeton location will also make it easier to peddle his company to big pharma. “From this office 75 percent of all big pharma headquarters are located within 50 miles,” he says, and being in close contact with big pharma is the next step in his business plan. “This drug is well along from a startup company perspective, and once we finish this trial, we’ll be partnering it. We will have to get big pharma for Phase III and for commercialization.”

NephroGenex is now finishing up preparations for Phase IIb. Although finding patients is always a challenge for clinical trials, it has taken NephroGenex only about 10 months to enroll participants for this trial. Fox attributes the relatively quick enrollment process to NephroGenex’s comprehensive approach. The company hired two groups to help out and also stayed involved itself. The efforts of the three, says Fox, were synergistic.

The Collaborative Study Group, a site management organization, is a nonprofit group of primarily nephrologists from around the world that develops trial protocols and conducts trials with clinical coordinators and clinical investigators at leading institutions with experience doing trials for diabetic kidney disease. They are the experts who conduct and direct the trials.

NephroGenex also works with Medpace, a clinical research organization in Cincinnati with experience in diabetes. Medpace executes the actual trial, dealing with quality and compliance issues associated with the nuts and bolts of conducting a trial; its staff visit the sites regularly, working with clinical coordinators to review medical records and find patients; making sure paperwork is kept properly; providing cab fares for patients to get to screenings; and ensuring that patients are taking the drugs — when they are done with a month’s supply, for example, they are asked to bring back the excess, and the pills are counted.

Even NephroGenex itself got involved in talking to the clinical coordinators — showing interest, telling them about the company, and sharing information about the drug being tested.

Fox estimates that if all goes normally, Pyridorin could be on market by 2014. With enrollment nearly complete for the Phase IIb trial, Fox is nearly ready to start talking with big pharma about his product opportunity as he seeks funding for Phase III.

“We get calls all the time, but we have to finish our preparations before we talk to them,” says Fox. Big pharma, he explains, asks a lot of questions and performs due diligence, looking into records of all the company’s studies. “It’s a very intensive process, and we have to be ready for that,” he says. Fox expects to begin talking with big pharma in the fall.

He also expects that his investment partners will be a big help in the search for Phase III funding. “They understand the pharma industry so well that they are a great asset to me — because this is a big pharma product, a big blockbuster candidate for diabetic kidney disease,” he says. “It is incredible the networking they have throughout the industry.”

The partnership with the venture capital firms is working well, with each side following its strengths. “We take care of the innovation side and the creativity,” says Fox, “and they take care of the business side of big pharma, providing the capital and telling us where we’re going to take the company.”

Fox is confident of a successful future for Pyridorin. “If it gets approved, the competition will be way behind,” says Fox. “That makes this a promising investment opportunity and very promising new treatment for diabetic kidney disease.”

Looking at the competitive landscape, Fox notes that as yet only two drugs have been approved to treat diabetic kidney disease. Both drugs target the same molecular pathway and slow the progression of the disease by reducing pressure in the kidney. These two approved drugs constitute the standard of care for the disease, and Pyridorin is complementary to these, not competitive. “Our drug has to be taken with their drug,” Fox explains, and the trials must show that Pyridorin will improve the situation on top of the drugs the patient is already taking. “This is particularly important if the drug is targeting a different pathway on the molecular level,” adds Fox.

Pyridorin targets what are called pathogenic oxidative chemistries — the chemicals formed in tissues of diabetes patients due to the extra metabolism that must occur with elevated glucose. “Pyridorin scavenges the ones that form quickly and inhibits the development of others,” says Fox. These pathogens are now believed to cause diabetic kidney disease.

Fox’s guess is that Pyridorin’s action on these pathogenic oxidative chemistries is the reason that the drug has slowed the progression of diabetic kidney disease by over 70 percent in trials completed to date.

Fox is aware of other drugs currently in development that target pressure in the kidney using different pathways from the already approved drugs. But “none of them are targeting pathogenic oxidative chemistries,” says Fox. “We are the only one.”

NephroGenex is also thinking about other possible markets for Pyridorin. One is acute renal failure, where a person under critical care may have to undergo dialysis for a few days.

NephroGenex’s staff of eight consists of Fox; Mark A. Klausner, chief medical officer; Linda C. Hogan, vice president of business development; Raja G. Khalifah, vice president of research and chemistry; as well as a director of clinical operations, a Pyridorin project director, a chief financial officer, and an administrative assistant.

Fox grew up in McKeesport, near Pittsburgh, where his father worked in a steel mill and played piano in his spare time. As a child Fox learned to play the piano from his father, but when it came to selecting a college he decided he could not commit to music at such an early age. He chose a small liberal arts school rather than a conservatory.

Although Fox majored in chemistry at Washington and Jefferson College and has a doctorate in biochemistry from the University of Kansas, he does not define himself as a bench scientist but as an entrepreneur.

He did start out his career in the lab, but after five years developing diagnostic tests for Abbot Labs and Baxter Healthcare he decided to try something else. “I realized that I was really much more entrepreneurial and much better off starting companies and trying to come up with new approaches and new therapies as opposed to big company politics, and I’ve been at it ever since,” says Fox.

Fox next founded two companies by translating the science that came out of universities and institutes into practical products, staying in each company only long enough to get it organized and secure financing and then moving on. RiboGene, involved in in vitro protein synthesis, was acquired and merged to form Questcor Pharmaceuticals. EnzyMed developed a method for using enzymes to synthesize hard-to-synthesize pharmaceutical compounds; it was acquired by Albany Molecular Research. Justifying his quick departure from these companies — he stayed at RiboGene for two years and EnzyMed for a year and a half — Fox observes, “I wasn’t the right person to be the CEO; as I got more experience, I became a CEO.”

Fox then founded BioStratum with Billy G. Hudson, a professor at Vanderbilt University and Fox’s graduate school advisor, and Karl Tryggvason of the Karolinska Institute in Stockholm. Fox approached Hudson after he had been in the business world for a while and asked, “Do you have anything we could start a company with?” It turned out that Hudson had a proprietary screening assay to identify compounds that would inhibit certain types of pathogenic oxidative chemistries.

BioStratum actually got started before Pyridorin emerged from this assay technology. BioStratum also worked with recombinant laminins, special proteins for growing stem cells, using a technology developed by Tryggvason that was eventually licensed to a Swedish company, Biolamina.

Fox was chief scientific officer of BioStratum from 1994 to 2004. While Pyridorin was at BioStratum it obtained the FDA’s fast track designation, meaning that the application will be reviewed in an expedited way. “They usually designate fast track status for diseases where there is a serious medical need or a life-threatening type of disease,” says Fox.

After 10 years with BioStratum — much too long for an entrepreneur to stay in one place — Fox got the yen to start another company, and hence NephroGenex.

For the last couple of years Fox has focused again on developing his musical talent, and he spends every evening playing the piano, mostly classical music. “The beauty of not making a living at it is that you can play what you want to play, and you have a little more leeway about how you play it.” His return to music is like closing a circle for him. “It’s coming back to where I started,” he says. “It’s also very relaxing. You use a different part of your brain, and it helps you keep a balance.”

Fox’s wife, Susan, is an executive at Cignet Health, where she manages rehabilitation and mental health units in hospitals. They have two sons. The oldest recently took the bar exam in Chicago, and the other just graduated from Full Sail College in Winter Park, Florida, where he prepared to enter the entertainment business. “I’ve got a creative side and an analytical side,” says Fox. “One son is more creative; one is more analytical.”

NephroGenex’s current focus is on moving Pyridorin down the pipeline. “That is 90 percent of what we’re doing, but depending on how a deal emerges, there are many possible scenarios,” says Fox. “What else we do will be dictated by what we will do with our lead product, which will depend on what kind of transaction we can accomplish with big pharma.”

Fox is hoping to sell the company to big pharma with as few contingencies as possible, and will launch a campaign this fall to move in that direction. He is not sure exactly how things will go, but he is pretty certain of one thing — that he will be starting another company when he’s done.

“One thing I’ve noticed over the years — a lot of people who have regular jobs look at us as crazy people out here, living from financing to financing,” says Fox. “But once you get a taste of it, it’s hard to go back to a large pharma or biotech. From my perspective, I can’t do the other. I can’t work in big companies. I’m here by necessity.”

NephroGenex, 104 Carnegie Center, Suite 214, Princeton 08540; 609-986-1780; fax, 609-275-5610. J. Wesley Fox, president and CEO. Home page: www.nephrogenex.com.

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