Some members of the band that pumped out a one-hit wonder at Icos are getting back together to see if they can produce at least one more hit at Seattle-based Calistoga Pharmaceuticals.
Calistoga has been building up its management team over the past year, and the latest recruit is chief business officer Cliff Stocks. He was a 15-year business development veteran at Bothell, WA-based Icos, the developer of tadalafil (Cialis) for erectile dysfunction, before that company was sold to Eli Lilly for $2.3 billion in 2007. Now Stocks is reunited with a couple of former Icosians—Calistoga’s president, Michael Gallatin, and chief medical officer, Albert Yu.
We last wrote about Calistoga six months ago when CEO Carol Gallagher came on board, so it is time for an update. A fair bit has happened: Calistoga has assembled some basic data from its first drug in clinical trials (for blood cancer), and although it is preliminary, it’s apparently encouraging enough that Calistoga hopes to get results from 60 patients included on the biggest stage for blood cancer research—the American Society of Hematology meeting in December. Plus, Calistoga moved a second drug candidate into clinical trials that may have potential for fighting inflammatory diseases like asthma or runny nose, Gallagher says.
Plenty is still left to prove in a business where only one out of 10 drugs at this stage ever makes it to FDA approval. But Stocks, a dealmaker, sensed it was time for him to pounce. He says his job is to start thinking about a partnership strategy for when Big Pharma comes calling. A year from now, Calistoga expects to have two products in Phase II clinical trials, and a third entering clinical trials.
“There is great value here. When you flip over the cards, you can see they are turning up nicely,” Stocks says. That said, Calistoga needs to be careful on its deal strategy, so it gets the resources from a big drugmaker that it needs without giving away too much of the store. The chief business officer job was a “hole” on the management team that needed to get filled, Gallagher says.
It’s easy to see why Calistoga would need to have a dealmaker on board. The company is pursuing one of the hottest targets in cancer biology, called the PI3 kinase pathway. This pathway’s job is to stimulate a bunch of cell processes like proliferation, migration, and cell survival. When these normal functions get flipped into an overactive mode, it’s a hallmark of cancer cells proliferating out of control as well as an immune system going haywire and attacking healthy tissue.
This target is in the cross-hairs of some deep-pocketed pharmaceutical players—GlaxoSmithKline, Novartis, and Genentech, as well as upstarts like Exelixis, Seattle-based Oncothyreon, and San Diego-based Intellikine. These other companies’ drugs tend to block several variations of the PI3 kinase, including one in particular called alpha, Gallagher says. That can be a problem, because blocking that can have the undesired effect of raising the amount of sugar in the blood, and insulin, possibly causing Type 2 diabetes, she says.
What makes Calistoga different is that its drug, CAL-101, is designed specifically to hit the delta isoform, or variation, of the PI3 kinase. This particular target is found on multiple cancer cell types, including chronic lymphocytic leukemia, acute myeloid leukemia, non-Hodgkin’s lymphoma, and multiple myeloma. And there’s no evidence to suggest a link to boosting blood glucose and insulin levels, Gallagher says.
The value for these PI3 kinase blockers could go up (or down) as soon as early June, when some of Calistoga’s rivals are expected to present results from early-stage clinical trials at the American Society of Clinical Oncology meeting.
Calistoga, which has staffed up to 22 employees, raised its initial $21 million in March 2007, and expects to tap its venture backers again this year, Gallagher says. The company received its initial support from Frazier Healthcare Ventures, Alta Partners, Three Arch Partners, and Amgen Ventures.
As for future financing, Stocks was careful to point out that he’s not under the gun to do a quick deal with a big drugmaker to bring in some cash, which would weaken his bargaining position with a larger company. He tossed around various deal scenarios he might consider, including one possibility of a deal with a Japanese company that would allow Calistoga to retain the “lion’s share” of valuable North American rights, which could someday be followed by a bigger global deal with another pharmaceutical company.
When I asked Gallagher and Stocks where they see the company in five years, they both paused and took a deep breath. They didn’t articulate the classic fully-integrated-biotech-company model to become like another Immunex or Genentech. They didn’t say they were looking to get acquired, but it’s hard to see what other option they’d have as long as the IPO window remains closed. Calistoga’s strengths are in moving drugs through the early phases of development, and then letting a bigger company spend the big bucks on larger trials needed to ultimately pass FDA scrutiny, Gallagher says. The venture capitalists, it’s safe to say, aren’t going to write checks for hundreds of millions of dollars to get to that point.
“With a small team of people, and not a lot of money but a lot of focused effort, we can get to be a clinical stage company and then a Big Pharma company can get it to patients,” Gallagher says. “We need to do what’s right for patients, and if we do, we’ll build value.”
