Cambridge, MA-based Stromedix is planning to begin a mid-stage trial of its lead drug in patients with a chronic lung disease called idiopathic pulmonary fibrosis before the end of June, CEO Michael Gilman tells me. And the firm’s investors have committed as much as $15.5 million in debt to cover the costs the trial.
Debt financings aren’t as sexy as big equity rounds, yet Gilman sounds optimistic about his company’s prospects. For one, he points out that the debt financing, which can be converted into equity, provides all the money his small startup needs to complete its Phase II trial of its lead drug, STX-100, in patients with idiopathic pulmonary fibrosis (IPF). There’s also a “ton” of interest from potential pharmaceutical partners in the experimental drug for IPF—for which there are no FDA-approved therapies, Gilman says. So far, Stromedix has only taken $2 million of the debt that it can draw from the new offering, Gilman says.
Stromedix, founded in 2007, previously raised $29.4 million through two round of equity funding from well-known life sciences investors such as Atlas Venture, Bessemer Venture Partners, Frazier Healthcare Ventures, and Red Abbey Venture Partners. Those investors also participated in the company’s debt financing, according to Gilman.
While no drugs are approved for IPF, which causes scarring in the lungs that limits the body’s ability to oxygenate the blood, there are more than 120,000 Americans with the illness awaiting new therapies. This has helped make IPF a hot market. For example, the biotech powerhouse Gilead Sciences (NASDAQ:[[ticker:GILD]]) in December scooped up Palo Alto, CA-based startup Arresto Biosciences, which is in early development of an antibody for treating IPF and cancer, for $225 million. Also, the market value of Brisbane, CA-based InterMune (NASDAQ:[[ticker:ITMN]]) has taken $1 billion-plus swings after both positive and negative regulatory opinions of its late-stage IPF candidate, pirfenidone, over the past year, Gilman says.
“The situation hasn’t really changed—it’s a terrible disease, the median survival is three to four years” after diagnosis, and “there are no approved drugs in the U.S. or Europe,” Gilman says.
All these factors support the case for further investment in the development of STX-100, an antibody drug that Stromedix has licensed from Weston, MA-based
