The Challenge Of Finding The Right Sales Partner

By Cindy Dubin

When it comes to telling its story, Light Sciences Oncology (LSO) in Bellevue, WA, is careful not to give away the ending too soon. Working primarily in the field of oncology, LSO has combined a novel light-activated drug with an included, single-use drug activator unit that is intended to provide easy use for physicians and tolerable, effective, and repeatable treatments for cancer patients. (LSO also has programs in urology and other conditions known as benign neoplasms.)

“There is a right and wrong way to tell our story, and if we are not careful in how we do so, we risk not attracting the right partner and not raising the funding that we need,” says Llew Keltner, M.D., Ph.D., president and CEO of LSO. “Especially in oncology, a company must be conservative about what information is shared with the public, and when, because it is easy to offer up false hope. Promoting something that isn’t quite ready can cost us. We must live in the present.”

The company’s Aptocine (talaporfin sodium) uses LEDs for targeted drug activation. Light-activated Aptocine causes the production of singlet oxygen molecules that kill target cells with minimum side effects and avoids the serious toxicities associated with conventional cancer treatments. Included with the drug, the Aptocine drug activator unit drives a tiny bar of LEDs at the end of a very narrow, flexible, coated microwire. In a minor, biopsy-like procedure requiring only a local anesthetic, administering physicians insert the LED array into the targeted tumor or tissue, inject Aptocine intravenously, and then energize the drug activator. A red light is emitted at a discrete frequency, intensity, and time period, in the “kill zone.” Some evidence and studies suggest Aptocine may also have a systemic effect on distant, untreated tumors by stimulating an immune response. To date, LSO has completed patient treatment in both a Phase 3 trial in hepatocellular carcinoma (HCC) and a Phase 3 trial in colorectal cancer metastatic to the liver (MCRC). LSO is also conducting clinical trials of Aptocine in benign prostatic hyperplasia (BPH), or enlargement of the prostate, and in neurofibromatosis and has clinical or preclinical programs in cardiovascular disease, eye disease, and dermatology.

“What we are doing here is very novel — locally destroying tumors with a drug,” Dr. Keltner explains. “Aptocine is a product that will be sold to medical oncologists around the world, and no product like it is available to them at the moment.”

Educating Potential Partners Is Crucial
While LSO completes the Phase 3 trials and prepares for regulatory filings, it also seeks the right commercial partner to market the product worldwide. The company has taken several steps to lay the groundwork for a partnership. In December 2006, LSO purchased the assets of its former parent company, Light Sciences Corporation. As a result of the purchase, LSO now owns all patents, assets, and its subsidiaries. According to Dr. Keltner, the acquisition allowed LSO access to the key technologies for current and future products, which helps entice potential partners.

LSO is currently in discussions with numerous potential partners, both large pharmaceutical companies and smaller companies trying to enter the oncology market — a market that has perplexed cancer researchers for decades. Current cancer treatments — surgery, radiation therapy, chemotherapy, and other local ablative therapies — have significant shortcomings, such as high toxicity, limited efficacy, tumor regrowth and resistance, high setup and usage costs, complicated administration, and poor patient quality of life. Aptocine seeks to address all of those disadvantages, says Dr. Keltner.

Educating potential sales partners about the drug and the included drug activator is a two-fold process. First, they must understand that Aptocine is likely to be reimbursed as a drug, which Dr. Keltner says is important in today’s healthcare environment. He says that until any drug is approved for sale and reimbursement is approved by public and private payers, no one can guarantee reimbursement. “Physicians in the future may never get paid for drugs. Centers for Medicare and Medicaid Services (CMS) and the private payers in the United States, as well as the National Health Service (NHS) in the UK, are moving to payment systems where physicians cannot participate in drug sales or profits—which is ethically correct, but very tough to implement. We have been careful at LSO to design a product that is a drug, which will likely be reimbursed as a drug, but which is tied to a procedure that may provide reasonable revenue to the physician or oncologist without putting a huge burden on the healthcare system.”

Second, pharmaceutical companies that partner with LSO must comprehend that Aptocine will put them in an economic space that they’ve never been a part of before, which will be critical to their survival. “They will be serving medical oncologists who have typically used chemotherapy and more traditional tumor ablation methods,” says Dr. Keltner. The Aptocine drug activator used in BPH (benign prostatic hyperplasia) is a linear LED array inside a standard catheter, providing a simple, easy-to-administer outpatient treatment. Administering physicians insert the catheter with LED array into the urethra, inject Aptocine intravenously, and then energize the drug activator.

Getting partner candidates excited about Aptocine has been relatively easy considering that no Phase 3 trial data is actually available. Dr. Keltner says that a group of pharma companies is currently negotiating with LSO to “buy an option” based on the Phase 3 data. “Although we are so close to obtaining data from both Phase 3 trials, most pharma companies are very nervous about finalizing a full license deal prior to seeing the data,” he says. “So, several companies are negotiating the purchase now of an option that could be exercised after the data is released — which has engendered some competitive spirit.”

However, LSO has not yet determined whether an option arrangement is in the company’s best interests. “We may prefer to wait for the data ourselves and then see if that generates even more serious competition. There are not many very late-stage, paradigm-shifting oncology assets out there. If we decide to do it, one of these companies (or possibly more than one if we split geographically) would either pay pure cash or would buy equity for the exclusive privilege of grabbing a license to Aptocine in oncology within a fixed time period following release of the data.”

No matter how the partnering plays out, LSO will not participate in any commercialization efforts. “We do not intend to comarket or sell the product,” says Dr. Keltner. “We build drugs and generate intellectual property. We are not sellers or marketers, and we are not eager to convert ourselves.”

Raising $100 Million Plus—Minus Pain
LSO is eager, however, to continually recite its tale to investors. “We are always in money-raising mode because, with very rare exceptions, we are always wrong about our timelines and capital needs,” says Dr. Keltner. “We are always out there telling our story: Aptocine could well be the leading treatment for solid tumors, and that is promising to investors.” Additionally, he points out that several LSO investors are related to cancer survivors or are concerned about cancer for one reason or another and want to be involved in finding treatments.

LSO does not perceive Aptocine as a cure for cancer, Dr. Keltner quickly points out. Instead, the company believes the Aptocine technology should fit into the emerging paradigm for treating cancer as a chronic, life-threatening disease, with the aim of extending patients’ lives and preserving quality of life. Limiting costs, easing administration, and increasing tolerability are attractive to investors, and they’ve responded with some serious funds.

“We expect, with adequate data to show efficacy in hand, that due in part to the very significant safety advantages and the potential systemic immune effect, Aptocine will eventually replace all other ablation methods as frontline cancer therapy for all solid tumors,” says Dr. Keltner. “As a result, we expect Aptocine to become a multibillion dollar drug in treating hepatocellular carcinoma, metastatic colorectal cancer, and other solid tumors.”

Based on this promise, LSO has been able to secure $137 million in funding: a $67 million Series A funding in 2005, $30 million Series B funding in 2007, and $40 million Series C funding in 2008. Plus, the company has a $23 million line of credit from existing investors. “It is not easy to attract investors, but we’ve had less pain doing it than other biotechs,” says Dr. Keltner. “That’s because we are well prepared.”

Dr. Keltner knows more promotion of Aptocine would generate more funding, but he opts to wait until all the information is available to share. “The temptation to overpromote the available data in order to make funding easier or to increase valuation is very powerful, and many CEOs succumb to the temptation in our industry. When the results of the Phase 3 trials are available, it is fine to let the public know. But, before that time, we can’t honestly represent that there is any hope from our therapies. We can’t offer those therapies to anyone, and we do a fundamental disservice first to patients and their families, but also to our entire industry, if we do so.”

More money will not necessarily translate into more employees at LSO, which currently employs 40 people who oversee engineering, clinical trials, manufacturing, and regulatory/legal affairs. Dr. Keltner sees no need for that number to go up or down anytime soon. “There is nothing to be gained from being a big company,” he says. “Being big has nothing to do with treating cancer or finding a happy ending for cancer patients.”