Applied Genetic stays inside to guard valuation

Dow Jones VentureWire
05.04.09

Applied Genetic stays inside to guard valuation

Guarding its valuation against potential new investors, Applied Genetic Technologies Corp. has added $11.8 million in insider funding to its Series A round to pursue clinical data for its treatments targeted at the un-commercialized area of gene therapy.

InterWest Partners led the new financing, which included Intersouth Partners and MedImmune Ventures. Neither PrimeBio Tech nor Skyline Ventures participated in the funding, but are still shareholders in the company, said Applied Genetic Chief Executive Sue Washer.

The decision to limit the funding to insiders was made because of the value the new data the company plans to pursue could bring the company, said InterWest Managing Director Arnie Oronsky. While new investors expressed interest in the company, they did not set acceptable valuations, he said.

"Everybody who gets into a company these days almost insists on a drastic down round because you can," Oronsky said of the current fund-raising environment. "We didn't have to do that with this company."

In total, Applied Genetic has raised about $34 million toward the Series A round. The company raised $15.25 million toward the round in 2003, according to VentureWire records, and continued the Series A funding due to the current capital environment and the ease of insiders' funding, Washer said. The $11.8 million, which closed April 30, was raised at an undisclosed flat valuation. Including seed funding, Applied Genetics Technologies has raised a little over $38 million.

To Oronsky, the investment in Applied Genetic follows the pursuit of finding a gene therapy investment that began in 1995 when he first joined InterWest. The area of gene therapy, which has yet to have commercialized treatments, saw tens of companies devoted to this space in the 1990s, he said, only to have that number diminish after safety risks arose. InterWest first invested in Applied Genetic in 2003.

"We waited for the sky to fall, so to speak, and then we got into it," Oronsky said. "If anything is going to change minds and bring new therapies, I think this could be the company that does it."

Applied Genetic's pipeline includes gene therapy treatments for a form of emphysema, Alpha-1 Antitrypsin Deficiency, a form of childhood blindness, Leber's Congenital Amaurosis, or LCA, and a form of daytime blindness, Achromatopsia. With the funding, the company plans to progress the first two treatments into Phase I/II testing, slated for completion in late 2010 or early 2011. The third daytime blindness treatment will advance in preclinical testing in that same timeframe.

The company's clinical data so far has been positive, Oronsky said, as the company sets out to prove that it can bring an effective level of gene production for its Alpha-1 Antitrypsin treatment and treat younger, teenage patients with the LCA treatment.

Because Applied Genetic's trials require small patient populations, the company could potentially progress the treatments on its own, Oronsky said, but will also likely consider future partnerships. Large pharmaceutical companies, which previously were reluctant to consider the gene therapy space, now seem to be more open to the space, he said.

"Their attitudes have changed completely," Oronsky said. "I think the interest is because they recognized it's only the beginning. Now when we call or go to a meeting, they don't hide anymore."

Applied Genetic is working with Genzyme Corp., a company which has been working in the gene therapy space since the early 1990's, according to VentureWire records. With Genzyme, Applied Genetic is developing a gene therapy treatment for neovascular age-related macular degeneration. The company received a $2 million milestone payment from Genzyme in 2007.

Genzyme also formed a partnership with venture-backed gene therapy developer Ceregene Inc. in 2007 for its lead Parkinson's targeted treatment. Ceregene announced in November that a Phase II trial on advanced Parkinson's disease did not show a significant difference between patients treated with their treatment and a control group. Ceregene said at the time that it planned to continue its pipeline work on that treatment and others targeting serious neurodegenerative and ocular diseases.

Applied Genetic, which has seven employees, was founded in 2001 with technology from the University of Florida.