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Tech startup of the month.

Replidyne Inc., Louisville


INITIAL LIGHTBULB: "There's a real problem with antibacterial antibiotics," explained Charles McHenry, Ph.D., Replidyne's chief scientific officer. "The development of new ones was ignored for a long period of time by the large pharmaceutical companies. There were a number of effective antibacterials that were working well, and the logic was, 'We're covered.'"

While big pharma was resting on its laurels, however, bacteria were doing anything but. After decades of exposure to the same drugs, mutant strains have emerged "that are resistant to every clinically available antibacterial," McHenry said.

As a professor at the University of Colorado Health Sciences Center in Denver, McHenry has long been aware of this dilemma, and his academic background led him to envision a class of next-generation antibacterial drugs that would inhibit the process of DNA replication. "This (DNA) machinery is absolutely essential for the propagation of cells," McHenry said. "It occurred to all of us ... that we could screen a huge number of compounds against the replication system and find a way to block it."

With this goal in mind, McHenry teamed with Nebojsa Janjic, Ph.D., who had previously worked in drug discovery at NeXstar, to develop a business plan for Replidyne. The pair quickly realized the need for more business acumen and recruited Kenneth Collins, who had been consulting for biotech startups for several years, as Replidyne's president and CEO. Janjic is vice president of research and development.

IN A NUTSHELL: Replidyne's technology will first be put to work to screen compounds for their efficacy in inhibiting the DNA replication process. "We'll identify' initial 'hits,' as they're called, off of the screen" said Janjic. "Then we will optimize the properties of those compounds." Replidyne will then put each potential antibacterial under a pre-clinical microscope to ensure they don't inhibit the replication of human DNA before moving into costly clinical trials. The objective is to develop an antibacterial drug that will fight a broad spectrum of pathogens, including E. coli and staphococcus. "The clinical indications that we will go against will be largely determined by what comes out of our screens," said McHenry. "We're not counting anything out right now."

The antibacterial category "is a space that's attractive because the predictability of developing drugs is somewhat higher" than other therapeutic areas, Collins said. Likewise, antibacterials are more likely than other drugs to behave similarly in a laboratory setting and in a human subject, added Janjic.

In line with expectations of doubling in size to 40 employees by early 2003, the company moved from a temporary Denver office to new Louisville digs in May. Collins said the surplus of space along the U.S. 36 corridor made the move much more financially palatable than it would have been in the late '90s.

CLINICAL TIMELINE: "We're several years away from clinical trials," said Collins, meaning that any Replidyne antibacterial could be a decade away from market. After identifying compounds that best inhibit DNA replication, Replidyne should be conducting pre-clinical studies by early 2004, he said.

THE MARKET: One of the largest categories of therapeutics, antibacterial drugs make up a $29 billion annual worldwide market. "Clearly the largest market would be for a broad-spectrum antibiotic," noted Collins, pointing to five different drugs with annual sales that exceed $1 billion. Replidyne's relatively small size makes the pursuit of narrow-spectrum drugs (which fight one specific type of bacteria) fiscally viable, something that is not the case for the large pharmaceutical conglomerates.

FINANCING: The company was founded with $2 million worth of Small Business Innovative Research grants. After a yearlong hunt for venture capital in a tight market, Replidyne closed on a Series A round of $13 million in March 2002. The lead investor was Boston-based Healthcare Ventures; Boulder's Sequel Venture Partners also participated. Replidyne "fits our overall investment strategy," said Dan Mitchell, a partner at Sequel. "We have been aware of the whole antibacterial issue for some time." Ultimately, Mitchell said the investment was based on familiarity with the management team and technology that was "intriguing enough to build a business around."

Replidyne will pursue a Series B round beginning in mid-2003, with hopes of closing by the end of the year.
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Title Annotation:Replidyne Inc.
Author:Peterson, Eric
Geographic Code:1USA
Date:Dec 1, 2002
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