Fintan Walton :

Hello and welcome to PharmaVentures Business Review here in Madrid. On this show I have Simon Kerry, who is CEO of Karus Therapeutics based in Southampton in England, welcome to the show.

Simon Kerry :

Thank you.

Fintan Walton :

Simon Kerry , Karus Therapeutics as I said is based in Southampton it came out of University of Southampton and it has some very specific technologies, could you tell us more about Karus Therapeutics?

Simon Kerry :

Of course yeah. And so Karus Therapeutics came out of really two key institutions in Southampton. The first is the Cancer Research UK clinical centre they are based in Southampton General hospital amongst really essential mechanism in understanding how disease cells use their genes very differently from normal cells and that's a key question in biology research, because a cancer cell has the same DNA as a healthy cell but it's clearly using it in different way. And what the guys at CRUK in Southampton are trying to understand is how you can reverse those effect, how you can make a cancer cell stop behaving like a normal cell again. Those biological insights were very important for founding of Karus Therapeutics and Professor Graham Packham who is one of our founders now has an active program one of which aspects which is looking at histone-deacetylase-Inhibitors, HDAC-Inhibitors. HDAC-Inhibitors were important class of compound because they've been shown to do exactly what I've just said, you can take a disease cell like a cancer cell well it could also be an inflammatory cell with number o f other diseases which have genes being used inappropriately I can make that cell stop behaving normally again, okay it does that by regulating the activation of genes.

Fintan Walton :

So, we will come back to the science in a moment. Karus Therapeutics itself is funded as a privately held company?

Simon Kerry :

It's a privately held company.

Fintan Walton :

Where is the funding come from?

Simon Kerry :

The initial funding came from two main sources one was the IP group formerly known as IP2IPO. They have relationship with University of Southampton and they were sufficiently impressed with the science space, they invested in the company in 2005 and alongside them came the SULIS Seedcorn fund which is one of these university challenge funds which came in with another major part of the funding and that raised us to 750,000 pounds in 2005.

Fintan Walton :

So how much funding have you go at the moment?

Simon Kerry :

Yeah so far we've raised in total just 1.6 million pounds. And with that 1.6 million pounds I think we've actually delivered quite a lot, so by the time we get to that 1.6 million pound from pretty much a standing start we will have two compounds about to go into preclinical development and a pipeline of other compounds which are about a year away from preclinical development.

Fintan Walton :

So going back to the HDAC-inhibitors what do they actually do and why are they relevant to those particular disease stage that you are investigating?

Simon Kerry :

Yes, so one thing that happens in a cancer cell is really probably the easiest way to explain it, in them all cells actually genes are regulated by the way in which they wind and unwind from proteins called histones, so when DNA is tightly bound at a histone it's inactive and when it becomes unbound it's become active it can be used. And one of the ways in which histone allows DNA to become bound and unbound from it is the acetylation state of the histone, so acetylated histones DNA unwinds and it's active, deacetylated histone DNA is tightly bound to it remains tightly bound to it, so just happens in cancer cells a number of other disease cells you get a massive up regulation of an enzyme called histone deacetylase which deacetylases, deacetylates the histone as you might expect and it silences number of genes and in the case of cancer it silences genes which were responsible for controlling cell growth so it is a slight double negative what happens is in the presence of histone deacetylase you get uncontrolled cell growth which is the hall mark of many cancer, cell just grows and grows and grows seem never to stop. If you can inhibit that enzymehistone-deacetylase with an HDAC-inhibitor then what you do effectively is you reverse that process and you revert it to a state where you get constitutive expression for cell growth factors. So a number of things that can happen when you give a HDAC-inhibitor cell all things are possible cell can stop behaving normally again it had to revert to being a healthy cell or it can die then undergo apoptosis or it can just grow the rest it's just there is something in the mechanism says something wrong here we just gonna stop. And that similar mechanisms happen in inflammatory disease cells too so we get massive over production for inflammatory factors and cytokines to similar process of histone deacetylase an induction of gene silencing which you can switch back on again with an HDAC-inhibitor.

Fintan Walton :

Right. Now the other thing you've got a compound a natural protein I believe which is a compound that's derived from bacteria which is called FK228?

Simon Kerry :

Yeah that's an interesting compound, it's discovered actually in the early 90's in Japan from a soil bacteria and it's compounds which actually the NCI in the US became very, very interested in, Fujisawa who founded [PharmaDeals ID = 16305] originally let the NCI play with this they put it through their panel of tests and found it to be an extremely interest in HDAC-inhibitor, it's by far the most potent HDAC-inhibitor that's in development, it's a 1000 times more potent than some of the compounds with the big pharma companies and that eventually found its way into the hands of company called Gloucester Pharmaceuticals in the US . It's an interesting compound because it has a number of very important properties extremely potent, it has a very long pharmacodynamic effect so you give a dose to cells and it will continue to acetylate the histone for many days, that's really important because that forces the cell to behave normally or to die. And it also it also is selective with HDAC-inhibitor that are important cancerinflammation, because unfortunately like most biological systems the HDAC story isn't a simple one, there actually there are 18 HDAC's in three classes the two most interesting there are 11 of them, class one is drive cell cycle effects, class two is drive other effects and you really would take the class one, so and FK228 hits all the right things, so you might think yourself its an interesting product it's in the clinic with somebody else, Gloucester pharmaceutical having a Phase IIb trial so that would normally be the end of the story apart from the fact that when god made this compound he didn't make it as a drug he made it for a completely different purpose and I am sure actually, not really sure the science really knows what that purpose is its purity form in a bacteria, but the consequence of that is it's got some really lousy drug like properties, so for example it induces drug resistance mechanisms and it's pumped out by PGP the pump and also we have problems with liver enzymes, number of problems with this compound that if you are starting from a straight forward medchem program in a pharmaceutical company you wouldn't end up with FK228. So when Karus Therapeutics started off you know the biologist where very interested in FK228 because it seem to do things other drugs couldn't do, but it was never going to be something of interest to take forward for us partly because it's in the hands of Gloucester Pharmaceuticals and partly because some of the problems that it had as a drug. So the premise on which Karus Therapeutics was set up was to take the starting point the scaffold if you like for making new drugs series and apply the same kind of rigorous lead optimization you'd apply to it to any other small molecular program to try and eliminate all the bad bits, retain all the good bits and come up with something which would be the best in class HDAC-inhibitor.

Fintan Walton :

The strengths of your company around the understanding the HDAC been able have the appropriate assays for assessing an HDAC-inhibitors, but obviously you must also have the chemistry to be able to create these new molecules as well?

Simon Kerry :

I think that's right. I think it would be difficult to pick up either the chemistry or biology as being the key component of a company. I think it's the way in which those two interact the ability to make compounds relatively efficiently, one thing we don't have to do like a conventional pharmaceutical company, we don't have to make 10,000 compounds and find the best 10 and then engineer those to get the best one. We only have to make 100 or so compounds which are all really potent they are all exceptional compounds and that allows us to select very quickly the ones that have the right drug like properties and that's partly through structure activity relationships, partly through a bit of luck when we come to testing, but it's the ability to combine the chemistry and the biology I think which really makes this very different thats really allowed us to move very, very quickly.

Fintan Walton :

So what have you got now coming through from that research program?

Simon Kerry :

So the two most advance programs one is a " one is in cancer and that's because most HDAC-inhibitors> research so far has taken place in cancer, if you look at all the trials the vast majority are in cancer. But we have two further programs based on the same compound series but different active ingredients one is a topical psoriasistopical psoriasis treatment and the other will be systemic treatment for inflammation for treatments like rheumatoid arthritis. And these going to work in a very similar way to the anti-TNF biologics, so what we are doing here is we are preventing the production of a whole load of pro-inflammatory cytokines. And we are anticipating that the compounds that we are making will actually be able to tackle inflammation in three key ways, one is that the anti-inflammatory effect it's a very, very potent anti-inflammatory agents. Secondly the anti-proliferative, so we can actually slow down the growth of hyper proliferating Keratinocytes and psoriasis for example, and (indiscernable) we anticipate in rheumatoid arthritis, but also they prevent angiogenesis new blood vessel formation well that's clearly important in cancer, but in psoriasis and rheumatoid arthritis too it's also important, it's a key part of the pathogenesis of the disease. So we are anticipating that we will be able to have almost a kind of three fold attack on these diseases but won't suffer the same consequences that you have from the very potent steroids for example.

Fintan Walton :

The other thing I know that you've already partnered with some other companies in biotech or other biotech companies in Europe?

Simon Kerry :

Yeah.

Fintan Walton :

Do you want to tell us little bit about those partnerships?

Simon Kerry :

Yes last year we signed a co-development deal with an Italian company called EOS, so EOS stands for Ethical Oncology Science [PharmaDeals ID = 33611]. So the deal is focused on the cancer program. And it's a real co-development, true co-development I think, because we are bringing all of our knowledge of HDAC-inhibitors and all of our chemistry knowledge, EOS so very much a virtual company they undertake preclinical development, clinical development of the compound and through this co-development agreement which is being funded by EOS, we will be taking the program right the way through Phase IIa trials in testing. The lead compound will be nominated later this year will be in preclinical toxicology hopefully the end of this year and with Phase IIa trials due to finish in 2011 and at the end of that you know we're going to partnering that program out to a pharma company hopefully for a nice big handsome deal for Phase IIa cancer program. And then the agreement is that we share the rewards of that partnering agreement.

Fintan Walton :

Okay. Clearly one important thing that all biotech companies have to do is to continue to fund itself and get additional financing?

Simon Kerry :

Yeah absolutely.

Fintan Walton :

So what is your what's your strategy currently in terms of financing?

Simon Kerry :

Yeah. There by every biotech company hangs by thread I think this is fair to say.

Fintan Walton :

Yeah.

Simon Kerry :

So we, after our seed financing in 2005 we raised further round last year and the vast majority of that round came from high networth individuals, all senior executives in the biotech and pharma industry and 25% of the round came from IP groups venture fund, this round we are looking for much larger rounds like a sell through preclinical development in our psoriasis program to build the pipeline, we anticipate by the summer we will have our first non-HDAC-inhibitor program in the company too. And you know we'll be looking to conventional VC, VC funds for that, for that fund raising.

Fintan Walton :

And when do you hope to close that finally?

Simon Kerry :

End of this year, quarter four.

Fintan Walton :

Okay.

Simon Kerry :

So and you know we really to start at the process and BIO Europe spring is a major part of that launching the process of talking to people.

Fintan Walton :

And that's why you are here at BIO Europe?

Simon Kerry :

That's one of the main reason that we are here, absolutely right.

Fintan Walton :

Okay. Well it's fascinating to hear about Karus Therapeutics and thanks Simon Kerry for coming on the show. Thank you very much indeed.

Simon Kerry :

Thank you. Thank you.

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