Aeolus Pharmaceuticals has over $150M of government funding supporting its development programs.
It is developing a new platform technology from Duke University and National Jewish Health. Three compounds are currently in development. Aeolus’ lead compound, AEOL 10150, not only protects healthy tissue from the damaging effects of radiation, but also helps increase tumor control when used in combination with radiation and chemotherapy.
Aeolus’ strategy is to leverage the substantial investment by the US Government in developing its lead compound as a medical countermeasure to pulmonary effects of Acute Radiation Syndromes (Lung-ARS) to develop it in oncology, where it would be used in combination therapy.
Unlike most biopharmas, Aeolus has two opportunities to address large markets. First, In oncology, where the government sponsored research work can be used to support and accelerate the Aeolus’ oncology clinical development program for AEOL 10150, thus reducing the company’s need for dilutive financing from outside investors. Radiation is an important foundation of cancer therapy, used in about 50% of all cancer patients. Effectiveness of radiation therapy is largely determined by the dose of radiation delivered to the tumor. Radiation-induced toxicity to healthy tissue remains a major factor limiting radiation dose. It has been estimated that increasing the effective dose of radiation by just 10% would increase tumor control rates by 5-30%.
The second significant market opportunity for Aeolus is a large potential procurement by the government for the Strategic National Stockpile, following the filing of an Emergency Use Authorization (EUA), which is expected in the 2H 2014. Procurements could generate significant cash and profit that could be re-invested to further develop AEOL 10150 for radiation oncology indications (and other compounds for additional indications). The amount of any potential procurement is undisclosed by the Biomedical Advanced Research and Development Authority (BARDA) at this time. Based on publicly available information, as well as other procurements already made by the government to date under EUAs, Aeolus believe the agency may purchase sufficient courses of therapy to treat a minimum of several hundred thousand people. This would provide sufficient funding to complete numerous clinical studies, including potentially large Phase III programs in oncology. This funding would allow Aeolus to fund these studies without having to partner the compounds or to raise as much money through equity offerings, which would lead to greater value for current stockholders.
Even if there were no government procurement, the BARDA contract will have paid for $40M to $50M of work that, if this were a typical biopharmaceutical company, would lead to significant, early-stage dilution to existing investors.
Aeolus is the only company awarded a contract from BARDA to develop a medical countermeasure for pulmonary acute radiation syndrome, or Lung-ARS, that has shown effectiveness when given post-exposure.