Putting on a new spin

SANTA CLARA, Calif.-That didn't take long. This past July, Amgen acquired Ilypsa Inc., for $420 million and in late October, spun out part of Ilypsa to form Relypsa Inc., which discovers and develops polymeric drugs. In conjunction with the spin out, Relypsa also received $33 million in Series A financing which should be sufficient to fund its work through 2009.

The idea for the quick spinout came after the acquisition, says Jay Shepard, Relypsa's CEO. Amgen, he says, saw Relypsa as "a new home for the technology and a way to really preserve a good share of jobs from the Ilypsa scenario." Ilypsa, a wholly owned subsidiary of Amgen, employed 76 people before the acquisition. Relypsa provides jobs for 38 former Ilypsa workers with unique skills fitting the new entity's functions.

Gerrit Klaerner, Ph.D., COO of Relypsa and a founder of Ilypsa while at Symyx Technologies, says, "The acquisition was really a full blown M&A in terms of all the programs and the technology." Klaerner, who also advised lead investor 5AM Ventures on the spin out, says the merger and acquisition process helped both companies recognize strengths and weaknesses.

Though there will be dialogue between Amgen and the spun out company, Klaerner stressed Relypsa will return to its entrepreneurial roots similar to Ilypsa's founding which began with only a technology platform from Symyx, creating and advancing drug candidates from scratch.

That technology, Klaerner says, is unique because polymers in medicine are usually used in drug delivery or medical devices, not as main actors. Relypsa focuses on selective GI-based polymers that block functions and are then excreted, rather than crossing into the blood and raising risk of side effects. Says Shepard, "These drugs are nonabsorbed so the side effects that you do see are limited to the GI tract."

Relypsa's pipeline already includes ILY 105, a potassium binder for treating hyperkalemia, and ILY 102, a sodium binder that may be used to treat congestive heart failure. Series A money, says Klaerner, will generate human proof of concept for 105 and gather Phase IIa data. The cash will also help generate a pipeline that Shepard thinks should result in one IND filing a year. "It's an ambitious goal, but we believe we have a good shot at being able to do that," he says.

Familiar investors should help Relypsa move quickly. "The investors that we have right now are, for the most part, the same that we've had with Ilypsa," says Shepard, though a new board seat goes to Amgen Ventures. The investor group comprises 5AM Ventures and New Leaf Venture Partners with participation from the Sprout Group, Delphi Ventures, CMEA Ventures, and Mediphase Venture Partners. According to a prepared statement, Amgen maintains a minority equity stake in Relypsa and holds certain rights related to the transferred programs.

Returns on previous investments, says Klaerner, show capital efficiency: Ilypsa raised $46 million and sold for $420 million, demonstrating the ability to create value. Klaerner believes Relypsa's model is a positive story in an industry dominated by in-licensing. "We really hope that we can encourage other people out there that it is possible to basically have a home-grown approach of discovering and developing drugs in today's environment in a timeframe and with capital that's available from the venture community."