Nereus Pharmaceuticals Inc.

Nereus Pharmaceuticals is looking to the ocean as a rich source of diversity. The company was founded to discover drugs from marine microorganisms.

• Contact: Kobi M. Sethna, President and CEO

• Address: 9255 Towne Center Drive

• Suite 300

• San Diego, CA 92121

• Phone: [phone]

• Fax: [phone]

• Industry Segment: Drug Discovery

• Business: Drugs from marine sources

• Founded: July 1998

• Founders: William Fenical, PhD; Michael A. Palladino Jr., PhD; Kobi M. Sethna

• Employees: 3

• Financing to Date: $1 million

• Scientific Advisory Board: William Fenical, PhD (University of California, San Diego); G. Jeanette Thorbecke, MD (New York University Medical Center); Lyle L. Moldawer, PhD (University of Florida); Robert Jacobs, PhD (University of California, Santa Barbara); Emmanuel Theodorakis, PhD (University of California, San Diego); Charles G. Smith, PhD (Ex-VP R&D, Squibb and Revlon Health Care Group); Michael A. Palladino, PhD (CSO, Nereus Pharmaceuticals Inc.)

Most of the drugs currently in clinical use are derived from natural sources, the great majority of them produced from soil-based micro-organisms. While the rate of discovery from land microbes has been decreasing, the rate of resistance to existing drugs is on the rise, and effective treatments for a number of diseases remain elusive. There is a compelling need to find new sources for drugs, and one recent start-up believes that the ocean offers a solution. The single richest source of diversity on the planet, the ocean teems with micro-organisms possessing novel structures and novel chemical defenses that can be exploited to develop new therapeutic agents. However, Big Pharma has traditionally ignored the ocean's resources because of the challenges inherent in discovery and production, and the effort required for an established industry—expert at discovering drugs from terrestrial sources but novices at exploring the marine environment—to switch gears and reeducate itself. The founders of Nereus Pharmaceuticals Inc. believe that this dilemma offers an ideal opportunity, and they have created their company to help bridge the gulf between the sea and the pharmaceutical industry.

Nereus co-founder William H. Fenical, PhD, has spent the better part of his career building that bridge. A professor of oceanography at the University of California, San Diego 's (UCSD) Scripps Institution of Oceanography and director of Scripps' Center for Marine Biotechnology and Biomedicine, Fenical has received $6 million from the National Institutes of Health over the past 10 years to fund his work in marine microbial drug discovery. He has focused on developing access to marine micro-organisms: learning how to discover them, isolate them from the ocean, culture them, and develop drug candidates from them. He has been successful, licensing some of his anti-cancer and anti-inflammatory discoveries to other pharmaceutical companies prior to co-founding Nereus.

In early 1998, Fenical decided that the time was right to commercialize his technology. He had been involved with various East Coast start-up efforts earlier in his career, but this time he wanted to keep it local. VC firm Forward Ventures linked Fenical with Michael Palladino, PhD, whose own year-old startup, Aventus International, offered a promising anti-inflammatory compound as well as proprietary screening technologies. Kobi Sethna, a former VP at American Cyanamid's Lederle division, was brought on board as Nereus's president and CEO. Forward seeded Nereus with $1 million and is actively involved in developing the company. Sethna estimates that the current round of financing, which is nearing completion, will raise an additional $5-6 million.

Part of Nereus's product portfolio comes from Palladino's work at Aventus. His high-throughput screening program combines pharmacologically directed assays and gene profiling run in a parallel, rather than serial fashion. This will enable quicker selection of lead candidates and will result, says Palladino, "in high quality drug leads, not just hits." Nereus will use this technology to identify small molecules that are more likely to be orally active as well as synthesizeable. Palladino says that Nereus is actively pursuing licensing opportunities for the screening platform in addition to using it for its own discovery efforts.

Palladino also provided Nereus with its lead drug candidate, an orally active, small-molecule TNF-a inhibitor with potential against rheumatoid arthritis, congestive heart disease, inflammatory bowel disease, certain cancers, and HIV. Nereus has high hopes for this compound, believing that if successful, it will offer significant advantages over current TNF-a inhibitors, which are difficult to manufacture, expensive for the patient, and available only in injectable form. Nereus has synthesized the parent molecule, which was originally isolated from a Far Eastern plant. It is in the process of selecting an analog, and plans to enter clinical trials by the fourth quarter of 2000.

Nereus's remaining candidates, all in preclinical development, are from Fenical's collection. Nereus has licensed exclusive rights to them from the UCSD [See Deal], and has first dibs on future compounds discovered through Fenical's continuing work at Scripps.

Fenical's grab-bag includes Pseudopterosin A, from a family of anti-inflammatory compounds with which he's been working for many years. Psuedopterosins were originally derived from soft coral, but Fenical has created a new library of synthetic analogs which he believes will be topically and systemically applicable to various inflammatory and possibly even osteoarthritic conditions. Nereus's antiviral candidate is a set of modified peptides as potent against herpes simplex as nucleoside drugs, Fenical claims, but with a different mechanism of action. This molecule was originally isolated from a marine fungus, but Nereus has been able to synthesize it as well as make it by fermentation. Still in a very early stage is Nereus's anti-cancer agent, a microtubule inhibitor also derived from a marine fungus. This agent has shown selective activity against a variety of tumor types, including some breast cancers that are now showing resistance to Taxol. Nereus also has an exclusive worldwide license to Scripps' culture media and saline fermentation process for growing marine micro-organisms.

Although Nereus wants to generate immediate revenue from its screening technologies, it is adopting a wait-and-see approach on licensing its compounds. Various parties have expressed an interest in its lead candidates, but Nereus is looking for deals that will enhance its ability to accelerate its development program and move more of its molecules forward. If it does accept a partner at this stage, says Sethna, "it is with the understanding that we will take compounds to Phase II together, and then work out a commercial contract. We are in it for the long haul."

Sethna believes that Nereus has the resources to sustain itself for the long run. It has a library of over 25,000 organisms that it is screening against its therapeutic targets. And with Bill Fenical isolating 300 unique molecules a year at his Scripps laboratory, Nereus is assured of a constant pipeline of candidates, Sethna says. It bodes well for the realization of Sethna's two-part goal for Nereus: to develop its compounds in a prioritized manner, with or without corporate partners, and to continue to develop the incredible resources of marine microbial discovery.

Although there are many other companies involved in extracting natural products from plants and marine animals, Nereus's founders believe that its screening technologies plus Fenical's pioneering role give their company a distinct advantage. The ten years of NIH funding enabled Fenical to delve into the basics of marine microbiology and learn how to cultivate a high percentage of organisms. "There's no other company out there who has done this work," says Fenical. "Others are certainly dabbling, and I think they could be up with us. All they've got to do is spend $6 million and ten years. That's why we have an edge. And we think it's a very good edge."-NTD