A Morrisville biopharmaceutical startup is the recipient of the first investment made by Rex Healthcare’s new venture capital fund.
Rex Health Ventures announced Thursday that it has invested $500,000 in Aerial BioPharma, a company developing a treatment for narcolepsy and another to treat acute and chronic pain.
Rex’s investment is part of a $3.8 million funding round, which also includes a group of angel investors based in Chattanooga, Tenn.
Aerial BioPharma formed in January 2011, but its management team – CEO Moise Khayrallah, President Steve Butts and Gary Bream, executive vice president of clinical affairs – has already found buyers for two other startups that they have built.
“We focus just on the drug development,” Butts said. “We don’t really have any commercial aspirations.”
Aerial is currently conducting phase 2 clinical trials on its narcolepsy treatment, and has licensed a molecule from UNC-Chapel Hill for its pain product. The funding will allow the company to complete its phase 2 studies and fund manufacturing and early safety work on the pain drug, Butts said.
In addition to providing funding, Rex may also use its five sleep centers in Wake County as clinical trial sites for studies of Aerial’s narcolepsy drug. Rex, which is owned by UNC Health Care, committed $10 million earlier this year to the venture capital fund, which the nonprofit says is designed to make money, improve health care and create local jobs.
Butts said Rex’s involvement gives Aerial access to a wide range of experts to help it evaluate its own products and others that it might be interested in licensing.
“We’re very lean from a funding standpoint, and you’re trying to be as efficient as possible, so to be able to drive down the street and meet with a sleep expert in a sleep clinic is pretty significant,” he said.
Aerial has eight full-time employees and relies on about a dozen contractors. The same drug development team was also behind Addrenex Pharmaceuticals and Neuronex.
Addrenex, which is developing drugs for hypertension and attention deficit disorder, was acquired by Shionogi Co. for $29 million in November 2009. Neuronex, which launched in 2010 and is developing a nasal spray to treat seizure disorders, is being acquired by Acorda Therapeutics in a deal that could provide its investors with up to $105 million in milestone payments.
Merrette Moore, managing partner of Lookout Capital and a Rex adviser, has known Butts and Khayrallah for several years.
“It’s about as good an early-stage team as you’re going to find in the area,” he said.
Moore said Rex Health Ventures is actively looking across the Southeast to make more investments. The fund is also seeking to raise an additional $10 million.
Since the fund launched in April, it’s received more than 150 proposals from companies seeking funding, Moore said.
“Once you tell the story about how we’re planning on using the resources and staff at Rex to help companies once we’ve invested, people get very interested,” he said.