Tranzyme gets $20 million infusion

Durham company awaiting data on constipation drug

Three deep-pocketed investors are betting $20 million on a Durham company that is working on treatments for serious constipation.

It's the trio's second large investment in Tranzyme Pharma in three years, and it could lead to even bigger things for the company.

Tranzyme Pharma will spend the cash on tests to firm up preliminary data that suggest the drugs work well without serious side effects. About 6 million people suffer from post-operative ileus and diabetic gastroparesis, two painful disorders in which portions of the gastrointestinal tract stop functioning. Results of the tests will be crucial to determine whether TZP-101, Tranzyme's most advanced drug, is more effective in patients and safer than existing treatments.

"It all depends on the data," said Alex Zisson, who represents venture capital firm Thomas, McNerney & Partners on Tranzyme's board of directors and one of the three major investors. "It's still too early to declare victory, but so far we're encouraged."

The test results are due in the spring. If they meet expectations, final testing of TZP-101 could start soon after, and the drug could come to market as early as 2010.

TZP-101, a liquid that must be injected, and its pill version, TZP-102, each have the potential to generate hundreds of millions of dollars in annual sales, said Brenda Gavin, another Tranzyme board member and a partner in the venture capital firm Quaker BioVentures, which is another of the Tranzyme's large investors. The third investor is H.I.G. Ventures.

Drug development is fraught with pitfalls, from disappointing test results to regulatory roadblocks. But Tranzyme has yet to run into major hurdles, Gavin said. "This has been so far a sweetheart kind of a company."

Patients and investors stand to benefit from a continuation of Tranzyme's lucky streak but not necessarily the Triangle.

Large drug makers and specialty pharmaceutical companies are already calling Tranzyme to inquire about the medicines the company is working on, including treatments for diarrhea caused by chemotherapy and weight control. Vipin Garg, Tranzyme's chief executive, projected that positive test data for TZP-101 will ready the company for a big deal.

An initial public offering, a partnership or a combination of the two would ensure Tranzyme continues to expand in the Triangle. Tranzyme employs 44, including 10 in Durham.

"There are enough tools to build a company," Garg said.

But there's also the possibility that Tranzyme will be sold, he said. If that happens, the headquarters could move. Already the research and development is done in a lab near Montreal.

It's hard to predict which option the board will pick when the time comes, Garg said. But the decision will likely follow the strategy the company has long pursued.

Many drug development companies are founded by scientists attached to a particular discovery no matter how daunting the task. Tranzyme has always focused on creating a maximum amount of bucks for each bang.

For example, targeting gastrointestinal treatments was a calculated decision, Garg said.

Few competitors exist for innovative gastrointestinal medicines, which makes it easier to find patients willing to participate in tests. Testing treatments for post-operative ileus and diabetic gastroparesis require one dose, which means studies can be done in a few months rather than years.

"That's the game we've chosen to play," Garg said.