Obituaries I: Altus Becomes a Casualty of Development Costs, but Drug May Live On

(MoneyWatch)  The biotech industry is leaner than it was 18 months ago, and the fallen include not just fly-by-nighters doomed to Darwinian attrition, but some of the oldest names in the industry, like Altus Pharmaceuticals (ALTU).

Altus was founded nearly 17 years ago as a subsidiary of Vertex Pharmaceuticals (VRTX). The fledgling biotech's goal was to commercialize Vertex's protein crystal technology, and its lead drug was an enzyme replacement for cystic fibrosis.

For 15 years, Altus did everything a biotech firm is supposed to do. The company advanced its lead drug into Phase III trials and nabbed a lucrative partnership with Genentech (DNA) for its second drug. But in December 2007, the Genentech deal fell apart amid whispers that the parties had clashed over the development plan. Eight months later, cystic fibrosis drug Trizytek proved underwhelming in Phase III despite hitting its primary endpoint.

Altus reportedly had everything worked out with the FDA to move forward with an approval filing -- but the company could not find a partner to help pay for the final clinical and regulatory work. So in early 2009, it restructured and gave Trizytek back to the Cystic Fibrosis Foundation (from whence it came). The company limped along until November, when it filed for Chapter 7 bankruptcy.

According to BioWorld, Altus raised something in the range of $350 million over the years. The company attracted more than $100 million in venture capital, at least $25 million in grants, $105 million in its 2006 initial public offering, and $88 million in a follow-on offering, not to mention the Genentech money.

At the time of the bankruptcy filing, Altus was trading at eight cents with a market capitalization of about $2 million.

And that might have been part of the problem. Altus had poured so much money into Trizytek's development that the company probably had to seek pretty steep terms on any pending partnerships. That could have been a deal-breaker.

But while Altus is dead, Trizytek is not. The drug was licensed from the CFF by Alnara Pharmaceuticals, a start-up founded by none other than Altus' former chief scientific officer.