Hatchtech’s 20-year journey to FDA approval

Nearly 20 years after Uniseed provided the initial seed investment in Hatchtech in December 2001, the company has received US Food and Drug Administration (FDA) approval for its novel human head lice treatment, the topical lotion Xeglyze (formerly DeOvo).
To give context to the significance of this achievement – the number of drugs approved by the FDA that have been developed, or substantially developed, by Australian companies is 12, and of these, there are only five other new molecular entities such as Hatchtech’s.
Uniseed is very proud to have been there from the start, and after such a long wait it is very satisfying to finally receive this news. Uniseed’s investment manager John Kurek and I have ‘tick-tacked’ as directors of the company throughout most of this journey, though it is important to acknowledge that this was a huge team effort involving a large number of people including University of Melbourne research team and technology transfer office (now Research Innovation & Commercial, or RIC), numerous Australian venture capital funds and investors, and Hatchtech’s staff, directors and consultants over the past 20 years.
Particular credit needs to go to founder and inventor Prof Vern Bowles at University of Melbourne, where he is deputy director of the Centre for Animal Biotechnology, and who has been Hatchtech’s chief scientific officer throughout the entire journey, and served on the Hatchtech board for approximately 10 years after company formation. Hatchtech’s CEO Hugh Alsop and regulatory affairs manager Sharon Hanegraaf – both of whom Uniseed is fortunate to have working at one of its latest investees, addiction treatment developer Kinoxis Therapeutics – were also instrumental in navigating through Xeglyze’s clinical development and regulatory submission with the FDA.

Pictured: Xeglyze packaging, a louse and a severe infestation
Uniseed was the sole participant in Hatchtech’s first investment round in 2001 with a $488,000 investment and has invested in every major funding round since. Uniseed played an instrumental role in shifting Hatchtech’s initial investment application from animal health (particularly sheep blowfly), to the treatment of human head lice, as there was a need for novel headlice treatments given that lice had developed resistance to many marketed products, and none of these treatments effectively killed eggs and stopped head lice infestation without nit combing.
From 2001 to 2005, Uniseed was the sole investor in Hatchtech, providing strategic guidance on the company’s scientific and commercial development program. During this time, animal and laboratory studies were completed, with the first of its patents covering the composition and application of its head lice treatment awarded in multiple jurisdictions in 2004, and the active ingredient, abametapir, selected in 2005 as lead compound.
From 2005 to 2009, Hatchtech secured additional investment from Uniseed and other Australian venture capital firms including GBS Venture Partners, Biocomm and the Queensland BioCapital Funds (QBF) managed by QIC, with University of Melbourne also investing directly from its endowment trust. This funding was used to take the company from the research phase through preclinical studies and to the completion of phase 1 human trials of its single treatment head lice product then known as DeOvo Lotion – a new generation low-toxicity lousicide highly effective in stopping egg hatching as well as killing adult lice.
The first human trial on 32 patients treated at escalating dose levels was conducted by the phase 1 contract clinical trial unit Q-Pharm in Queensland during 2007, finding no side effects or other adverse events associated with the product.
In early 2008, the FDA accepted Hatchtech’s Investigational New Drug (IND) application, and a phase 2a multicentre trial in Australia and India completed in early 2010 was supported by a $2.5m funding round backed by Uniseed and GBS Venture Partners, as advisor of the University of Melbourne Endowment Trust.
The double-blind placebo-controlled study was conducted in 30 heavily infested adult subjects. It was primarily designed to assess the safety profile of the product following a single application to the hair and scalp.  An analysis of the data concluded that DeOvo Lotion was safe and well tolerated.
In addition to the primary goal of safety and tolerability, an assessment of efficacy was undertaken. Treatment success was defined as no live lice and no live eggs following application of the product.  The data indicated that DeOvo Lotion had significant ovicidal and lousicidal activity in comparison to the vehicle control. This activity was seen with only a single, short (10 or 20 minutes) contact time which contrasted very favourably with currently marketed lousicidal products, most of which required two applications and may have required treatment times of up to 12 hours.
The period after the global financial crisis was a difficult time for the company, which needed significant capital to complete human clinical trials at a time when there was a dearth of capital available. Despite this, in October 2010, Hatchtech closed a $6.3m series E round to conduct a phase 2b clinical trial. Investors included Uniseed, the University of Melbourne Endowment Trust, GBS Venture Partners through an Australian government Innovation Investment Follow-On Fund program, QBF (QIC BioVentures) and new investor OneVentures, which earlier that year launched an Australian federal government-backed Innovation Investment Fund (IIF).
Following the recent successful completion of a phase 2a study in adult populations, this new funding supported the Phase 2b clinical trial in the target paediatric population. The trial, completed at the end of 2011, consisted of treating 140 healthy subjects with head lice infestation, two years of age and older, in two study centres in the US. The results confirmed DeOvo was both safe and highly effective following a single application. The primary efficacy result demonstrated a statistically significant (p<0.001) and clinically relevant outcome (85.7% treatment success in the 0.74% w/v group), defined as being lice free 14 days after a single treatment. No serious adverse events were reported.
In November 2012, Hatchtech published data describing the mechanism of action of the active ingredient (abametapir / Ha44) in its lead product. The research data, published in the journal PLOS ONE (Vol 7, issue 11 e49961) described the ability of abametapir to fatally disrupt all stages of the life cycle of the model organism Drosophila melanogaster, from eggs to adult flies. Abametapir, a small heterocyclic organic molecule, is able to chelate heavy metal ions including zinc, iron and copper and thereby disrupt metal-dependent targets within the insect that require these ions for normal function.
In December 2012, Hatchtech completed a $6m bridge financing led by OneVentures, which enabled the company to commence the final stage of development – the phase 3 development program comprising a range of manufacturing, clinical and non-clinical studies directed toward filing a New Drug Application (NDA) with the US FDA.
In October 2013, Hatchtech completed a further $12.6m capital raise, with participation from existing shareholders OneVentures, Uniseed, QBF, University of Melbourne and new investors including a number of private sophisticated investors and BlueSky Alternative Investments, to complete the phase 3 clinical trial and submission of the NDA to the US FDA.
In December 2013, Hatchtech received final written agreement from the FDA on the design of its phase 3 clinical studies for DeOvo for the treatment of headlice under the FDA’s Special Protocol Assessment (SPA) scheme.
The results of two pivotal Phase 3 studies were reported in September 2014, with 81.5% of subjects treated with Xeglyze Lotion (recently registered as a new trademark replacing the name DeOvo) being free of lice 14 days following a single application without nit combing, and no serious adverse events reported.  Collectively, the two studies enrolled 704 subjects across 14 clinical study sites in the US. The studies were double-blind, randomised, multi-centre, vehicle controlled, parallel group and treated subjects with an active head lice infestation aged six months and older. The studies showed that after a single 10-minute application, 90% of subjects were lice free just one day after treatment, and 88% were lice free after 7 days.  The clinical results were published by Vern Bowles and co-investigators during 2018 in Pediatric Dermatology and in 2019 in Global Pediatric Health.
At the time of the NDA submission to the US FDA in September 2015, Hatchtech signed a commercialisation agreement with integrated pharmaceutical company Dr Reddy’s Laboratories for the rights to Xeglyz Lotion in key territories.  Under the terms of the deal with Dr Reddy’s, Hatchtech would receive an upfront payment of $10 million, up to $50 million in pre-commercialisation payments, plus additional milestone payments on commercial sales of up to $137 million. Dr Reddy’s acquired the rights to manufacture and distribute Xeglyze in Australia, New Zealand, the US, Canada, India, Venezuela, Russia and the Commonwealth of Independent States. Hatchtech retained the right to commercialise Xeglyze outside these territories and also retained global rights for non-human applications of the product.
The deal was highly acclaimed, receiving the Australian Venture Capital and Private Equity Association (AVCAL; now AIC) “Best Early Stage Deal” award in 2016. In 2018, Hatchtech, along with the Fibrotech and Spinifex deals in 2014 and 2015, was highlighted in the prestigious journal Nature as game-changers in the Australian biotechnology industry (Vol 557, S27-S29, May 10, 2018).
Nearly five years after submitting the NDA to the US FDA in 2015, and nearly 20 years after the initial investment by Uniseed, Hatchtech finally received regulatory approval of Xeglyze in July 2020, which triggers a $20 million milestone payment from Dr Reddy’s, with further milestone payments expected.
FDA approval had been delayed due to deficient quality practices cited by the FDA during audits at Dr Reddy’s manufacturing plants in India. While none of the quality issues involved Hatchtech’s product, the agency would not approve any new products from the facilities in question until the remediation was complete. This delay, which was outside Hatchtech’s control, highlights the risk that exists right through the drug development process.
In summary, the total funding received by Hatchtech since inception, including grants and tax rebates, exceeded A$40 million. A total of 11 human clinical studies were completed, including the two pivotal phase 3 studies conducted in 14 sites in the US with 704 patients. Additionally, over 74 non-clinical studies were completed over the life of the project, with a full battery of studies conducted for a single-use product required under ICH and FDA guidance.
Key insights from this journey are that successful biotech companies and deals do not just happen. Drug development is always about managing risks and adopting a disciplined approach and strategically thinking about all that could go wrong, and mitigating risk by implementing plans where possible to reduce that probability and reduce the potential impact.  You also need to be prepared for the curve balls… they are on their way and you will need to meet them head-on. Adopting the excellence mindset is also important: to the team, in planning, in execution, in advisers and providers. The journey to approval has been a test of patience, resilience and persistence for all involved.
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About Uniseed: Formed in 2000, Uniseed is Australia’s longest-running university commercialisation fund – a collaboration between University of Queensland, University of Melbourne, University of New South Wales, University of Melbourne and CSIRO. Uniseed has supported more than 50 startups including a number of highly successful companies arising from partner research organisations, such as University of Melbourne’s Fibrotech (sold to Shire in 2014) and Hatchtech (sold to Dr Reddy’s Laboratories in 2015); University of Queensland’s Spinifex (sold to Novartis in 2015); and University of New South Wales’s Smart Sparrow (sold to Pearson in 2019) and Exonate (major research collaboration with Johnson & Johnson announced in 2020). Uniseed is a mutual fund, owned by research organisations, for research organisations. The fund facilitates the commercialisation of its research partners’ most promising intellectual property and secures targeted investment in resulting products and technologies.
– This article was adapted by Peter Devine for GUV, based on his original comment on LinkedIn.