DiObex Shuts Down and Sells Assets

About a month ago, I wrote a post about potential opportunities to pick up assets from distressed companies. Last week, DiObex announced that it failed to raise additional capital and was effectively shutting down. The company was financed previously by venture firms including Domain Associates, Inventages Venture Capital, Pequot Ventures, and Sofinnova Ventures. The board has now decided to sell the company's assets, mainly diabetes drug (DIO-901) entering Phase II, to recoup invested capital. Although the diabetes market is huge, getting regulatory approval for a diabetes drug can be difficult, time-consuming, and expensive. Recent safety concerns with diabetes drugs, e.g. Avandia, has made the FDA very cautious, and long-term safety is always an issue since most diabetes drugs are taken chronically. This might be an opportunity for a large pharmaceutical company, e.g. Lilly or Novo Nordisk, to pick up an asset on the cheap. Unfortunately, I don't believe this will be the last we hear about companies having to sell their assets this year.