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Highland’s innovation is a double-coating system around existing anti-ADHD molecules that delays the release of the underlying drug into the body until hours after ingestion.Getty Images/iStockphoto

A Toronto biotech startup hoping to shake up the multibillion-dollar Attention Deficit Hyperactivity Disorder drug market has raised $200-million (U.S.) to bring its first product to market in a debt deal brokered by Morgan Stanley & Co.

Toronto-based Highland Therapeutics is tiny – it has just 25 people – but has secured the funding through a wholly owned subsidiary in anticipation of receiving approval from the U.S. Food and Drug Administration in July for a treatment it hopes will bring relief to parents of children with ADHD. "We think this drug has the potential to be a game-changer for patients struggling with ADHD," said Highland's Canadian-born CEO David Lickrish, who runs the firm from the Cayman Islands. He said the debt deal, partly contingent upon gaining FDA approval, will enable Highland to "challenge for leadership in this category."

ADHD medications are typically taken in the morning, leaving a lag time until the drugs' calming effects kick in, Mr. Lickrish said. Highland's innovation is a double-coating system around existing anti-ADHD molecules that delays the release of the underlying drug into the body until hours after ingestion. That enables children to take their pills before going to bed and wake up just as the medication starts to have its effect, lasting all day.

Highland recently reported favourable results for patients using its drugs compared to those who consumed placebos, but has not reported data comparing its effectiveness to other treatments.

Its first product, pending FDA approval, would compete with a class of off-patent ADHD drugs known as methylphenidates, including Janssen's Concerta, which had sales of $659-million in the first nine months of 2016. Highland is in the earlier stages of developing a delayed-release amphetamine-based drug that would compete with market leader Vyvanse, a $2-billion-plus blockbuster for Shire PLC.

A Shire spokeswoman said the pharma giant "welcomes the introduction of new treatment options," adding that her company has also applied to introduce a longer-acting version of Vyvanse for adults. "We believe it is important to have a range of treatment options to support individual patient needs."

Tara Raveendran, an analyst with Shore Capital in London, said Highland faces "an uphill battle" against entrenched competitors, saying the company will need to invest heavily to build its brand – a challenge "in such an actively promoted market as ADHD." She said new drugs in established categories typically have to show significant quality-of-life improvements to gain traction. "I couldn't see the incumbents reacting as if it were a significant threat," she said.

Mr. Lickrish said the idea of developing a night-before ADHD pill came when he was a Wall Street analyst a decade ago. "I had friends that had kids with ADHD. They frequently told me what a challenge their morning routine was … because your kids are effectively unmedicated at a particularly demanding time of the day." He founded the company in 2008, and partnered with University of Texas researchers to develop the drug-delivery technology.

Mr. Lickrish had difficulty securing financing from venture capitalists and pharma giants, but managed to raise $92-million in capital largely from friends and contacts, including ID Biomedical founder Tony Holler and an investment firm indirectly controlled by Cayman Islands billionaire Kenneth Dart. He also credits Toronto's MaRS Discovery District for incubating his company. "David developed an ambitious and unusual funding strategy for the company given the difficulties in raising large amounts of biotech venture capital [in] Canada," said MaRS CEO Ilse Treurnicht. "It is an extraordinary accomplishment for a small company to get this far on its own."

Highland plans to use the debt proceeds to hire hundreds of sales people, lease offices in the Philadelphia area to serve as its U.S. headquarters and build inventories through a deal with a third-party manufacturer. The management team includes two former executives from Shire's ADHD business unit, Craig Lewis and Tom Curatolo.