After failing to raise a sustaining round of capital, DiObex has been effectively shut down by its investors. They have laid off the San Francisco company’s eight employees and are moving to quickly sell off its assets, including its lead drug candidate, a compound that prevents hypoglycemia in diabetes patients.

DiObex originally launched with $30 million from Domain Associates, Inventages Venture Capital, Pequot Capital, Sofinnova Ventures and several others in 2003. In the past year or so, it has been looking for an additional $20 to $30 million to push its drug through a second phase of clinical trials. But all potential investments would have caused a steep decline in the company’s valuation. Its existing backers decided it would be more lucrative to simply sell the rights to the drug, called DIO-901.

So far there have been no takers, and it’s unclear whether the investors will in fact get a return from the sale, according to VentureWire. While it had another type 2 diabetes treatment in development, it had stopped working on it due to safety concerns. The Food and Drug Administration has sharpened its teeth when it comes to approving diabetes medications of late due to past safety problems.

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