Tuesday, August 26, 2008

Proteostasis Proves Platform Companies Still In Vogue

It pays to be fashionable. Anyone doubting that platform-based, big think biotech start-ups have gone by the wayside should think again. On Monday Proteostasis Therapeutics stepped out of stealth mode, announcing it had secured a cool $45 million in financing from a synidcate of backers that includes HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates, Novartis Option Fund, and Genzyme Ventures.

The Cambridge Mass.-based company's Series A was one of the largest to date in 2008, eclipsed only by the $105 million raised earlier this summer by RaQualia Pharma, which spun out of Pfizer’s Nayoga research site with backing from the UK’s Coller Capital and Japan’s NIF SMBC Ventures.

But unlike RaQualia, which comes with three marketed products, six development programs, and a 70-strong team of researchers, Proteostasis is an early-stage platform company that is at least three to five years away from clinical candidates. The recent funding shows that at least some venture firms aren’t shying away from discovery-based companies, as long as there’s a potential platform that can be monetized.

Other companies announcing eyebrow-raising amounts of money this year include Constellation and Agios. In April, Constellation, a company focused on developing drugs based on an emerging field called epigenetics, pulled in $32 million in financing from Third Rock Ventures, The Column Group, and Venrock Associates. Meanwhile, Third Rock joined returning seed investors Flagship Ventures and Arch Venture Partners in July to fund Agios, which is focused on cancer metabolism and therapeutics targeting a poorly understood cellular process called autophagy.

Like Constellation and Agios, Proteostasis Therapeutics is of a type: A-list investors, top management, and hot science. Mention the company's scientific founders by name and VCs interested in staking high science start-ups morph into Pavlov's dogs. The three co-founders are Jeffery Kelly of Scripps Research Institute, Andrew Dillin of the Salk Institute, and Richard Morimoto of Northwestern University. Taking the helm as CEO is David Pendergast, who served as COO and CEO at Transkaryotic Therapies before its 2005 acquisition by Shire for nearly $1.6 billion.

Proteostasis hopes to develop first-in-class therapies for neurodegenerative diseases and certain genetic conditions by targeting the biological pathways that regulate the correct folding or placement of proteins within a cell. “It’s a fundamentally different way of looking at disease,” says investor Christopher Mirabelli, managing director of HealthCare Ventures.

To work correctly, proteins must undergo a poorly understood act of molecular origami that depends both on the primary amino acid sequence and the cellular milieu where the folding occurs. Once folded, the proteins must be sent to the right place in the cell – a process called trafficking – to do their job.

But mistakes happen in this complicated multistep process, and that’s when disease strikes. Misfolded proteins can overload the cell’s quality-control mechanisms, aggregating into toxic intermediates such as the debilitative amyloid beta plaques that are the hallmark of Alzheimer’s disease. When certain proteins – especially enzymes – misfold, they are no longer in the proper conformation to do their jobs. So-called molecular chaperones of the kind Proteostasis is interested in developing would cross the intracellular membrane and coax the misfolded molecules into their correct, biologically active conformations.

The company has spent the past 18 months in stealth mode, validating its hypotheses and generating small molecules that work in animal models and cell lines with a $1 million in seed money from HealthCare Ventures. Folks can get an early look at what might be the scientific rationale for the company. In the September 5 issue of Cell, Kelly's lab will publish a paper that shows that certain well known small molecule drugs can disturb the biological pathways involved in proteostasis.

If the company's business model sounds familiar, that's because it isn't entirely without precedent. VCs have been investing heavily in this space for the past several years in companies such as Amicus Therapeutics, which went public in 2007 and recently signed a licensing deal with Shire worth up to $200 million. Meanwhile, FoldRx, a company using molecular chaperones to treat diseases such as cystic fibrosis, Parkinson's Disease, and the rare neurodegenerative disorder familial TTR amyloidosis, also boasts Jeffery Kelly as a founder, and HealthCare Venures as a backer.

Mirabelli isn't worried, however, that FoldRx and Proteostasis will be competing either for partnerships or with potential therapeutics. "It's such a big space. There's room for a number of investment opportunities," claims Mirabelli.

In an interview, Mirabelli emphasized that the two start-ups are taking complementary approaches to the developing therapeutics based on protein homeostasis. While FoldRx has focused on salvaging individual misfolded proteins that play a role in disease, Proteostasis is taking a more global approach, attempting to use systems biology to track down regulators that involved in various diseases.

Though the company hasn't specifically outlined its therapeutic areas of interest, based on conversations with co-founder Kelly, Pendergast and Mirabelli, it seems that Proteostasis will also initially focus on different diseases than FoldRx, with a special eye on Huntington's Disease and the lysosomal storage diseases.

This focus on lysosomal storage diseases could make Proteostasis a direct competitor of Amicus-- if the technology bears fruit. And it's likely one of the reasons Genzyme Ventures got involved in the deal. Genzyme, after all, pioneered enzyme replacement therapy, developing Cerezyme for Gaucher Disease and Fabryzyme for Fabry disease. In 2007 alone, the two products generated over $1.5 billion in sales. Despite the fantastic success of these large molecule products, they don't work for all patients afflicted with the disease. Moreover, Shire's rich deal with Amicus suggests that Genzyme is attempting to hedge its bets by investing in a potential challenger.

The fact that Novartis Option Fund is also a backer suggests the potential breadth of Proteostasis's technology. As we described last year, Novartis Option Fund was designed to do two things: invest in early stage companies, but at the same time take an option on a promising therapeutic program, creating a cheaper "in" for the parent pharmaceutical company. Any potential licensing deal comes with a pre-negotiated price tag and can only be triggered by discreet events, such as lead optimization, pre-IND, and first-patient dosing. So that it's impossible for Novartis to exercise virtual control of a potention portfolio company, Novartis Option only invests in companies that have at least three programs.

The current market turmoil and difficulty exiting via the public markets mean Proteostasis's backers will likely carry the company for a long time. (It's worth keeping in mind that Amicus's backers poured at least $150 million into that company before it finally went public in 2007 after several attempts.) That's likely one of the reasons for the large Series A.

But Mirabelli insists that big science of this kind deserves big money. It was important he says, to have the company's executives focused on validating the theory and generating ideas. "We didn't want them to spend a lot of time on fund raising," he says.

(Photo courtesy of Flickr user malingerer via a creative commons license.)

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