Cultivating the next Big Idea company
Firm takes protein approach to health
At a San Diego Padres game two seasons ago, Jeffrey Kelley made his pitch to Chris Mirabelli, a Cambridge venture capitalist.
Some new research at Kelley's lab at the Scripps Research Institute in California was starting to show promise; it dealt with the way cells stay healthy - or fall prey to disease - by managing the production of proteins.
Just two years before, Mirabelli, managing director at HealthCare Ventures, had helped to form a company around earlier work in the same field done by Kelley and Susan Lindquist, a scientist at MIT's Whitehead Institute. Now Kelley was talking about something much bigger: a company that would develop drugs to help keep our cells cranking out proteins in a perfectly normal way.
In a general sense, proteins are responsible for a vast array of jobs in the body, from fighting infections to sending signals to moving things around. When that production goes awry, the result can be diseases like Alzheimer's, Huntington's, and cystic fibrosis.
This week, the concept that Kelley and Mirabelli first discussed at Qualcomm Stadium is morphing into a company, ProteoStasis Therapeutics Inc., with a $45 million war chest of venture capital funding. Joining HealthCare Ventures as backers of ProteoStasis are Fidelity Biosciences and the venture capital arms of Genzyme Corp. and Novartis AG, among others. It'll likely be one of the largest initial VC rounds of 2008 for a life sciences company.
When a company raises so much money before it even has office space or more than one employee - the ProteoStasis payroll starts and ends with CEO David Pendergast - its funders believe they're cultivating a Big Idea company, not just another start-up seeking to create a single new product.
"When you put $45 million into a company in the A round," says biotech consultant Steven Dickman of CBT Advisors, "you're making a bold statement."
That kind of money helps Big Idea companies put a stake in the ground: Don't try to compete with us with a piddling 10 or 20 mil. Big Idea companies collect some of the leading thinkers in a scientific or technical realm on their boards, and they do what they can to lock up all of the significant patents related to what they're doing. Big Idea companies, Dickman observes, traditionally have "charismatic management" and the ability to persuade much bigger companies that the way to own a piece of the future is to collaborate with them, rather than taking an independent path.
In life sciences, Sirtris Pharmaceuticals and Alnylam Pharmaceuticals are two of the more successful Big Idea companies our region has seen recently. Sirtris cast itself as the pioneering company in the field of sirtuins, a kind of protein that seems to be a factor in aging and age-related diseases; Alnylam staked a claim to the science of RNA (ribonucleic acid) interference, a technique that attempts to block the progress of certain diseases by preventing disease-causing genes from doing their work. Alnylam is publicly traded, and Sirtris had been before it was acquired by GlaxoSmithKline for $720 million in April, just four years after the company was founded.
But with Big Ideas comes the risk that actual marketable products will be slow in materializing, or won't rock the world in the way a company's founders expect. In life sciences, Elixir Pharmaceuticals Inc. and Archemix Corp. are two Big Idea companies still trying to find a foothold; both companies pulled planned initial public offerings earlier this year. In tech, New Hampshire's Segway LLC raised about $90 million in funding in 2000 to introduce a transportation device that was intended to revolutionize the way urbanites get around. (Didn't you Segway to the corner coffee shop this morning?) The Cambridge start-up Brightcove Inc. was among the first to realize, in 2004, that a boom in online video viewing was around the corner. But having raised about $80 million in funding, the Big Idea company now needs to find a big exit: either an acquisition or an IPO.
Kelley and Mirabelli created an earlier Big Idea company together, Cambridge's FoldRx Pharmaceuticals Inc. That company has raised nearly $60 million so far to develop drugs to treat diseases where proteins fold in the wrong way (proteins can't function properly if they're misfolded). The company is developing a drug for a rare genetic disease called familial amyloid polyneuropathy, which is fatal unless the sufferer can get a liver transplant. Fidelity Biosciences, along with Mirabelli's firm, was also an investor in FoldRx.
But the promise of the new company, ProteoStasis, is that it may discover a single drug that can treat several different diseases that involve protein production going haywire. (The two companies are focused on many of the same diseases, however, such as Parkinson's, diabetes, and cystic fibrosis.)
"Controlling protein maintenance could be very useful in a spectrum of diseases," Kelley says. A big part of that is quality control: making sure that functional proteins get to the right place, and defective ones don't pile up. (Clumps of junk proteins are a major suspect in Alzheimer's disease.) Pendergast adds, "No one, to our knowledge, is focusing on the entire proteostasis network, and the signaling pathways that control it." The company uses the term proteostasis, meaning "protein homeostasis," to refer to a cell's normal protein-production activity. Pendergast says there are 500 or 600 key proteins, arranged into a dozen "circuits," or pathways, "that control how the other 22,000 proteins in your body get produced."
After Kelley and Mirabelli talked at the Padres game, they met in Cambridge, and Mirabelli agreed to sponsor some of the work of Kelley's lab, to the tune of about $1 million. In return, he'd get first dibs on licensing their discoveries from the nonprofit Scripps Research Institute. The team submitted some patent applications late last year, and also brought in a Northwestern University researcher, Richard Morimoto, to join Kelley and Andrew Dillin of the Salk Institute as the company's founding scientific trio.
Their big round of funding was finalized on Aug. 15. Pendergast is now looking for office space, and seeking to build a research group of about 20 people to start turning ProteoStasis' science into drugs.
To raise a second round of funding, Mirabelli says, the company will need to have started the clinical trials for at least one drug. That's the point where Big Idea companies in the life sciences field start to prove their worth.
Scott Kirsner can be reached at kirsner@pobox.com. 