Despite downturn, biotechs are still attracting investor attention

Agios of Boston raises $33m in venture capital

Agios founders (from left) Lewis Cantley, Craig Thompson, and Tak Mak. (Pat Greenhouse/Globe Staff)

The stock market is down. Initial public stock offerings are rare. But local biotech companies keep landing impressive sums to develop cutting-edge medical treatments.

In the latest example, Agios Pharmaceuticals Inc. plans to say today it has raised $33 million in a first round of venture capital. The Boston company, focused on developing new drugs to treat cancer, raised the money from Third Rock Ventures in Boston, Flagship Ventures in Cambridge, and Arch Venture Partners in Seattle.

At least four other Massachusetts biotech companies this year also have raised at least $25 million: Concert Pharmaceuticals Inc. in Lexington raised $37 million, Constellation Pharmaceuticals Inc. of Cambridge brought in $32 million, Bedford-based Resolvyx Pharmaceuticals Inc. garnered $25 million, and Stromedix Inc., another Cambridge biotech, took in $25 million.

"Obviously, we're headed into a shaky economy," said Richard Kimball, a partner with law firm Nutter, McClennen & Fish in Boston, who handles venture capital deals as part of his practice. "But biotech companies are long-term plays. The folks who are investing now are looking for returns four to five years from now. I don't think they are that influenced by what is happening today."

Last year, biotechs in New England raised $924 million in venture capital, up 6 percent from 2006, according to the PricewaterhouseCoopers' Money Tree survey. In the first quarter of this year, New England biotechs raised $255 million in 27 deals, less than the previous quarter, but a healthy amount. Second-quarter figures will be available this month.

Meanwhile, Agios has attracted several investors by working on a relatively novel method of attacking cancerous cells - starving them. Specifically, Agios is trying is to find ways to deprive cancerous cells of key nutrients by blocking them from breaking down glucose, forming or using fatty acids, and even stopping them from raiding nonessential pieces of their own cells for fuel.

"This is very new and very exciting," said Kevin Starr, the company's interim chief executive and a Third Rock partner. "Once you choke off the food supply, the cancer has no place to go."

A common problem with treating cancer is figuring out how to attack the sick cells while leaving healthy ones undisturbed. But, Starr said, cancerous cells gather food using special enzymes that could be targeted with new drugs.

Agios was founded by four biologists, including Lewis Cantley, a Harvard Medical School professor who described some of the underlying research in a March article in the journal Nature.

Starr, a former Millennium Pharmaceuticals Inc. executive, said Agios could potentially use the discoveries to develop treatments that target most kinds of cancer, as well some other diseases. Still, like many biotech start-ups, the company is years away from developing drugs that are ready to be tested in humans.

Agios is temporarily operating out of Third Rock's offices in Boston, but is looking for office and lab space in Cambridge. Starr said it hopes to have 25 employees within a year and 35 within two. He also is recruiting a management team, including a permanent chief executive.

So far this year, there haven't been any venture-backed IPOs from Massachusetts, because of the turmoil on Wall Street. But major drug companies are continuing to gobble up biotech companies, giving venture investors another way to cash out of their investment. For instance, GlaxoSmithKline PLC paid $720 million for Sirtris Pharmaceuticals Inc., a Cambridge company trying to combat aging-related diseases. And Takeda Pharmaceutical paid an eye-popping $8.8 billion for Millennium, which owns a fast-growing cancer drug, Velcade. "I would suspect most venture-backed companies are eventually acquired," Kimball said.

Todd Wallack can be reached at twallack@globe.com.