Microbia lands $75m in financing

Eight years after it was hatched as an idea in an MIT lab for yeast research, the private Cambridge biotechnology company Microbia Inc. said today that it has received $75 million in new venture capital financing -- the biggest biotech venture deal in New England since 2004.

The 70-person company is pushing two experimental drugs through clinical trials, one for constipation and the other for high cholesterol. Neither is related to the company's original yeast technology.

Attracted by the drugs' progress, large-scale equity firms Sigma Capital Partners, Jennison Associates, and Maverick Capital joined initial venture backers Venrock Associates and Polaris Venture Partners in the deal, which closed last week.

''It's a great new set of investors," said Bryan Roberts of Venrock, who predicted that Microbia could see a large-scale public offering in a year and a half.

''This set of people did not invest in this for this to be a $200 [million] to $300 million IPO," he said. ''We all expect that Microbia has not only the assets, but also the future assets to make this a very susbtantial company."

The $75 million investment dwarfs the largest New England biotech financings of 2005, according to records of the National Venture Capital Association. The biggest single round last year was $30 million invested in Therion Biologics Corp., also of Cambridge. Nationally, only Fibrogen Inc. of California closed a bigger deal last year.

In many ways Microbia's history reads like a playbook of Cambridge biotechnology. The company's cofounder and chief executive, Peter Hecht, grew up in Belmont and came to the MIT-affiliated Whitehead Institute for Biomedical Research as a post-doctoral student, looking at intriguing properties of yeast.

Better known for its role in helping bread rise and beer ferment, yeast is a powerful scientific tool with a dedicated subculture of biologists who study it. Hecht and three other young researchers decided that yeast and other types of fungus produced enough interesting byproducts to form the basis of a new company. They told their lab head, the prominent researcher Gerald Fink, they were leaving.

''One day Peter Hecht appeared and said that he had good news and good news," said Fink. ''The good news is that you're going to have space in your lab. And the other good news is that four of us are leaving to start a company."

Hecht would bring Fink, his former mentor, aboard as a scientific adviser. He also hired the administrator from Fink's lab -- ''which I have never forgiven him for," Fink joked.

Like many other biotech companies, Microbia assembled a team of advisers and employees from the local biotech and academic world. It also exhibited another quality emblematic of biotech survivors: the artful reversal.

Unable to deliver on its original promise of developing anti-fungals and other drugs to fight infections, Microbia began looking at more traditional drugs for widespread diseases. Today it appears to be finding them. Led by two veteran ''drug hunters" from big pharmaceutical companies, John Talley and Mark Currie, it has developed an anti-constipation pill that is now in Phase 2 human trials to see if it works as intended, and a cholesterol-blocking pill which is currently in Phase 1 human safety tests.

The company's original yeast expertise today exists as a side business, with about 20 employees custom-designing new kinds of fungus and bacteria to help manufacture chemicals for other companies.

With potential patients numbering in the tens of millions, the diseases that Microbia is targeting are a long way from the usual biotechnolgy targets of rare cancers and other severe, uncommon diseases. That could put them head-to-head with much larger pharmaceutical companies.

''It's a growing but fairly competitive space, but we're in a quite encouraging position," said Hecht, who predicted the company would be able to afford the larger-scale later trials needed to bring its drugs to market.

Though making drugs to be taken by millions of patients can carry a higher risk of side effects and other liabilities, as the cases against Vioxx maker Merck & Co. have shown, it can also raise the attraction for investors looking for a payoff.

''They're enormous markets, they've got interesting clinical data, they own all the compounds so far," said Roberts. ''They've created a team that knows what they're doing."

Stephen Heuser can be reached at sheuser@globe.com.