Proteostasis Therapeutics, a drug-discovery startup based on research conducted at a trio of US research institutions, said last week that it has secured $45 million in Series A financing to develop drugs to treat a variety of genetic and degenerative disorders associated with protein homeostasis deficiencies.
The company, which has licenses to intellectual property developed at Northwestern University, the Salk Institute for Biological Studies, and the Scripps Research Institute, is an example of how cooperation between tech-transfer offices at multiple academic institutions can result in a more attractive investment target, a company co-founder said this week.
Investors in Proteostasis’ Series A financing included VC firms HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates; and pharma/biotech investors Novartis Option Fund and Genzyme Ventures, each of which will have an opportunity to have a first look at any discoveries emanating from Proteostasis.
The lead investor and the amounts of the individual investments were not disclosed. However, according to Jeffrey Kelly, co-founder of Proteostasis and professor of chemistry at Scripps, the firm was initially founded almost two years ago with “a modest amount” of seed funding from HealthCare Ventures.
Kelly told BTW last week that this seed funding allowed the company to get on its feet by having rights of first refusal and, ultimately, the right to license various scientific discoveries made in his lab and in the lab of Andrew Dillin, developmental chair and associate professor of molecular and cell biology at Salk.
The Scripps and Salk IP surrounds compounds that affect specific signaling pathways that control protein homeostasis, or proteostasis. The proteostasis network maintains the body’s natural balance of proteins to protect people from numerous diseases, and the potential therapeutics are designed to treat multiple genetic and degenerative disorders associated with deficiencies of this network, such as emphysema, type II diabetes, Alzheimer’s disease, and Huntington’s disease.
“The IP here is [related to] compounds connected to pathways connected to diseases,” Kelly said.
According to Kelly, Proteostasis was able to form relatively quickly primarily because of cooperation between the tech-transfer offices of Scripps and Salk – a cooperation that he claims doesn’t happen frequently enough around technologies developed at universities and research institutions.
“Our respective departments … basically got on the phone and hammered out an in-principle agreement very quickly that said, ‘If you guys can do this, we’ll work together, and one of us will negotiate on behalf of both institutions,’” Kelly said.
“I wish it were more common that institutions would cooperate – this has not always been my experience.”
“I wish it were more common that institutions would cooperate – this has not always been my experience,” Kelly added, declining to elaborate. “I was really pleased, though, that in this particular case Scripps and Salk saw the big picture; saw the idea that there was some really important IP co-mingled between the two institutions; and decided to do this together.”
It is unclear which institution took the lead on negotiations with Proteostasis or what the terms of the licensing agreement are.
Shortly after the negotiations between Salk, Scripps, and the company were finalized last year, Kelly and Dillin identified a third scientist – Richard Morimoto, a professor of biology, molecular biology, and cell biology at Northwestern – who had developed some IP that complemented theirs. In particular, Morimoto identified two additional signaling pathways involved in the proteostasis network and proprietary structures of small molecules that affect them.
Morimoto put the two in touch with Northwestern’s tech-transfer office, which separately negotiated a licensing agreement with the startup firm. “Rick Morimoto is founder number three, if you will, and he was recruited about a year after we started the company,” Kelly said. “He had IP that was nearly ready to be disclosed to respective patent authorities and stuff that was going forward. Northwestern was also very cooperative and supportive.”
The breadth and depth of the IP portfolio and expertise that Proteostasis assembled in such a short period of time attracted a number of investors to the table, and the company last week announced that those VCs had pumped about $45 million into the company – an unusually generous amount for any two-year-old university-based startup.
“At the end of the day, the investors saw that this was really a big idea,” Kelly said. “It was my perception that they didn’t want to cash-starve this company, so that this big idea could be realized in an amount of time that would please everybody.”
Still, in the world of drug discovery and development, especially when a startup itself intends to move drug candidates toward clinical trials, $45 million is not an outlandish sum.
“Our initial funding of [Proteostasis] … provided the basis for this emerging area of science to mature so that it now offers the promise of new drug candidates entering the clinic in the next three to five years,” Christopher Mirabelli, managing director of HealthCare Ventures and chairman of Proteostasis, said in a statement.
The Series A round “is designed to support [the company’s] strategy to advance proprietary compounds into the clinic, as well as to continue to develop the unique technology platform that will serve as the basis for strategic partnerships,” he added.
Kelly added that “there is a lot of biology to be worked out; there are drugs to be developed, and when you add it all up, it’s not that $45 million isn’t enough, but of course it ultimately enables us to do deals with companies and foundations.”
Kelly said that there is “definitely other IP out there, and we are in the midst of negotiating with some institutions to acquire that right now,” but declined to identify them.
He also said that although he, Dillin, and Morimoto are all taking scientific advising roles with Proteostasis, they will not be taking business roles with the company.
“There is a lot of science to do here,” he said. “While we’re heavily involved in the technical side, we’re in the process of recruiting seasoned managers, both scientific and otherwise.”
Despite its scientific co-founders being located in the San Diego and Chicago metropolitan areas, Proteostasis has made its home in Cambridge, Mass., primarily because HealthCare Ventures and several of the other Series A investors are based there. Kelly said that the physical distance between the company’s co-founders and investors is not problematic — and in fact may be a boon.
“I think there are more advantages to having the company in [the] Boston [area], in a way, because the success of these companies is half based on the science and half based on what I call smart money,” Kelly said.
“I’m really impressed with the help that comes with the financing from firms in the Northeast corridor,” he added. “They have a track record of excellence in staying with companies long enough to see them mature into real entities. They are a little more realistic in creating value.”