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Purdue Spinout Kylin Hopes $250K Seed Grant Spurs More VC Bets on RNAi Tech

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Kylin Therapeutics, a 2007 spinout of Purdue University, is using a recently awarded $250,000 grant from the Indiana Economic Development Corporation to hire additional employees and continue developing a proprietary RNAi-delivery technology developed by Purdue scientists, the company said last week.
 
Kylin, which has thus far subsisted on $1.2 million in private seed funding, also hopes to parlay the cash into more substantial VC funding over the coming year to at least double its existing workforce and pursue therapeutic and research tool applications for its technology, according to company officials.
 
In the meantime, the company, whose management team and investors have a strong connection to neighboring Purdue, will continue to use resources provided by the Purdue Research Park system and the Purdue Discovery Park to move its RNAi platform along, the officials said.
 
Kylin’s core technology, called packaging RNA, or pRNA, was invented by Peixuan Guo, a former virology and biomedical engineering professor at Purdue who has since taken a position with the University of Cincinnati.
 
Packaging RNA is derived from bacteriophage phi29 and characterized by the company as a “gear in the DNA packaging machinery” that can be modified with therapeutic RNA, such as siRNA, for targeted delivery to cells. Likewise, the technology could be used as a research tool to deliver siRNAs to in vitro systems or animal models.
 
The Purdue Research Foundation, the non-profit entity responsible for Purdue’s tech-transfer operations, owns the surrounding IP. Last year, PRF and Guo attracted a management team and an undisclosed amount of seed financing from local VC firm IN-vivo Ventures and North Carolina’s Golden Pine Ventures to found Kylin as a vehicle to commercialize the technology.
 
The pRNA IP portfolio comprises more than a dozen patent applications, to which Kylin negotiated an exclusive license from Purdue over the course of several months, finalizing a deal in January.
 
“We like to say that tech transfer is not an event, it’s a process,” Joe Trebley, director of technology development for Kylin, told BTW this week.
 
Although Guo no longer has a role with Kylin, the company was able to retain a strong connection to the university. Trebley is a former Purdue professor and PRF employee; while both Eric Davis, the firm’s president, CEO, and director, and Chris Meldrum, Kylin’s chairman, have worked for PRF’s Office of Technology Commercialization.
 
Davis and Meldrum are also on the management teams at IN-vivo Ventures and Golden Pine Ventures, respectively.
 
Trebley told BTW that it is “not unusual” for the PRF to take such active roles with university spinout companies, and in fact has played an important role in attracting additional management from outside the region.
 

“The role that something like the $250,000 from the 21st Century Fund plays is that it gives you validation with a number of different types of investors that will invest in the seed-stage round.”

“Engaging externally is something that Purdue has done really well — recruiting [employees] to come … to the Midwest and take advantage of all the IP that is generated here that is not as picked through as some of the West Coast and East Coast universities,” Trebley said.
 
Purdue has also played an important role in terms of providing laboratory space to Kylin, which is currently one of 165 high-tech companies housed within the Purdue Research Park system. Trebley said that the company has also been using laboratory facilities within the Bindley Bioscience Center at the school’s internally located Purdue Discovery Park for some of its key development work.
 
“I think the Discovery Park makes a conscious effort to engage not only our inventor base at Purdue, but the entrepreneurial community at large,” Shane Fimbel, technology manager at PRF, told BTW. “To that extent, efforts are continuing to build out this technology park and other Purdue-affiliated parks in Indiana. I think engagement is the key, and I think that’s what Purdue has excelled at.”
 
In terms of financial resources, Kylin has subsisted thus far on an undisclosed amount of seed funding from IN-vivo and Golden Pine, provided at the company’s launch; as well as $1.2 million in private investment garnered late last year.
 
It is unclear whether other entities besides IN-vivo and Golden Pine contributed to that cash influx. It is unclear whether Purdue took an equity position in the company in exchange for seed funding; university and Kylin officials declined to comment. Trebley said that “the important thing we see in the early stages is that the founders, including the Purdue Research Foundation, have made sure that all of our interests are aligned.”
 
Kylin now hopes it can expand both its employee and investment base beyond the Purdue-IN-vivo-Golden Pine brain trust, and the $250,000 seed grant from IEDC’s 21st Century Fund is a first step in that process.
 
“One of the difficult things to do is get a hold of that gap funding, that seed-stage funding,” Trebley said. “The role that something like the $250,000 from the 21st Century Fund plays is that it gives you validation with a number of different types of investors that will invest in the seed-stage round.
 
Trebley added that the grant “shows that this project has been vetted by experts. While $250,000 is a small part of what we need, it certainly acts as a catalyst to raise the additional money that is needed.”
 
Kylin currently employs six people — four of whom were hired since the IEDC grant was officially awarded last December — but that number could double over the next year as the company works to raise additional cash and gather data supporting the use of its delivery technology as a therapeutic and research tool, Kylin’s Davis told BTW sister publication RNAi News last week.
 
“The academic environment can take [a technology] so far, and [Purdue] had taken it through a lot of in vitro validation and … some animal work,” he said. “But to take it to the next level [requires] more standardized in vivo tests and in vivo results. Obviously, it takes people to do that.”
 
Davis also told RNAi News that Kylin remains on the lookout for additional capital. Specifically, the company is aiming to close a round of institutional investment in late 2008 or early 2009, he said. “At that point in time, in conjunction with [the IEDC funding], we’d be at a minimum doubling our workforce.”
 
He declined to disclose how much the company hopes to raise, but said that he expects interest in the financing round will largely rely on positive in vivo data for the pRNA technology: In May 2006, Gou published data describing the construction of folate-conjugated pRNA for the delivery of siRNAs to cancer cells; and last year, Gou reported that pRNA could be used to escort hammerhead ribozymes into cancer cells.
 
For its in-house drug-development work, Kylin expects to focus on using the pRNA to develop RNAi-based cancer treatments, since that is the area in which most of its scientific expertise lies and because it has already formed a partnership with Wyeth’s Fort Dodge Animal Health to develop cancer drugs based on the technology (see RNAi News, 9/20/2007).
 
But at the same time, “we want to show the market that [the technology] has broad applicability” in order to create interest not only from the investment community but also companies that might want to incorporate pRNA for use in their own RNAi drug programs that fall outside of Kylin’s cancer focus, Davis said.
 
Meanwhile, Kylin is also generating data it hopes will demonstrate the potential of pRNA for research applications. Davis said the company has “had a lot of interest” in pRNA from reagent providers since delivery remains a challenge for those using RNAi as a research tool. But, as with therapeutic use of pRNA, finalizing a deal will require strong data, he added.
 
“To a significant extent, those two paths [towards showing pRNA’s potential as a therapeutic and a research tool] are aligned at the present time [and] we believe that we can demonstrate both” through the work currently underway, he said.
 
Likewise, Kylin could go in one of two directions in terms of partnering to develop its technology, Trebley told BTW. One direction, which he said mirrors RNAi firm Sirna, would involve building up a large IP portfolio to attract potential suitors for acquisition.
 
The other model, he said, is similar to competing firm Alnylam, “where you build up a large portfolio using a couple strategic [partnerships] and some venture capital, and then sort of outlicense the non-exclusives to the portfolio,” Trebley said.
 
“The important thing is to keep all of our options open in moving the technology forward,” he added. “The beginning stages of both of those look the same. We’re just keeping our options open.”

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