Molecular Templates, a cancer therapeutics shop based on technology developed at the Ontario Cancer Institute and University of Toronto, will relocate from Toronto to Texas after closing a $2.5 million Series A venture financing round from Austin-based Santé Ventures, the venture capital firm said last week.
Molecular Templates will use the financing to advance into clinical trials a lead melanoma compound, and to develop other cancer therapeutics using its proprietary protein-engineering and high-throughput screening platform technology.
Founded in 2000, the company is making the move to the US after finding it difficult to secure add-on funding in its home country following a startup investment from a handful of Canadian angel investors and VC firms, Molecular Templates President and CEO Eric Poma said this week.
"I think it speaks less to the technology and more to the financing infrastructure that exists in Canada right now," Poma told BTW.
Molecular Templates "had gotten some funding on [its] own from some small angel investors and small VCs … and some non-dilutive financing from the Canadian government, but were basically tapped out … and couldn't go any further," said Poma said, who joined Molecular Templates in late 2008.
Poma said that when he took over the company, he saw a need to incorporate the company in the US and seek additional financing there. He brought his company to the attention of Santé, with whom he had worked in the past.
Kevin Lalande, managing director at Santé Ventures, told BTW this week that he viewed Molecular Templates' relocation as "a natural evolution of the company. Yes, it was founded in Toronto, but it was [geographically] reasonably close to the US. They worked on the science as long as it made sense. We liked the technology, liked the company, and would like to have them closer to our location."
Lalande said that before Poma took the helm, Molecular Templates had for the most part been run by its scientific founders: Jean Gariépy, a senior scientist in the Division of Cancer Genomics and Proteomics at OCI; and Leigh Revers, a former member of Gariépy's lab and currently assistant director of the Master of Biotechnology program at UT.
Gariépy and Revers founded Molecular Templates in 2000 to use a platform technology they had developed to screen and engineer variants of a naturally occurring toxin from the bacteria Shigella. The variants, called Shiga-like toxins, can selectively and efficiently kill specific cell types.
The company received an initial investment of CAN$1.5 million (about US $1 million at the time) from Milestone Medica, Sunnybrook Working Ventures Medical Breakthrough Fund, and a private UK investor. With this cash, it was able then to in-license the technology from its owner, the University Health Network, of which Princess Margaret Hospital and its research arm, OCI, are members.
In exchange, UHN received a "small" undisclosed royalty consideration in future products based on the technology, Poma said.
For a time, Molecular Templates was a resident of the MaRS Discovery District, a conglomeration of academic entities, investors, and companies in downtown Toronto. However, the company eventually burned through its cash reserves and was not able to attract additional outside investors.
"Canada and Ontario, in particular, have got great academic research," Poma said. "They've done a very good job putting together all the pieces they can put together. Now it's just trying to put together a savvy VC industry in Canada that can fund biotech.
"It's an industry that requires some specialization and understanding," he added. "UHN took this as far as [it] could, but there was nothing really homegrown to take this forward."
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Santé, founded in 2006, invests exclusively in early-stage companies in the medical or healthcare space. In December 2007, the firm closed its debut $130 million healthcare fund, which it said it would use to invest in seed and early-stage companies around the US, but with a particular focus on the central US (see BTW, 12/17/07).
Despite Molecular Templates' Canadian roots, Santé's Lalande said that the company was "really right down the middle of what we're looking for: an early-stage life sciences-based investment. We did find the technology in Toronto, but that's not that uncommon. We're looking for the best technologies in the world."
In conjunction with the financing, Lalande and Casey Cunningham, a scientific advisor at Santé, will join Molecular Templates' board of directors.
Molecular Templates will conduct its business administration out of Santé's Austin offices, and has leased wet-lab space about a 45-minute drive north of Austin, Lalande said. There, the firm will use Santé's investment to both further develop its lead compound for treating melanoma and apply its technology platform more broadly to find other Shiga-like toxins that might be useful as cancer therapeutics.
The discovery platform is a bit unusual in that it has been able to identify Shiga-like toxins with anti-cancer activity first, without knowing on which targets the compounds are acting. Before the company can move its melanoma treatment to the clinic, "we need to find out what exactly this lead compound is binding on melanoma cells," Poma said. "We've just begun some work in this area, and it's a pretty standard approach that we think will take probably six months or so.
Then Molecular Templates will turn its attention to conducting studies in support of an investigational new drug application. "We think we're around 18 months from the clinic," Poma said.
Meantime, the company will also work on increasing the breadth and throughput of its screening system for Shiga-like toxins with anti-cancer activity, which Poma said would give the company the flexibility to look at other therapeutic indications.
"So those are the two major projects we're working on right now: advance the lead to the clinic, but also broaden robustness of platform technology," he said.
Though Poma admitted that following the money to Austin was imperative for Molecular Templates, he stressed also that Santé's pedigree and the life sciences-innovation cluster taking shape in Texas are attractive.
"In this case there was more to it," Poma said. Santé's Cunningham, who has both basic and clinical research experience, "is a great resource to have," Poma said. "It is a great idea to have someone who is almost like a [chief medical officer] type involved with the company right off the bat."
In addition, Poma said, Texas provides "tremendous resources" for biotech startup companies, "even though it might not be top of mind as a place for biotech. The economics for lab space in Texas have been extraordinary compared with other places that have been more traditional," Poma said.
"Also, we are a drive away from MD Anderson [for clinical trials]; and then there is UT Southwestern, Texas A&M, [and] others — a lot of places to draw from in terms of R&D talent," Poma added. "Santé was our first choice from a funding standpoint for all those reasons."
And although the Toronto area loses a homegrown biotech startup, Poma believes that it would still be considered a boon for the region if Molecular Templates were to succeed in its new digs.
"In terms of the investors who originally [put money in] to Molecular Templates, they are extremely grateful and extremely pleased to see that the company is continuing to be developed," Poma said. "In terms of the rest of the infrastructure in Ontario … I think they'd be very pleased to see a success, and it would engender faith that the other companies they are generating need to be financed and kept at home.
"If Molecular Templates goes on to become a roaring success, people will say, 'Hey, don't let the next Molecular Templates slip out of Canada because we can't finance it. Let's build the infrastructure here,'" Poma added.
"My hope is that it becomes a win-win for everyone. A win for the state of Texas; and proof of principle that biotechnology coming out of Canada needs to be looked at very seriously and looked at as a potential industry in Canada," he said.