Traversa Therapeutics, a spinout of the University of California, San Diego, said this week that it has closed a $2 million Series A round of venture capital financing to further develop its RNA interference-delivery technology.
A company official said Traversa will use the cash to ramp up manufacturing of the technology as a drug-screening tool — an application with modest market potential that Traversa hopes will pave the way to the more lucrative RNAi-based therapeutics space.
Traversa was founded in mid-2006 to commercialize technology developed by Steven Dowdy, a professor of cellular and molecular medicine and Howard Hughes Medical Investigator at UCSD.
Even though Dowdy is an HHMI-funded researcher, the institute’s policy confers to the host institute ownership of any intellectual property developed by one of its scientists, so UCSD owns the underlying patents. Traversa licensed the technology when it was founded and was required to make an undisclosed up-front and royalty payments to the school on future products developed by Traversa or entities to which it sub-licenses the IP.
HHMI’s IP ownership policy also grants it a worldwide, non-exclusive, royalty-free, and irrevocable license to use the property for research purposes. However, HHMI does not have the right to sublicense the IP.
In addition, the policy states that the technology-transfer office of the host institution — UCSD in this case — lead any licensing or other commercialization activities that surround the IP. In turn, the host institution is obliged to share any resulting expenses and income with HHMI. HHMI does not disclose the specific terms of this sharing scheme.
‘Most Challenging Problem’
Traversa’s core technology combines protein-transduction domains linked with a double-stranded RNA-binding domain to encapsulate small interfering RNAs so they can be delivered into a variety of cell types with little or no cytotoxicity.
Hans Petersen, president, CEO, and co-founder of Traversa, this week told BTW that siRNA delivery “is perhaps the most challenging problem to be solved in the RNAi sector.”
According to Petersen, early studies indicate that the delivery technology has shown promise as the basis for RNAi therapeutics because of its high efficiency and low toxicity profiles.
“The first [application of this technology] is as a gene target-based therapeutic” that the company would license “on a target-by-target basis,” Petersen said.
He said there are about 4,000 genes that are appropriate for RNAi, “and we can deliver those within a variety of tissues in vivo” for human therapeutic development.
Developing such a product, however, takes years of R&D and financial resources that most university spinouts do not have. Compounding this is the fact that venture capitalists in recent years have been investing in more advanced therapeutic candidates, a strategy that shuts out many early-stage drug developers.
Traversa has a short-term plan to address this problem, according to Petersen: The company would sell the delivery technology as a screening tool and, eventually, even as a transfection reagent that could be used to transfect cells unresponsive to lipofectamine, a common transfection reagent made and sold by Invitrogen.
“It’s not very common for a biotech to have short-term revenue like we do.”
“We know that this is also valuable in vitro for reagents and especially high-throughput screening,” Petersen said. “We had one of our early collaborating companies tell us that they wanted to run a screen on 30,000 siRNAs in five cell lines. So he calls us and tells us he wants to order enough material for that. We charge per well, and off he goes.
“What’s nice is that this is a short-term value that the technology, or one version of it, adds,” Petersen said. “It’s not the therapeutic version, but it’s a version that helps people screen for drug targets that might actually be small-molecule targets. It’s not just for screening RNAi-based drugs.”
It was this short-term revenue potential, Petersen said, that attracted Series A investors San Diego Tech Coast Angels, Mesa Verde Venture Partners, and Morningside Group to make a combined investment of $2 million in Traversa.
“They were very attracted to a couple of things,” Petersen said. “One is that it is in the RNAi sector. [Another is that] there is a lot of revenue in our sales pipeline, and they liked the short-term and long-term revenue options; there are two different flavors of revenue that are independent. The screening … is just a matter of business development, getting the word out there, and selling it by the well.”
Calls to lead Traversa investor San Diego Tech Coast Angels were not returned in time for this publication.
Petersen said that Traversa actually tried to limit the Series A figure to $2 million, despite investors’ willingness to put more money in. He said the company eventually hopes to pay for the therapeutic development on its own using the revenues it receives from screening and, possibly, reagent kit sales.
“We worked very hard to pull the number down to a size that would allow us to take care of our revenue,” he said. “It’s not very common for a biotech to have short-term revenue like we do. Let’s say you look at a $5 million round. What does that buy you? Normally over an 18-month burn, you do the math on that, and it’s something like $3 million or $2.5 million per year. Well, if we’re getting that in revenue, why would we take a Series A of $5 million?”
Petersen said that Traversa is presently seeing undisclosed revenues from screening sales; 11 companies are currently evaluating the technology, and six more are negotiating with Traversa to enter similar collaborative agreements.
In fact, he said, the company will use the Series A cash primarily to ramp up manufacturing of the delivery technology for screening applications to meet the potential demand of evaluating companies. “It’s selling faster than we can make it,” he said.
However, the therapeutics market is certainly the bigger fish for Traversa to land, although Petersen didn’t put a number on the market potential. Industry estimates of the potential vary because of the wide variety of diseases and conditions for which an RNAi-based drug might be developed.
But even if a therapeutic play takes years to materialize, or doesn’t materialize at all, Petersen indicated that the company may be able to survive as a research tools provider.
“We don’t want to put our hopes on it, but there is actually a very large market out there for reagents and screening in the RNAi field,” he said. “We’re optimistic about this, but it’s not our primary focus.”