A Trio Of Strategic VCs Helps To Back Effector Therapeutics With $45 Million

Using technology spun out of UCSF, a new company hopes to develop oncology drugs that target effector mechanisms of protein synthesis, thereby affecting multiple oncogenes simultaneously. The San Diego-based biotech also hopes to license out its platform for non-cancer indications, bringing in non-dilutive money.

Two years after selling Anadys Pharmaceuticals Inc. to Roche, Steve Worland has started a new entrepreneurial project by linking novel science with enthusiastic early-stage investors. Newly launched Effector Therapeutics Inc., a start-up that will target protein synthesis in an effort to make better cancer drugs, is the result of his feet-on-the-ground approach.

“We became aware of the science in the classic way: knocking on doors and making connections” at the University of California, San Francisco,” Effector CEO Worland said. “We did the same thing among VCs, asking what was fundable and how people were looking at the landscape of new biology and what was unexploited.”

Effector closed a $45 million Series A round of funding, announced May 20, that includes commitments from seven firms including three tied to big pharma. They include corporate VCs GlaxoSmithKline PLC’s venture firm SR One, Novartis AG’s Novartis Venture Funds, Astellas Pharma Inc.’s Astellas Venture Management, as well as Abingworth, Osage University Partners, U.S. Venture Partners and Mission Bay Capital.

The company plans to develop and commercialize new drugs based on discoveries at UCSF concerning the process of translation, or protein synthesis. Effector believes it can create compounds that affect multiple oncogenes simultaneously, halting a key mechanism that leads to tumor growth.

Specifically, the company will target so-called “effector mechanisms” selectively, aiming for an upstream process that can activate more than one cancer gene at the same time. San Diego-based Effector believes that newly-discovered methods of disrupting certain malfunctioning effector mechanisms can sever a key lifeline upon which cancer cells depend.

Worland declined to discuss the terms of Effector’s licensing agreement with UCSF’s Office of Innovation, Technologies & Alliances. He said the company’s intellectual property includes both technology targeting a specific area of biology and a specific approach to inventing small-molecule drugs using a type of fragment-based design.

U.S. Venture Partners partner Larry Lasky said he was aware of the program within UCSF, thanks to an early call from UCSF cellular and molecular pharmacology department chair Kevan Shokat. “Chance favors a prepared mind,” he said. “By the time we heard their pitch, we knew we wanted to invest in it.”

Corporate Investors Bring Patience

For Worland, Effector is a chance to build a new company from the ground up. He was CEO of publicly traded hepatitis C specialist Anadys until its sale to Roche for $230 million in October 2011 (Also see "Roche Agrees To Acquire HCV Biotech Anadys For $230 Million" - Pink Sheet, 17 Oct, 2011.). A veteran of Agouron Pharmaceuticals Inc. who remained with the organization after its $2.1 billion acquisition in 1999 by Warner-Lambert Co. and eventual absorption into Pfizer Inc., Worland sought an investor group whose ambitions would match his own [See Deal].

The founder said his involvement with Effector’s VCs “was like being an entrepreneur-in-residence at three or four firms simultaneously” as he built the syndicate. Although the group includes three corporate firms, Worland said they received no special rights, options, or similar ties to the programs Effector has underway.

Still, he stressed that the corporate investors were appropriate for several reasons. As evergreen funds of no fixed duration, they don’t require a return within a set period of time. “They have a long horizon,” he said, describing their expectation of financial returns. They’re also deep-pocketed and can put in more capital as needed, he said.

Moreover, for an earlystage, science-oriented company such as Effector, the relationships will keep the young start-up focused on projects potentially useful to pharms. “Pharmas are ultimately our customers,” said Worland. “It’s important for us to know their pipelines.”

Worland assembled a team that includes some past colleagues. Senior Vice President of Drug Discovery Siegfried Reich was a fellow Agouron employee who also worked at Pfizer, while Senior Vice President of Corporate Development Kevin Eastwood spent time at both Agouron and Anadys. Effector’s Chief Financial Officer, contractor Alana McNulty, splits time with another new San Diego-area start-up, Lumena Pharmaceuticals Inc. (Also see "Lumena Pharmaceuticals Takes $23M To Fight Rare Liver Disease" - Pink Sheet, 13 May, 2013.).

Effector’s board is chaired by Carol Gallagher, the former CEO of cancer drug developer Calistoga Pharmaceuticals Inc. until Gilead Sciences Inc. acquired it for $375 million upfront in 2011 (Also see "Gilead Springs Further Into Oncology With Calistoga Acquisition" - Pink Sheet, 22 Feb, 2011.). Calistoga specialized in inhibitors of the phosphoinositide 3-kinase, thought to be another critical mechanism in the proliferation of tumor cells.

She sits on a board that includes Lasky and representatives from SR One, Novartis, and Abingworth, as well as Worland; Lasky said the four firms that took board seats were the “main investors,” while the other firms contributed smaller amounts.

Funding Cancer Programs Through Business Development

Effector hasn’t identified a lead program yet.Worland said it’s too early to say which cancer types it will choose to investigate. The technology is applicable to both solid and liquid tumor types, he noted. Lasky described the technology as “not that basic,” however, and said some “very druggable or likely druggable” targets have begun to emerge.

Worland said the platform can also be used to create drugs that address other disorders; the technology has been identified as potentially useful in immunology, for one. With that in mind, Effector hopes to conduct business development deals outside of cancer, while maintaining ownership of its oncology programs, he said.

Ideally, the biotech will be able to fund studies on future internal oncology candidates with non-dilutive funding. Worland said it’s too early to tell whether Effector will require a Series B round, but the company hopes to receive data from human trials before its Series A cash runs out.

Lasky added that from his firm’s perspective, a goal of this financing is to attract another outside investor to help fund Effector’s lead candidate through Phase II studies, potentially in a Series B round. At that point, the company can decide whether to partner, go public, or tap private investors again, he said.

Most importantly, Effector wants to keep its options open, Worland said, with regard to Effector’s plans for partnering, licensing, and building a standalone company. Ultimately, he said “We’re in it to change outcomes of disease.”