Proteostasis Therapeutics Raises $45 Million

In one of 2008’s largest financings, A-list investors back a “Big Think” company focused on protein homeostasis.

Proteostasis Therapeutics said August 25 that it pulled in $45 million in private funding from a syndicate of venture capital firms, including Healthcare Ventures, Fidelity Biosciences, New Enterprise Associates, the Novartis Option Fund, and Genzyme Ventures.

The mammoth Series A, one of the largest to date in 2008, is second only to the $105 million raised by RaQualia Pharma, which spun out of Pfizer's Nayoga research site earlier this year with backing from the U.K.'s Coller Capital and Japan's the NIF SMBC Ventures.

But unlike RaQualia, which comes with three marketed products, six development programs, and a 70-strong team of researchers, Proteostasis is an early-stage platform company that is at least three to five years away from clinical candidates.

The funding shows that at least some venture firms aren't shying away from discovery-based companies, as long as there's a platform that may be monetized.

Proteostasis, of Cambridge, Mass., doesn't just come with A-list backers. Not too surprisingly, it also lists star founders and management. Founders include: Jeffery Kelly, of the Scripps Research Institute; Northwestern University biochemist Richard Miromoto; and Andrew Dillin, of the Salk Institute. Taking the helm as CEO is David Pendergast, former CEO of Transkaryotic Therapies, a biotech that helped pioneer enzyme replacement therapy and was acquired by Shire in 2005.

Proteostasis' goal is to develop first-in-class therapies for neurodegenerative diseases, such as Huntington's disease, and certain genetic conditions, such as lysosomal storage disorders.

"It's a fundamentally different way of looking at disease," says investor Christopher Mirabelli, managing director of Healthcare Ventures. Instead of interfering with the function of a specific protein - either by activating or inhibiting it - the company hopes to treat a given disease by developing small molecules that work upstream and are part of a complicated biological network responsible for the correct folding or placement of the protein within the cell.

To work correctly, proteins must undergo a poorly understood act of molecular origami that depends both on the primary amino acid sequence and the cellular milieu where the folding occurs. Once folded, the proteins must be sent to the right place in the cell - a process called trafficking - to do their job.

But mistakes happen in this complicated multistep process, and that's when disease strikes. Misfolded proteins can overload the cell's quality-control mechanisms, aggregating into toxic intermediates, such as the debilitative amyloid beta plaques that are the hallmark of Alzheimer's disease.

When certain proteins - especially enzymes - misfold, they are no longer in the proper conformation to do their jobs. So-called molecular chaperones of the kind Proteostasis is interested in developing would cross the intracellular membrane and coax the misfolded molecules into their correct, biologically active conformations.

It's too soon to say whether the approach will work broadly, but that hasn't prevented VCs from pouring money into the field. Companies also playing in this space include Amicus Therapeutics, which raised nearly $70 million in a 2007 IPO and recently licensed three products to Shire for $50 million up-front and an additional $150 million in development milestones.

Another company working in the same area is FoldRx, which has raised nearly $60 million in venture backing and recently pulled in another $22 million from the Cystic Fibrosis Foundation.

Proteostasis and FoldRx share a number of traits. Not only are both involved in the emerging field of protein homeostasis, but both companies also list Jeffery Kelly as a co-founder and Healthcare Ventures as a backer.

Mirabelli and Kelly are both quick to note that the commercial potential for protein-folding therapeutics is such that it can support the approaches taken by both companies, however. "More than likely, the approaches will be complementary," says Mirabelli.

Before committing $45 million to the endeavor, Healthcare Ventures gave Kelly and Dillen $1 million of seed money in order to demonstrate that this systems biology approach could generate druggable targets. The two co-founders brought in Northwestern's Morimoto, who is one of the world's experts on molecular chaperones.

The researchers quickly identified small molecules through a high throughput screening process and tested them in animal models and cell lines. At that point, Healthcare Ventures assembled a syndicate of backers to industrialize the process.

To date, Proteostasis has not indicated whether it will focus its energies on a particular therapeutic area beyond saying that Huntington's disease and LSDs will for now be a primary focus. As the company learns more about how protein regulation impacts disease, it will likely move to use its technology in other diseases.

It will also look to partner its technology. CEO Pendergast noted that as the company learns more about the importance of protein folding and trafficking to disease, it's likely that it will identify potential drug targets in indications that a small company, even one as well-funded as Proteostasis, can't tackle effectively. In such cases, Proteostasis would look to for a deep-pocketed pharmaceutical partner.

"Our partnering strategy is evolving," added Mirabelli. "To build companies such as this, you need to provide financial resources that can't be gotten solely through venture investing," he says.

In the meantime, Proteostasis has a sizeable chunk of change at its disposal. Pendergast notes that the company will initially use the money to build out its research group to 20 scientists. In addition, it will use the money to develop several small molecules identified with the seed funding.

- Ellen Licking ([email protected])