After Complex Sale, Amira Scientist And VC Team Up Again For Discovery Start-up

Versant Ventures is backing Inception Sciences, a new company led by former Amira chief scientist Peppi Prasit that aims to spin out multiple programs into separate companies, a new model gaining traction in the biotech world.

Fresh from a collaboration that led to the acquisition of Amira Pharmaceuticals Inc., former Merck & Co. Inc. scientist Peppi Prasit and Versant Ventures Managing Director Brad Bolzon have unveiled a new firm, Inception Sciences Inc. The San Diego-based Inception is at once a holding company and a drug-discovery firm, with future plans to spin out at least two drug programs into separate companies.

For many start-ups, the transition from broad drug discovery to product-focused clinical development can be a difficult process. Inception has been designed to separate the two sides so that promising assets are easily shifted into new corporate entities. The first two, which focus on neurology and oncology assets, are temporarily dubbed "Inception I" and "Inception II."

The structure, which several early-stage biotechs have recently adopted, is also meant to simplify the acquisition of the development programs by larger pharmas - and shorten the path to returns for shareholders (Also see "Investing A La Carte: Making Separate Bets on Discovery and Development to Boost Near-Term Returns" - Scrip, 1 Mar, 2011.).

In theory, the structure should relieve some of the end-game complexity Prasit and Bolzon just went through in the Amira acquisition."It was a lot of gymnastics," said Prasit of the Amira deal.

Bristol-Myers Squibb Co. said July 21 that it would buy Amira for $325 million up-front, primarily for its fibrotic disease program. But BMS left behind two programs, a FLAP (5-lipoxygenase-activating protein) inhibitor program for asthma that Amira had partnered with GlaxoSmithKline PLC, and an unclaimed DP2 antagonist program for asthma and chronic obstructive pulmonary disease. Each is now housed in a separate LLC company, and could be sold or partnered (Also see "BMS Bets On Amira's IPF Drug In $325M Acquisition" - Pink Sheet, 22 Jul, 2011.).

Such loose ends are a large part of what Inception wants to avoid. The firm already employs about 20 scientists, including Prasit, working on neurodegenerative and oncology programs. The neurodegeneration program is targeting the prevention of neuronal death, not the underlying disease state, which potentially lends it broad application, said Bolzon. In oncology, Prasit's team is exploring cancer metabolism, an area that has attracted pharma interest and dollars, as evidenced by the recent tie-up between Roche's Genentech Inc. and Forma Therapeutics (Also see "Genentech Licenses A Cancer Metabolism Program From Forma, With Option To Buy" - Pink Sheet, 27 Jun, 2011.). Given these programs are arenas for avid dealmaking, both Bolzon and Prasit hope Inception's products will lure buyers before the start-up has to pour tens of millions of dollars into mid-stage clinical trials.

Prior to Amira, Prasit's tenure at Merck included work on blockbuster arthritis drug Vioxx (rofecoxib), later withdrawn, and asthma treatment Singulair (montelukast).

Shifting Programs To New Entities As They Reach Maturity

The plan is to transfer the lead programs - lead molecules, backups and surrounding IP - into new companies, "once we have confidence that there's an opportunity," said Bolzon. But he also noted that the transfer needs to happen early in the discovery process for tax considerations. Inception I and II have already each received $5 million tranches of funding according to a regulatory filing. The total invested so far by Versant, which is seeding the enterprise, was not disclosed.

Bolzon said Versant is as committed to each spin-out as it would be to independent companies and remains "flexible" about its syndication strategy.

The Inception structure - with the "parent" corporation holding the discovery or platform technology, and new companies taking ownership of the resulting products for development - is gaining popularity, often but not always with the parent structured as a limited liability corporation. One example is Amunix Inc., which has developed a half-life extension technology, and its spin-outs Versartis Inc. and Diartis Pharmaceuticals Inc. (Also see "Two's a Crowd: Versartis Raises $21 Million Series B, Cleaves Off Diabetes Asset to Form Diartis Pharma" - Pink Sheet, 16 Feb, 2011.).

"It's not a significant number yet, but it's a trend people are asking about," says Cooley LLP life sciences attorney Glen Sato, who has helped set up a similar model for a client in the past year. Sato says the structure is best employed when the scientists running the platform or discovery engine have refined the technology, "know what they're good at" and won't get distracted. Also important is having backers with the sophistication to spin out and finance the resulting assets, as well as the bandwidth to recruit the right management team - or teams, if more than one asset is involved.

Bolzon and Prasit noted Atlas Venture used a similar model with Nimbus Discovery LLC, which brought in corporate cash from GSK's SR One and Lilly Ventures for its $24 million A round. Using its access to a novel computational chemistry platform, Nimbus hopes to spin out separate companies with compounds that go after diseases involving the IRAK4 kinase and the metabolic enzyme ACC, both proteins that have proven difficult to target.

Ideally, Inception I and II would sell their wares before proof-of-concept to drug companies looking to augment their pipelines, but Bolzon said that goal is a template more than a hard-and-fast rule. "The hope is that assets will be attractive at an earlier stage of development," he said. He declined to say how much Versant is willing to pour into each spin-out. The life science firm is currently investing its fourth fund, a $500 million vehicle that closed in 2008. Bolzon said there are no immediate plans to raise a fifth fund.

Bolzon was emphatic that the Inception model was not a new direction for Versant's biopharma investment strategy. "It's not a crisis if we need to shift gears," he said. The spin-outs can always be folded back into discovery side of the business if the new model isn't working, he said.

- Alex Lash ( [email protected] ) and Paul Bonanos ( [email protected] )