Cydan Hopes To Accelerate Rare Disease Drug Development With $16M Raise

The Massachusetts start-up has plans to create five new companies that will focus on rare disease work through an innovative business model that will de-risk the assets before spinning them out into separate biotech companies.

In an effort to capitalize on the positive regulatory environment for treatments of rare and orphan diseases, one start-up is using an incubator-like business model to create companies that will focus on rare diseases. Cydan announced April 11 that it has closed a $16 million financing that will help it get its endeavor off the ground.

Cydan, which is defining itself as an orphan drug accelerator, launched with $16 million in the bank from New Enterprise Associates, Pfizer Venture Investments and Alexandria Real Estate Equities Inc. The company, which is looking for offices in Cambridge, Mass., will use the funds to begin its search for assets that can be “de-risked” and eventually spun out into new companies.

Cydan will focus on assets that can be developed as treatments for orphan diseases, or those diseases that typically affect fewer than 200,000 people in the U.S. The company said there are about 7,000 recognized orphan diseases affecting about 30 million Americans. The majority of these diseases manifests early in life and greatly shortens the patient’s lifespan.

While the accelerator will not focus on any specific therapeutic area, it will look for diseases that have a high unmet medical need and are not currently being pursued by other companies. Certain rare diseases – such as Fabry disease and Gaucher disease – have gotten a lot of attention over the last few years as several companies have been competing to make treatments for these conditions.

Cydan CEO Cristina Csimma said the company plans to process multiple programs at the same time in hopes of starting five new companies within the next four years. The assets that Cydan selects will have to be in diseases that are well understood biologically and even have biomarkers that help determine patient populations, said Csimma. Cydan also will be looking to ensure that each of the assets chosen can be de-risked within 12 months, that development by a small company without a large partner will be viable, and that each asset will have commercial prospects.

The accelerator will explore assets from all types of organization, including academic institutions and compounds that may have been put aside by large pharmaceutical companies. “As so often happens in big pharma, compounds with good safety profiles are shelved for strategic reasons,” said Csimma, who noted that big pharma companies often are confined by therapeutic areas or proprietary franchises.

Once compounds are chosen, the company will outsource pharmacology, toxicology and other studies aimed at de-risking the assets and providing enough data to attract a syndicate of Series A investors. Csimma said Cydan then will help put management in place and make arrangements for an initial financing. Cydan will be an initial shareholder in each of the new companies and Cydan’s investor syndicate will have the first opportunity to invest in the start-ups that result.

Cydan itself will be manned by a team possessing a strong background in rare disease drug development. Csimma has held roles at Virdante Pharmaceuticals Inc. and Wyeth Research and Genetics Institute, as well as doing work with rare disease non-profit organizations and being a principal with Clarus Ventures. Cydan’s Chief Business Officer will be Chris Adams, the former CBO of FoldRx Pharmaceuticals Inc. prior to its acquisition by Pfizer Inc. in 2010 and a senior business development executive at Transkaryotic Therapies, Inc. which eventually was acquired by Shire PLC as the base of its orphan drug business [See Deal] and (Also see "Shire/TKT: The Price of Diversification" - In Vivo, 1 May, 2005.).

Joining them on the team as Chief Scientific Officer is James McArthur, a former senior R&D executive at Synovex, Phylogix Inc. and Cell Genesys Inc. Deborah Geraghty, a former senior portfolio management executive at Aileron Therapeutics Inc. and Infinity Pharmaceuticals Inc., will serve as VP of project and portfolio development for Cydan.

“The founding team at Cydan is exceptionally well positioned to build this new business model for orphan drug development, bringing a depth of expertise, a vast network of key relationships and a true passion for developing treatments for rare diseases,” said David Mott, a General Partner at NEA. In an interview, Mott called the Cydan team a “very nimble, agnostic, highly experienced group.” He added that the opportunity in rare diseases currently is ideal for the accelerator model because it allows for compounds from academia, government labs and non-profit organizations to be screened quickly and moved forward into a biotech business model.

In a similar fashion, venture capital firm Third Rock Ventures uses its own funds to find unique assets, often targeting rare diseases, and then create biotechs centered around the compounds. The venture firm hasn’t seen a lot of exits for its biotechs yet, but has been provoking enthusiastic interest from limited partners who have contributed to its three oversubscribed funds (Also see "Third Rock Continues To Attract Investors, Closes $516M Fund" - Pink Sheet, 25 Mar, 2013.).