Bill Gates Backs Nimbus, Betting on Computer-Based Drug Discovery

3/10/11

Here’s a startup that is stepping out of top-secret status in style. Microsoft Chairman Bill Gates, the second-most wealthy person in the world, is one of two new seed investors in the stealthy biotech startup, Nimbus Discovery.

Cambridge, MA-based Nimbus, focused on computer-based drug discovery in partnership with the global chemical-simulation software provider Schrödinger, said today that it has expanded its seed round with investments from Gates and Richard Friesner, a professor of chemistry at Columbia University and a co-founder of Schrödinger. The seed round also includes founding investor Atlas Venture. Nimbus didn’t disclose how much it has raised from its backers.

Atlas formed Nimbus in spring 2009 with Schrödinger, which specializes in computational chemistry and drug design for the biopharmaceutical industry. (Schrödinger has offices in New York, Cambridge, San Diego, Portland, OR, and other locations around the world.) Gates learned about Nimbus through the folks at Schrödinger, according to Atlas partner Bruce Booth, a co-founder and chairman of Nimbus. Schrödinger got a $10 million equity investment in spring 2010 from Gates‘ investment and holding company, Cascade Investment.

Though he’s best known as a software magnate, Gates has a lot of experience in healthcare too. The Bill & Melinda Gates Foundation is a major supporter of global health and educational efforts. And Gates was a major investor and board member of the Bothell, WA-based biotech firm Icos, which developed the erectile dysfunction drug tadalafil (Cialis) and was acquired by Eli Lilly (NYSE:LLY) for $2.1 billion in 2007. Early this week, my colleague Luke Timmerman also reported the Gates Foundation put together its first direct equity investment in a biotech company, through a $10 million financing of Research Triangle Park, NC-based Liquidia Technologies.

Fittingly, Nimbus straddles the worlds of software and biotech with its computer-aided method of drug discovery. The startup has a strategic partnership with Schrödinger that gives the biotech access to Schrödinger’s tools that help scientists understand the mechanics of how drugs bind to certain disease targets. Schrödinger’s technology also enables the company to design drugs against those targets. Later, the drugs can be formulated into actual chemical compounds and tested in laboratory experiments to confirm insights from the software, explained Jonathan Montagu, the vice president of business operations at Nimbus.

Schrödinger has been around since 1990 and its software has been used in many major biopharmaceutical company labs around the world. Yet Nimbus works with Schrödinger engineers who have developed software for specific types of disease targets of interest to the biotech startup. Montagu says that the startup gets access to these applications years ahead of any other drug developers, giving it an edge in discovering drugs against disease-related proteins that have been difficult to target in the past.

Nimbus is now in early research phases with its lead programs for two disease targets, one of which plays an important role in an aggressive form of blood cancer known as diffuse large B-cell lymphoma, and the other in metabolic diseases such as obesity. The lymphoma target, known as IRAK4, is a protein that is also involved in inflammation. The obesity target is an enzyme called ACC, which plays a role in the synthesis and burning of fat, according to the startup. Booth says that the firm aims to have a development-ready compound against the IRAK4 target by the end of this year and a candidate for the ACC target in 2012.

Another key aspect of the startup is its business structure. For starters, the startup is able to benefit from the many millions of dollars that Schrödinger has invested in developing its technology. Nimbus is also organized as a limited liability company, and individual subsidiaries controlled by the LLC control assets tied to certain disease target programs. (The startup wants to find pharmaceutical companies to partner with on specific programs in its pipeline early in the development process, and its corporate structure allows those partners to focus their investments in on the subsidiaries with assets in which they are most interested.) Each partnership gives the investors in Nimbus an opportunity to get a return on their investment in the startup.

“The difference here,” Booth says, “is we won’t have to spend $100 million to $150 million to develop the platform, and the programs, and push them forward.” Raising that much money makes it very difficult to get the big kind of financial returns venture capitalists seek, Booth says.

The startup aims to raise a Series A round of financing later this year, Montagu says. For now, the company is running lean with two full-time employees—Montagu and Rosana Kapeller, the company’s chief scientific officer and a co-founder of Aileron Therapeutics in Cambridge. The company, in its early days, is also relying on the support of multiple staff members at Schrödinger. The startup also uses a network of consultants and contract research organizations, Montagu says.

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