Lotus Pioneers New Treatment for Rare and Disfiguring Disorder, Raises $26 Million From Third Rock

6/30/11Follow @arleneweintraub

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serving as the company’s founding CEO. The company’s co-founder and president, James Fordyce, is a longtime VC whose investments include Genentech, Regeneron, and Centocor. (Fordyce did not invest in Lotus’ Series A.)

De Souza discovered USC’s work while serving in a business development role at Dyax. “I was monitoring various opportunities and found this,” he says. “It seemed like a straightforward way to treat a horrible disease.”

Third Rock’s Reilly readily agreed. Despite an ongoing debate in the venture community about whether rare diseases are lucrative enough for drugmakers, Reilly believed an effective DEB treatment would offer an attractive market opportunity—and one that insurance companies would support. Because there are no treatments for DEB, parents often have to cover their childrens’ hands and feet with gauze. Then there’s the cost of treating the skin cancer. Lotus’ drug would likely need to be taken chronically. Still, says Reilly, “Even if it ends up being an expensive therapy, it would reduce the overall costs of caring for these patients. We don’t expect much resistance from insurance companies.”

Third Rock has already invested in two rare-disease plays: Edimer and Bluebird Bio. In April, Bluebird raised a $30 million Series C, which included new money from ARCH Venture Partners, as well as contributions from Third Rock and several other previous investors. The Cambridge, MA company is working on gene therapies for rare diseases.

Big Pharma traditionally has had more interest in mass markets like cardiovascular disease and diabetes, but interest has been growing in the rare disease field—witness Sanofi’s recent takeover of Cambridge, MA-based Genzyme. Big Pharma’s burgeoning investments in rare diseases makes opportunities like Lotus all that more tantalizing, Reilly says. “We can create companies and sell them early” to pharma firms that are desperate to fill their pipelines, he says. “Third Rock got into rare diseases a long time ago. But now we see groups like GlaxoSmithKline, Pfizer, and Novartis doing deals [for orphan drugs]. The big guys are really confirming our idea.”

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