Enzyme Maker Alcresta Nabs $10M from Third Rock, Bessemer, Frazier

4/17/12Follow @arleneweintraub

The team behind Newton, MA-based Allena Pharmaceuticals, which started up six months ago to develop enzyme-based drugs, is announcing today that they’ve formed a second enzyme company, Alcresta, to turn novel enzymes into nutritional supplements. That team—Third Rock Ventures, Bessemer Venture Partners, and Frazier Healthcare Ventures—put $15 million into Allena, and is pouring another $10 million into the new company. And to take advantage of the synergies between Allena and Alcresta, the startups will share an office and a management team, at least in the beginning stages, says Alexey Margolin, CEO of both companies.

Alcresta’s products are designed to address a shortcoming of nutritional goods such as infant formulas for premature babies and fortified drinks for adults suffering from chronic diseases. Those products usually contain the “good fats,” such as omega-3 and omega-6, which support the immune system and have been shown to improve heart and brain health. Problem is, many preemies and adults with health problems can’t properly digest those fats, because they lack the enzymes they need to do so.

Alcresta is developing boosters—enzyme supplements that can be used by caregivers to enhance the digestibility of formulas and nutritional drinks. “There’s a $20 billion market for infant formula, for example, despite the fact that virtually all premature babies can’t digest it,” says Robert Gallotto, founder and chief operating officer of Alcresta. “We’re taking those products one step forward.”

The potential market among preemies alone is quite large, as about 12.4 percent of U.S. infants were born prematurely in 2005, according to the first detailed analysis conducted by the Centers for Disease Control & Prevention in 2009.

Alcresta isn’t yet revealing the details of its product line, except to say that it will develop both supplements and medical devices that can be used in hospitals and homes. Gallotto estimates that the total global market for patient nutrition is $33 billion a year.

Gallotto, Margolin, and other members of Alcresta’s startup team are veterans of Alnara, an enzyme startup that Eli Lilly acquired for $380 million in 2010. Alnara developed enzyme-based drugs that could be taken orally, including a treatment for the lung disease cystic fibrosis. The FDA turned down Lilly’s application to market the drug a year ago.

After selling the previous company to Lilly, the Alnara team moved on Allena, which is developing technology to enhance the stability of enzymes, so they don’t get chewed up in the stomach before they can go to work. On March 28, the company offered a glimpse at its pipeline when it announced it had struck a deal with San Diego-based Althea Technologies. Althea’s enzyme patents and manufacturing capabilities will be used to develop a drug for hyperoxaluria, a rare condition that can cause kidney stones or chronic kidney disease. Allena expects to begin clinical trials of its hyperoxaluria drug, called ALLN-177, by the first quarter of next year, Margolin says.

Eight full-time employees are working for both Allena and Alcresta. (Gallotto is also COO of Allena.) Granted, the two companies will face completely different routes to market—Allena will endure the lengthy FDA drug-approval rigmarole, while Alcresta’s product candidates will go through a much less involved process—but Margolin believes each can still benefit from a shared management team. “We think we’ll be able to leverage our common know-how and hold down costs, even though we’re focused on two very different markets,” he says. Gallotta estimates the companies could save as much as 30 percent in overhead expenses such as real estate and information technology.

Gallotta says Alcresta could get to market with its first nutritional products as early as next year. At some point, he acknowledges, the companies may find themselves at such different stages developmentally that it will make sense split the management teams. “This unique model is mostly valuable when you’re starting up,” he says. “That’s when your synergies are most applicable to two different companies.”

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