Shire Buys Third Rock’s Lotus Tissue Repair

1/8/13Follow @cathyarnst

Third Rock Ventures, the prolific five-year-old Boston-based VC firm, likes to bet on biotech startups that are developing unusual drugs, and today one of those bets paid off. Shire (NASDAQ: SHPG) announced that it agreed to acquire Lotus Tissue Repair  of Cambridge for an undisclosed amount, just 18 months after Third Rock unveiled the startup.

Third Rock started Lotus Tissue as the sole investor and led a $26 million Series A round in June 2011. As Third Rock partner and Xconomist Alexis Borisy told me in December, the firm’s strategy is to invest in health startups in the very early stages of drug development, and focus on disruptive technologies and unique drugs.

The firm has some 30 startups in its portfolio and the Shire deal marks Third Rock’s second exit. It sold Cambridge, MA-based Alnara Pharmaceuticals to Eli Lilly (NYSE: LLY) in July, 2010 for as much as $380 million.

Lotus Tissue fits Third Rock’s strategy exactly, as Xconomy wrote when the firm was launched. The startup is developing a protein replacement therapy for dystrophic epidermolysis bullosa, a very rare disease that affects only some 300 people in the U.S., and has no effective therapy. It is caused by a deficiency of a protein called collagen type VII that leads to painful blisters on the skin, esophagus, and gastrointestinal tract, and a high risk of developing a deadly skin cancer. Lotus is developing a genetically engineered form of collagen type VII called rC7.

Shire, an Irish company with a large U.S. operation in Lexington, MA, said in its press release that it will further develop rC7, currently in late pre-clinical development. The company will purchase Lotus Tissue for an up-front payment and future milestone payments.

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