PureTech Ventures, JDRF Team Up to Form Type 1 Diabetes Startup Creator

10/15/13Follow @benthefidler

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provide companies with grants, grants with paybacks, debt, or equity investments. Any profit then flows back to the foundation strictly to invest more in its mission. Going the equity route is complicated, however, because there are various restrictions on non-profits, among them the amount of stock they can own in a company.

So PureTech did a few things: For-profit members of T1D can’t stray from the mission of the group. There’s also a so-called “mission committee” in place that JDRF sits on. That committee has the right to rule out potential investments that aren’t consistent with the goals of the organization (the committee won’t manage T1D’s investments on a day to day basis). T1D is also structured in such a way to prevent taxable income from going to JDRF at the wrong time, according to Steinberg.

“We did a whole bunch of legal and accounting work where we could actually allow non-profits to have equity holdings in companies out of mission-related capital while still having many layers of protection and oversight to ensure that it doesn’t in any way put in jeopardy their not for profit status,” Steinberg says.

PureTech chose type-1 diabetes as the focus of this vehicle because of a long-standing relationship with JDRF, and a few specific properties about the disease: there is a big need for medical advances for type 1 diabetes (which could, in turn, make big dollars for for-profit investors), but it is a small enough patient group that it doesn’t attract the attention of the traditional investment community.

Type 1 diabetes accounts for just a tiny percent of people with the disease in total. It occurs when the immune system attacks insulin-producing cells in the pancreas, rendering people unable to keep their blood sugar in check. This is far less common than type 2 diabetes, in which people gradually lose the ability to control their blood sugar—typically when they become overweight. There’s no known cause for type 1 diabetes, and there’s no cure. It’s a chronic condition that affects kids and adults of any age, and has to be managed for life through insulin injections.

This isn’t to say large pharmaceutical companies avoid investing in treatments for type 1 diabetes. Rather, it’s just really tough for a startup with a transformative idea to get the backing to break in given the size of the market. So T1D is taking a broad approach. It’s not interested in incremental advances, just potentially transformational ones that can treat, or potentially prevent or cure the disease altogether. And it’s not just interested in drugs, but medical devices, and even electronic apps that could possibly have a substantial impact on patients. By taking this approach, T1D can take a variety of routes to company creation while still pursuing the longer, costlier, startup that requires a full-blown drug development process.

“We’re not going to go after slightly longer lasting insulins, or e-app type things that are really just tracking things but really don’t affect your disease,” Steinberg says. “There are a lot of really exciting new things going on that we think are going to have a big influence on the area, so we actually have a chance to start some companies that will be potentially transformational.”

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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