UW Spinoff Resolve Therapeutics Lures In Takeda, Lines Up Return

2/27/13Follow @xconomy

Seattle-based Resolve Therapeutics was founded three years ago on the notion that on a shoestring budget, and short timeline, it could deliver a venture-style return for its investors without pulling off a miraculous IPO or big-ticket acquisition. Today it has announced it has found the partner it was looking for to make the dream come true.

Resolve is announcing today that Japan-based Takeda Pharmaceuticals has agreed to form a partnership to co-develop Resolve’s lead drug candidate for autoimmune diseases. Under the deal, Takeda has gotten the exclusive option to license Resolve’s lead drug candidate, RSLV-132, and all of its other molecules in development once the lead drug has finished an early-to-mid stage clinical trial in lupus patients. The deal calls for Resolve to get $8 million this year to fund the early development it needs to get it to that judgment day expected in late 2014 or early 2015.

Takeda isn’t disclosing how much it will pay Resolve if it chooses to exercise its option then, but Takeda has agreed to pay Resolve shareholders as much as $247 million over time when rolling together the exercise fee and two development milestones, says Resolve co-founder and CEO Jim Posada. The exercise fee alone is enough to provide a five-fold return on investment for Resolve’s shareholders, and if RSLV-132 hits all its goals, it could provide a 10-fold to 15-fold return on investment, Posada says, plus ongoing royalties on sales of the Takeda drug. If Takeda exercises its license option, Resolve will end up among the top 1-5 percent of life science venture returns, partly because of the small amount of investment it required, he says.

Jim Posada, CEO of Resolve Therapeutics

If Takeda declines its option, Resolve will be free to license the drug to another company.

“This is a great deal for the investors,” Posada says. “The real story is we were able to go from a concept in a research lab at UW, to a lead molecule in manufacturing with a data package suitable for a large pharmaceutical company to make a significant investment, after a little more than two years and $3 million of investor money.”

To be clear, Posada says the company has only used $3 million of investor money to clinch this partnership, but it has more than that in the bank. The company has raised a total of $7.8 million in a pair of financings, including its most recent round in November. New Science Ventures and Easton Capital backed the company in both financings, and Seattle-based WRF Capital joined the most recent round.

Resolve was founded in 2010, based on a concept from rheumatologist Keith Elkon and immunologist Jeff Ledbetter. They worked with Posada, a former Eli Lilly dealmaker, to craft a development plan for a fusion protein drug that shuts down the excess production of inflammatory molecules like interferon alpha, which are troublemakers in patients with systemic lupus erythematosus. This disease is known for causing flare-ups in which the immune system attacks healthy tissue like a virus, causing joint damage, and chronic swelling, pain, and fatigue.

The company hasn’t yet filed an application to the FDA to start clinical trials, although it plans to do that by late summer or early fall, Posada says. The first clinical trial will enroll healthy volunteers, and assess safety. The next step will be to run an early-to-mid-stage clinical trial of the drug in lupus patients, assessing safety and effectiveness at a variety of doses, Posada says. That study, estimated to enroll about 50-60 patients, should give Resolve and Takeda a clear sense of whether the drug is doing what it’s supposed to do, tamping down inflammatory biomarkers associated with lupus. That rich dataset should be available by late 2014 or early 2015, and will be the basis for whether Takeda exercises its license option and delivers Resolve investors their desired return.

Part of what’s interesting with this deal is that it validates the strategy Posada proposed, which never depended on pulling off an IPO or a big-ticket acquisition. Back when Resolve started during the depressed economic times of 2010, few venture investors were willing to bet on traditional business models that depended on spending long years and tens of millions in the hope of one day achieving one of those outcomes. If Takeda ends up exercising the option in a couple years, it will be a proof point for the lean-and-mean “virtual” company model, at least as a way to generate returns for investors.

“This is a model that Takeda loves and other pharma companies love,” Posada says. “The nice thing is I don’t need to spend all my time raising money. We’ve got the funding, and we’ve got a great supporter in Takeda. They have the resources to see this through. Now we need to execute on the plan.”

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