Just before the financial crisis hit in September 2008, Cambridge, MA-based Proteostasis Therapeutics was fortunate to snag $45 million of initial venture financing to pursue a dream. It has been pretty quiet since then. But behind the scenes, the idea has morphed into a company built to make convenient oral pills for diseases of aging.

Proteostasis was started by a big-name investor syndicate led by HealthCare Ventures. The founding science came from the San Diego labs of Jeffery Kelly at The Scripps Research Institute and Andrew Dillin at the Salk Institute for Biological Studies, and Richard Morimoto at Northwestern University. The money, and the brainpower, was supposed to rally around emerging biology that seeks to alter protein pathways that break down as people age, and lead to neurodegenerative diseases like Alzheimer’s and Parkinson’s.

“The philosophy was let’s take the leading lights in the academic field, who are defining and pushing this understanding of protein stability, and work with them and create a first-in-class, best-in-class company that is able to OWN this space. That’s the idea that went into Proteostasis, and that investors were sold on,” says Greg Licholai, the company’s chief operating officer.

The first six months or so were really nascent days, in which Proteostasis sought to precisely define goals and strategy, Licholai says. The company spent 2009 in the building phase—obtaining licenses to key intellectual property, hiring a team of 30 biologists, chemists, pharmacologists, and bioinformatics specialists. The big-name CEO from the beginning, David Pendergast, left, and chairman Chris Mirabelli of Healthcare Ventures now holds the title of interim CEO.

As the year went on, Proteostasis offered up some glimpses of its science. One paper in Nature Chemical Biology suggested an oral pill could restore partial function to lung cells from patients with cystic fibrosis. Another publication in the journal Cell showed how a pill might be able to stop the cumulative piling up of beta amyloid proteins that is thought to contribute to Alzheimer’s. A third study that Licholai told me about found that by altering a certain protein pathway in worms with Huntington’s disease, researchers could double their lifespan.

Greg Licholai

All of this research still has an extremely long way to go before it can reach a clinical trial, and Licholai didn’t want to divulge the company’s timetable for reaching that milestone. Still, the idea of altering not just one protein, but networks of proteins with convenient, oral small molecules is starting to attract attention from potential partners in the biotech and pharmaceutical industry, Licholai says.

The science of what’s happening here isn’t easy to explain in lay terms, but I’ll give it a whirl. The central dogma of biology says that DNA provides the instructional code for RNA, which makes proteins that carry out the functions in the body. Proteostasis sees itself navigating the complex intermediary steps in which the sequence for a protein is produced, but the protein still needs to pass through certain pathways to become fully functional, stable, and find its appropriate location in the cell. Sometimes these pathways degrade as we age and cause neurodegenerative diseases like Alzheimer’s, Parkinson’s, or Huntington’s. Or, the cumulative effect of high blood sugar puts stress on protein pathways, which perturbs the network, and leads to an altered state in which people develop insulin resistance and get diabetes, Licholai says. Scientists are only beginning to map out connections between these networks, and the trick will be to find the most important nodes on the network, Licholai says.

“Just like on the Internet, certain nodes have higher levels of connectivity than other nodes. Why is that important? Not all nodes are created equal. If Amazon.com loses its connectivity, that has a major effect on the network. The same thing is true from a biological point of view,” Licholai says. “Those are the ones to understand from a disease point of view, and from a drug discovery point of view.”

Anytime you start aiming a drug at a new target, especially one that’s an important crossroad for a lot of biological function, it’s obvious that a ton of work will need to be done to demonstrate this is safe. So Proteostasis is spending a lot of effort mapping … Next Page »

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Don’t be confused by the name of the Novartis Option Fund. The fund’s purpose isn’t to gain options in companies for Swiss drug giant Novartis to later acquire, says Lauren Silverman, the fund’s managing director. And it isn’t a traditional corporate VC firm that operates as an extension of the parent company.

Rather, Silverman prefers to think of the fund as a more general venture capital fund that happens to have a single limited partner. That partner, to be sure, is Swiss drug giant Novartis (NYSE:NVS). However, says Silverman, “We really don’t consider ourselves as a strategic fund (to Novartis) at all. In terms of our investment mission, we can invest on strategy with Novartis or not on strategy with Novartis.”

For all the ways it is similar to mainstream VC outfits, however, the Cambridge, MA-based Novartis fund is different from most venture firms in other ways. For one, the fund plays a role in helping Novartis purchase options to certain uses of its portfolio companies’ technologies. Silverman acknowledges that this aspect of her fund is indeed “strategic,” in terms of serving the product interests of Novartis, but she notes that the option rights return to the startups if Novartis doesn’t exercise them within a set period.

Also, unlike other VC firms that must tap numerous limited partners to raise money for their own investments, the option fund launched out of the gate in January 2007 with $200 million from its parent company—an enviable trait to venture investors struggling to raise money amid the current economic crisis.

Good news for newly hatched life sciences startups. With its considerable resources, the option fund searches for opportunities to invest in biotech firms at their earliest stage of development—even as many traditional VC firms steer their resources toward more mature enterprises. Over time, Silverman says, the fund aims to invest between $20 million and $25 million in its portfolio companies.

To be clear, the option fund’s own board is composed both of Novartis executives and independent members. Further, the option fund is part of Novartis Venture Funds, which is one of the largest corporate biotech VC units in the world with more than $600 million under management. (Here’s our list of some of the Boston-area corporate VC firms focused on life sciences.) Yet Silverman was adamant about the limits of Novartis’ influence over her fund, noting that the board is led by independent chairman Spyros Artavanis-Tsakonas, a professor of biology at Harvard Medical School.

Thus far, the option fund has placed bets on the following five startups:

… Next Page »

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One of those foggy concepts from eighth-grade biology came back to me the other day when I spoke with David Pendergast. It’s homeostasis, the idea that the human body naturally makes constant adjustments on the fly to maintain a proper balance of things like body temperature, water, or salt in your system.

Pendergast, the CEO of Cambridge, MA-based Proteostasis Therapeutics, is attempting to take advantage of new insights in biology that may enable scientists to promote or restore the homeostasis of proteins—molecules that are key players in every tissue and organ in the body and which can cause a host of problems when they’re out of whack. Restoring protein homeostasis might mean revving up the protein machinery that normally does the job of sweeping up degraded proteins; this machinery can break down as we age, causing diseases like Alzheimer’s or Parkinson’s. Or it could help patients with rare genetic disorders, such as Huntington’s disease, who might just need a nudge to their protein networks to keep their symptoms at bay, Pendergast says.

Proteostasis recently raised a whopping $45 million in its initial round of financing, from HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates, Novartis Option Fund, and Genzyme Ventures. Pendergast was formerly the president of human genetics therapies at Shire Pharmaceuticals, and before that was CEO of Cambridge, MA-based Transkaryotic Therapies. He’s now placing a big bet on a field of biology that isn’t being tapped by traditional pharmaceutical or biotech companies, and that’s still three to five years away from entering clinical trials, Pendergast says.

“We’re talking about restoring a natural function that works for people,” Pendergast says. “It has a lot of appeal, as opposed to a lot of other drugs that try to block something, and you may not always understand the unintended consequences of that.”

Some of the pioneering work in this field of biology comes from the lab of Proteostasis co-founder Andrew Dillin at the Salk Institute in San Diego. A series of experiments there and other labs have given the venture capitalists confidence that it’s time to invest, Pendergast says. The researchers were able to show they could stimulate the pathways that control protein homeostasis using conventional small-molecule drugs that are cheaper and easier to make than drugs produced through genetic engineering, he says. The effect is reversible, and reproducible in rodents, worms, and tissue cultures growing in lab dishes, he says.

It sounded to me like a technology that could potentially be applied as a preventive medicine. Who wouldn’t want a pill, for example, that might be able to ensure 70-year-olds will maintain order in the protein network responsible for clearing up amyloid plaques in the brain, which are thought to play a key role in Alzheimer’s disease?

It’s theoretically possible to do that, Pendergast says, but that’s not what the company has in mind. To get a drug approved by the FDA, the company would aim to treat patients who already have mild-to-moderate Alzheimer’s disease, then give them the drug for a six-month or one-year period, and use standard measures tracking their cognition. It would take many more years, and loads of more capital, to show, say, that healthy 70-year-olds who take a Proteostasis drug have a lower risk of getting Alzheimer’s by the time they turn 80.

That’s a pretty far-out, futuristic vision, and not really on the company’s agenda, Pendergast says. For now, Pendergast is focused on hiring a chief scientific officer and scientific team of 20 people over the next 12 to 18 months, to better understand the protein networks it is thinking about targeting.

It’s a new challenge for Pendergast, whose experience is with leading bigger companies. “Here, you’re starting with a blank sheet of paper,” he says. “It’s a building project. We’re excited, and we think this is an exciting area of biology, and we hope we can show significant benefit for patients.”

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Some of the most exclusive clubs in the Boston area aren’t actually clubs at all, they are venture capital firms, where partners hold the power to turn ideas into companies—and make themselves a lot of money in the process. So perhaps it’s not surprising that some big companies would want to get in on the act as well. Nowhere does this seem to be the case more than in life sciences, where a variety of firms have set up venture arms in recent years to invest in ideas that might help fill their diminishing pipelines.

The ranks of Boston area life sciences companies with venture capital divisions grew last week with the launch of Covidien Ventures, the offspring of medical technology giant Covidien (NYSE:COV), based in Mansfield, MA. Then a few days ago we learned that a tandem of local life sciences corporate VCs— Genzyme Ventures and the Novartis Option Fund—were among the investors in a $45 million Series A round for newly hatched biotech startup Proteostasis Therapeutics of Cambridge.

Given this recent activity in the corporate VC arena, now seemed an appropriate time to list all the players we could identify in the Boston area. This list doesn’t include local corporate VC firms with single limited partners, such as Fidelity Biosciences and Navigator Technology Ventures. I also trimmed corporate VC groups located outside New England, which eliminates some big players such as Amgen Ventures, GlaxoSmithKline‘s (NYSE:GSK) SR One and J&J Development. Still, what remains is an impressive roster of outfits with literally billions of dollars at their collective disposal. (As always, let me know if I’ve missed any groups that should be on this list.)

Here they are:

Biogen New Ventures — Cambridge, MA and San Diego, CA
Corporate parent: Biogen Idec
Fund size: $100 million
Description: Biogen’s (NASDAQ:BIIB) venture capital fund, established in 2004, makes million initial investments of $5 million to $10 in biotech startups with science that complements its focus on the cardiovascular, immunology, oncology, neurology, and rheumatology markets. Perhaps to his chagrin, activist Biogen shareholder Carl Icahn has no influence—of which I am aware—on how this fund spends money.

Covidien Ventures — Mansfield, MA
Corporate parent: Covidien (formerly Tyco Healthcare)
Fund size: no fund allotment
Description: Even though fund head Dan Sheehan has been making the rounds in the Boston area for months, Covidien Ventures only debuted last week. It has no set fund, but proposes to invest up to $5 million in each round of financing of its portfolio companies; it’ll be interesting to see where the firm makes its first bet. … Next Page »

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