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Cydan, the NEA Startup Machine, Scours the Globe for Orphan Drugs

Xconomy Boston — 

What if you could create a biotech startup focused on treating a rare disease, with a drug candidate already in hand, and high odds of success in clinical trials?

That’s the concept that crystallized in former MedImmune executive David Mott’s mind through decades of experience in the life sciences sector. The idea ultimately led him to start a Cambridge, MA-based biotech incubator called Cydan. This new organization, formally announced this month, has been staffed with a hand-picked squad of specialists tasked with churning out a lineup of small companies that make drugs for orphan diseases.

Mott (pictured above), now a general partner at life sciences investment firm New Enterprise Associates, pulled together support for the idea from Pfizer Venture investments (the VC arm of New York-based Pfizer) and Alexandria Real Estate Equities to provide $16 million to get Cydan off the ground. That cash allows Cydan’s four-member executive crew to begin its novel quest—establishing itself as a creator of orphan disease startups that are already well positioned to succeed upon their formation. Each startup will attempt to reward investors by either signing lucrative partnerships with pharmaceutical companies or getting bought outright.

“I think it’s a way to help capitalize on the science that’s evolving, to help develop assets that ultimately there’ll be a lot of buyers for, or partners for, since so many Big Pharmas now like this space, and [to] make a big difference for all the patients out there,” Mott says.

Mott plans to make it work by creating an economically efficient, virtual company that has key relationships with not-for-profit, parent and patient advocacy groups, and experience in the drug development and investment communities that give it a leg up in unearthing promising rare disease programs from academia. Cydan won’t do any of the basic discovery or research on those programs, but will instead identify drug candidates, and then either acquire, license, or option the technology from others who have already done much of the basic research. Once the program is in-house, Cydan will map out a series of experiments and then get the work done by outside contractors, who will perform toxicology, pharmacology, and other studies that seek to make the drugs less risky for further development. Those contractors will answer questions such as whether a compound has drug-like properties, if it can be given orally, and what the maximum tolerated dose would be, among other things.

“Those external services have become so much more high quality, available, and cost effective, that I think a virtual company with [about] a half a dozen employees can really quite effectively do drug development across many therapeutic areas by looking for outside sources to do the key experiments,” Mott says.

That 12-month process would, in theory, be an economically efficient way to lower the risk involved in developing a potential worthy rare disease treatment candidate. Once the experiments are done, Cydan will review the results, and then either green light the project, or pull the plug on it.

Once Cydan picks its winners for further development, it will then form a company around it and in some cases hire a management team and spin it out in conjunction with a separate Series A financing round, Mott says.

For Mott, the idea is the culmination of years of experience working, networking, and eventually investing in the life sciences sector. He cites, for example, his 17 years at Gaithersburg, MD-based MedImmune (acquired by AstraZeneca for $15.6 billion in 2007), which developed palivizumab (Synagis), a drug that prevents lung infections in babies caused by the respiratory syncytial virus. Then came a stop on the board of Dublin, Ireland-based Shire, which has its own rare genetic disease division, and later, during his current role as a general partner at NEA.

As a VC, he made an investment in Leiden, Netherlands-based Prosensa, which is teaming with GlaxoSmithKline to make a treatment for Duchenne Muscular Dystrophy. All of these stops imbued Mott with an affection for the rare disease business model and a keen understanding of its limitations. Mott recalls a conversation with certain Prosensa executives, for example, in which they expressed frustration in being a rare disease specialist yet only having the VC funding to tackle the “one to three projects you’re allowed to focus on.” Such companies thus don’t typically have the ability to take advantage of a new opportunity they come across, he explains.

Mott also noted that large pharmaceutical companies typically “aren’t set up to do the early stage part” of rare disease research despite their interest in the space. This, he says, is because the innovation takes place in academia and is driven by not-for-profit and patient advocacy groups.

Sensing a way to smooth out those inefficiencies, Mott put a group together with overlapping “Venn diagrams” of experience with such groups, rare disease drug development, and business savvy, to head Cydan.

Mott cold-called Cristina Csimma, who is seasoned on the drug development (Virdante Pharmaceutials, Wyeth) and investment (Clarus Ventures) sides.

“We spoke for several months and the concept easily resonated with me,” says Csimma, who accepted the position as Cydan’s CEO.

Mott then added chief business officer Chris Adams, who has held management roles at FoldRx Pharmaceuticals (acquired by Pfizer in 2010) and ViaCell (acquired by PerkinElmer in 2007), to handle the business development side of Cydan. Csimma and Adams then lobbied with Mott to add chief scientific officer James McArthur, a former R&D executive at Synovex, Phylogix and Cell Genesys; and vice president of project and portfolio development Deborah Geraghty, who founded Back Bay Strategies and has strategic planning experience through roles at Infinity Pharmaceuticals and Aileron Therapeutics. Both had previously worked with Csimma and Adams in prior settings, according to Mott.

“We speak the language of the various stakeholders and understand their motivations and constraints,” Csimma says.

Then came the funding. NEA initially thought about forming Cydan on its own, but Mott wanted the ability to tap into a pharmaceutical company’s thinking so Cydan could design clinical development plans that would be credible to potential partners or acquirers. So he brought Pfizer in, and added Alexandria, which can lease out office space to startup companies created by Cydan.

Mott says Cydan will spend about $500,000 to $2 million on “de-risking” assets it finds before it begins to spin out companies. Cydan plans to spin out its first company in 2014 and three to five companies over a four-year span before potentially recapitalizing if it runs out of resources.

The operating model for each entity it spins out will vary by asset. Mott explains that there may be some projects, for example, that Cydan spins out as an “asset model,” meaning Cydan won’t hire a management team and will essentially run it on its own. In other scenarios, Cydan may view a project as a full-fledged company, and will recruit a management team to take the reins.

“I think both of those models will happen,” Mott says.

For now, Cydan is pounding the pavement from the U.S. to Europe, talking with academic centers, technology transfer offices, rare disease foundations – even googling the authors of papers in key science journals and calling them up looking for gems. Csimma recently spent a week in Dublin, for example, at a world congress on rare and orphan diseases where she spread the word on the kind of projects Cydan is looking for. Adams was at a similar conference in Washington, DC, the week prior, according to Mott.

“You just keep pulling those threads until one comes out with a diamond in the rough on it,” Mott says.