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Cydan, NEA’s Orphan Drug Experiment, Pays Off in $200M Vtesse Deal

Xconomy Boston — 

Four years into its existence, Cydan Development, New Enterprise Associates’ orphan drug startup accelerator, has notched its first big win. Vtesse, the first company to emerge from Cydan, has been sold in a deal valued at $200 million.

Sucampo Pharmaceuticals (NASDAQ: SCMP), a Rockville, MD-based maker of a drug to treat various bowel conditions, will acquire Vtesse for $170 million in cash and 2,782,678 shares of Sucampo, which closed at $11 apiece on Friday. Vtesse’s shareholders—New Enterprise Associates (NEA), Alexandria Real Estate Equities, Bay City Capital, Pfizer Venture Investments, and Lundbeckfond Ventures—could also get royalties on sales if Vtesse’s experimental drug, VTS-270, ever reaches the market. The drug candidate is designed to be a potential treatment for the rare genetic condition Niemann-Pick Type C1 disease, which mostly affects children.

Companies developing drugs for rare childhood diseases also get a lucrative “priority review voucher” from the FDA if they’re successful. These vouchers, which speed up the review of a drug, have sold for as much as $350 million. Vtesse’s stockholders would get a share of the sale proceeds if VST-270 is approved and Sucampo gets, and sells a voucher.

Vtesse’s shareholders plan to set aside an unspecified portion of the proceeds from selling the company to set up a foundation devoted to Niemann-Pick research. Sucampo will match its contributions.

Niemann-Pick type C1 is a progressive and deadly genetic disease that affects 2,000 to 3,000 people across the globe, causing an abnormal buildup of cholesterol in the brain, liver, and spleen. The disease leads to developmental and neurological problems like ataxia. There are no approved treatments in the U.S., though Actelion Pharmaceuticals’ miglustat (Zavesca), a pill that helps slow disease progression, is available in 46 other countries around the world (the drug was rejected by the FDA in 2010 but is approved in the U.S. for a different rare disorder, Gaucher’s disease).

VTS-270, meanwhile, is specifically meant to deal with the neurological problems caused by Niemann-Pick by stopping the excessive cholesterol buildup in the brains of patients. The drug, administered through an intrathecal injection, is already in its final clinical trial, with results expected in the middle of 2018.

The deal is the first big stamp of validation for Cambridge, MA-based Cydan. Venture firm NEA hatched Cydan four years ago to scour the globe for possible rare disease drug candidates gathering dust elsewhere, funnel them into companies, and push them forward with the help of a small team of experts. Cydan got the backing of Pfizer, Alexandria, Bay City, and Lundbeckfond to help fund the effort along with NEA. Vtesse, started in January 2015, and sickle cell disease drug developer Imara, launched just over a year later, are its first two projects.

VTS-270 was being tested in a National Institutes of Health-sponsored Phase 1 study (here’s more on that from the Wall Street Journal). Vtesse licensed the experimental drug from the NIH. Cydan got Imara’s drug from Danish pharma firm H. Lundbeck A/S.

The “optimal outcome” for these startups, Cydan CEO Chris Adams told Xconomy in 2016, is a buyout. Here’s more on the thinking behind that strategy.