Boston Globe: Investors reconsider genetic therapies
April 4, 2005
Nearly 20 years after the first gene therapy company was started, biotechnology investors are again opening their minds and wallets to the concept of making drugs that fix genetic flaws and cure diseases.
'I don't run in the other direction because it's gene therapy, which a lot of people do still," said David Mack of Alta Partners, a San Francisco venture capital firm, which recruited other firms, such as MPM Capital, to raise $32 million for Ceregene in August. The company is developing therapies for Alzheimer's, Parkinson's, and Lou Gehrig's diseases.
Gene therapy in its early years 'overpromised and underdelivered," Mack said, echoing the views of other investors and scientists.
By the mid-1990s, nearly a decade after the first companies were founded in 1987, biotech investors had tired of waiting. The money was running out even before teenager Jesse Gelsinger died in 1999 in a Pennsylvania clinic, due to what experts agree was a protocol violation, not a problem with gene therapy itself.
This spotty history, with more than a thousand gene therapy trials started but no big successes so far, 'created a scorched earth for investors interested in the area and for new companies seeking to raise money," said Steven Dickman, chief executive of the Cambridge biotech consulting firm CBT Advisors. Dickman's due diligence at Techno Venture Management in the early 2000s helped persuade the firm to invest in Cambridge-based Genetix Pharmaceuticals Inc., as part of a $12 million round in October 2004. The company is developing a hemoglobin gene therapy for sickle cell anemia and beta-thalessemia.
'As much as venture capitalists are risk-takers, it's hard to be first," Dickman said.
But a growing knowledge of the science of gene therapy has led to improved technology for delivering working genes into the body and a sharper focus on the types of ailments gene therapy is best suited to repair, entrepreneurs and investors say. The start-ups all aim to develop cures for conditions, often fatal, for which there aren't many options for patients.
'Two things compelled us," said Drew Senyei, of Enterprise Partners Venture Capital, 'the amount of clinical data in small and large animals, and a huge unmet need." Senyei is chairman of La Jolla, Calif.-based Celladon, which is developing a therapy to deliver an enzyme to strengthen heart muscle and reverse congestive heart failure, which he called 'the number one cause of hospital admissions in the US."
Traditionally, the drug would be an enzyme or protein injected into the body to correct emphysema, stem heart failure, or slow Alzheimer's disease. Scientists are fine-tuning techniques to import copies of the genes themselves into a patient's blood, heart, or brain, for example to direct a person's body to make the desired compound.
'They picked targets that were really complicated and laid on top of that the complications of gene therapy," Washer said.
With diseases that AGTC is targeting, such as an inherited form of emphysema and a type of congenital blindness, 'Everyone knows what gene is broken and what will happen to the patient over time."
And with their newly raised capital, at least two start-ups are collaborating with established companies to get a head start on the manufacturing technology and capability they will eventually need: AGTC with Genzyme Corp. of Cambridge, and Celladon with Targeted Genetics Corp. of Seattle.
Even Boston Scientific has gotten into gene therapy, through a $25 million deal with Atlanta-based Corautus Genetics Inc. in July 2003.
The Massachusetts life sciences giant invested $9 million for 10 percent equity in Corautus, paid a $1 million licensing fee, and committed itself to loaning the company up to $15 million. Corautus will be using a Boston Scientific catheter in phase II clinical trials to inject DNA into the heart muscle of patients with severe angina, to grow blood vessels that would increase blood supply.
Clinical trials will tell researchers how large a dose and just how frequently the gene therapies will be needed.
Also making use of collective knowledge, Genetix will be working closely with French regulators and is hoping to conduct clinical trials in Paris by this summer, under the same researchers who tested gene therapy on children with a genetic immune disorder, said Geert-Jan Mulder, a venture capitalist with ABN AMRO Capital in Amsterdam and an AGTC director.
'That of course gives you a lot of confidence as an investor. Even though there is a failure rate, these guys are doing everything right," Mulder said. 'From a medical standpoint, there's a real solution to a severe problem."
Eyes are also on Introgen Therapeutics Inc., a 12-year-old company in Austin, Texas, that has applied for accelerated approval to sell the first gene therapy product, to control the growth of tumors in head and neck cancer.
'Part of the problem with a sector that's out of favor is it takes incentive to invest," said Introgen's chief executive, David Nance.
'Because gene therapy has been so out of favor, I don't think anybody has looked at the field for five or six years. . . . A lot of the questions and misunderstandings are really based on old information."
Four start-ups -- in Cambridge, Florida, and California -- have raised significant backing in the last 18 months; all have started or hope to soon start clinical trials.
While raising funds to run such companies remains a crusade for the dedicated, a small number of venture capitalists say they are convinced that two decades of gene therapy research will eventually translate into handsome payoffs, both in terms of profits and lives saved.
'I don't run in the other direction because it's gene therapy, which a lot of people do still," said David Mack of Alta Partners, a San Francisco venture capital firm, which recruited other firms, such as MPM Capital, to raise $32 million for Ceregene in August. The company is developing therapies for Alzheimer's, Parkinson's, and Lou Gehrig's diseases.
Gene therapy in its early years 'overpromised and underdelivered," Mack said, echoing the views of other investors and scientists.
By the mid-1990s, nearly a decade after the first companies were founded in 1987, biotech investors had tired of waiting. The money was running out even before teenager Jesse Gelsinger died in 1999 in a Pennsylvania clinic, due to what experts agree was a protocol violation, not a problem with gene therapy itself.
This spotty history, with more than a thousand gene therapy trials started but no big successes so far, 'created a scorched earth for investors interested in the area and for new companies seeking to raise money," said Steven Dickman, chief executive of the Cambridge biotech consulting firm CBT Advisors. Dickman's due diligence at Techno Venture Management in the early 2000s helped persuade the firm to invest in Cambridge-based Genetix Pharmaceuticals Inc., as part of a $12 million round in October 2004. The company is developing a hemoglobin gene therapy for sickle cell anemia and beta-thalessemia.
'As much as venture capitalists are risk-takers, it's hard to be first," Dickman said.
But a growing knowledge of the science of gene therapy has led to improved technology for delivering working genes into the body and a sharper focus on the types of ailments gene therapy is best suited to repair, entrepreneurs and investors say. The start-ups all aim to develop cures for conditions, often fatal, for which there aren't many options for patients.
'Two things compelled us," said Drew Senyei, of Enterprise Partners Venture Capital, 'the amount of clinical data in small and large animals, and a huge unmet need." Senyei is chairman of La Jolla, Calif.-based Celladon, which is developing a therapy to deliver an enzyme to strengthen heart muscle and reverse congestive heart failure, which he called 'the number one cause of hospital admissions in the US."
Investors are viewing gene therapy as merely a different way of delivering a drug, said David Lowe, of Skyline Ventures in Palo Alto, which joined a $15 million investment round in Applied Genetic Technologies Corp., a Florida start-up in Alachua, northwest of Gainesville, in December 2003.
Traditionally, the drug would be an enzyme or protein injected into the body to correct emphysema, stem heart failure, or slow Alzheimer's disease. Scientists are fine-tuning techniques to import copies of the genes themselves into a patient's blood, heart, or brain, for example to direct a person's body to make the desired compound.
Another key to success is avoiding trying to do too much, said Sue Washer, AGTC's chief executive, pointing to early gene therapy companies that saw missteps while working on cancer and other diseases with multiple genes interacting.
'They picked targets that were really complicated and laid on top of that the complications of gene therapy," Washer said.
With diseases that AGTC is targeting, such as an inherited form of emphysema and a type of congenital blindness, 'Everyone knows what gene is broken and what will happen to the patient over time."
And with their newly raised capital, at least two start-ups are collaborating with established companies to get a head start on the manufacturing technology and capability they will eventually need: AGTC with Genzyme Corp. of Cambridge, and Celladon with Targeted Genetics Corp. of Seattle.
Even Boston Scientific has gotten into gene therapy, through a $25 million deal with Atlanta-based Corautus Genetics Inc. in July 2003.
The Massachusetts life sciences giant invested $9 million for 10 percent equity in Corautus, paid a $1 million licensing fee, and committed itself to loaning the company up to $15 million. Corautus will be using a Boston Scientific catheter in phase II clinical trials to inject DNA into the heart muscle of patients with severe angina, to grow blood vessels that would increase blood supply.
Clinical trials will tell researchers how large a dose and just how frequently the gene therapies will be needed.
'In the next two years you'll see if this is safe or not, if it'll work or not, and whether the FDA will approve it or not," said Chris Ehrlich of InterWest Partners of Menlo Park, the lead investor in AGTC.
Also making use of collective knowledge, Genetix will be working closely with French regulators and is hoping to conduct clinical trials in Paris by this summer, under the same researchers who tested gene therapy on children with a genetic immune disorder, said Geert-Jan Mulder, a venture capitalist with ABN AMRO Capital in Amsterdam and an AGTC director.
'That of course gives you a lot of confidence as an investor. Even though there is a failure rate, these guys are doing everything right," Mulder said. 'From a medical standpoint, there's a real solution to a severe problem."
Eyes are also on Introgen Therapeutics Inc., a 12-year-old company in Austin, Texas, that has applied for accelerated approval to sell the first gene therapy product, to control the growth of tumors in head and neck cancer.
'Part of the problem with a sector that's out of favor is it takes incentive to invest," said Introgen's chief executive, David Nance.
'Because gene therapy has been so out of favor, I don't think anybody has looked at the field for five or six years. . . . A lot of the questions and misunderstandings are really based on old information."