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A Nobel Laureate’s Stealthy Biotech, Its Japanese Pharma Backer, and the Englishman In Charge

Xconomy Boston — 

Outside of certain circles at MIT, you’d be hard pressed to find someone who is familiar with the biotech startup Galenea. The Cambridge, MA-based firm has been researching drugs for schizophrenia and other neurological disorders for more than five years, yet it has done so with a unique funding strategy that has kept its significant operation under the radar.

Galenea, founded in 2003 by MIT professor and Nobel laureate Susumu Tonegawa and others, has received the majority of its funding from the Japanese drug maker Otsuka Pharmaceutical, Mark Benjamin, the firm’s CEO, said. The startup has never raised a round of venture capital. And the company’s founders, employees, and Otsuka own the company.

Otsuka Pharmaceutical, a unit of Otsuka Holdings, began collaborating with Galenea in January 2005 and will have pumped $90 million into the startup’s research by the end of 2011. A focus of the collaboration has been on a defective protein, studied in Tonegawa’s lab at MIT and at Rockefeller University, which is believed to play a role in schizophrenia and other neurological dysfunctions. The aim is to find drugs that can modify the activity of the protein enough to treat a variety of mental disorders.

“The original founding of the company was essentially through the personal relationship of Susumu Tonegawa and the patriarch of the Otsuka family,” Benjamin says. Tonegawa—who won a 1987 Nobel Prize in medicine for his research of the genetic underpinnings of antibodies—was born in Japan and is considered a national treasure in the country, he added.

Benjamin, a U.S. citizen who grew up in England, has had the rare experience of working at three biotech companies founded by winners of Nobel Prizes in medicine. Of course, he began working with Tonegawa when he became CEO of Galenea in 2007. Earlier in his career, Benjamin was chief business officer of Seattle-based Nura, which was co-founded by Nobel laureate Linda Buck of the Fred Hutchinson Cancer Research Center. At Kirkland, WA-based Rosetta Inpharmatics where he worked from 1999 until the company was bought by Merck in 2001, the founding team included Nobel laureate Leland Hartwell.

To hear Benjamin tell it, Galenea’s work with Otsuka might hinge on whether his firm can deliver at least one compound from the collaboration that the Japanese company decides is worthy of testing in humans. Otsuka has already extended the period of its original collaboration deal with Galenea twice based on the startup’s achievement of certain goals, and the latest extension struck in late 2009 expires at the end of 2011.

For its part, Otsuka Pharmaceutical, which is Japan’s largest privately owned drug company, has a major interest in the treatment of schizophrenia. The firm discovered a blockbuster drug for schizophrenia and other mood disorders called aripiprazole (Abilify), which Bristol-Myers Squibb markets in the U.S. (Interestingly, the company also makes a sports drink called “Pocari Sweat,” which is wildly popular in Southeast Asia, Benjamin said.) Otsuka Holdings, the drug firm’s parent company, says it generated $13.1 billion in revenue for its fiscal year ending in March 2010.

Otsuka’s cash has enabled Galenea to develop cutting-edge technology for discovering potential drugs for diseases of the central nervous system, Benjamin says. For instance, the startup has developed a new way of rapidly screening molecules for ones that impact neuron-to-neuron communication—or synaptic transmission—to treat mental disorders. Recently, the firm won a $4.5 million grant from the National Institutes of Health to further develop the drug-discovery technology. Otsuka is already using the system for its own R&D operations.

Mark Benjamin, CEO of Galenea

Mark Benjamin, CEO of Galenea

With previous grant support from the NIH, the firm has also developed a system for finding patterns in brain activities and physical behaviors in mice to test the effectiveness of drugs for certain mental disorders. It’s a leap ahead of the traditional method of watching how the drugs impact the physical behaviors alone. In fact, there’s a lack of reliable mouse models of mental disorders, making it risky to say whether a drug that appears to work in mice will be effective in humans as well.

In the meantime, Galenea has been pursuing research of drugs that falls outside of its Otsuka deal. In October 2009, the startup bought a compound, which has potential to improve mental abilities in schizophrenia patients, in an auction of assets from the now defunct Lexington, MA-based Epix Pharmaceuticals. Epix, which wound down its operations in July 2009, had shown that the drug was safe in an initial human study. Now Galenea plans to meet with the FDA this fall to talk about starting a new Phase I clinical trial to get further data on the safety of the drug, Benjamin says.

Galenea has also licensed potential anti-obesity compounds from the Woburn, MA-based chemistry research outsourcing firm Organix. Within the next year, Benjamin says, the startup plans to find a partner to take over development of those compounds.

Back to the Otsuka collaboration, Benjamin says he will probably know by early next year whether the Japanese company decides to further develop one of the compounds from the startup. That will be an important milestone for this 46-person company, because it would be a strong statement from Otsuka that it believes it will see a big return on its $90 million investment in Galenea.

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2 responses to “A Nobel Laureate’s Stealthy Biotech, Its Japanese Pharma Backer, and the Englishman In Charge”

  1. Ryan – Very catchy headline! More important- good article

    Mithra Bindhu :-)

  2. Ryo KubotaRyo Kubota says:

    Great article! We love working with Otsuka as well!