Biotech Vet Gerngross Dishes Out More Details On Latest VC-Backed Startup Arsanis

Xconomy Boston — 

Our immune systems churn out antibodies to fight infections, so perhaps it’s about time that some biotech companies started getting in on the action. Arsanis, co-founded late last year by successful biotech entrepreneur Tillman Gerngross, is using the antibody discovery technology from another of Gerngross’s startups, Lebanon, NH-based Adimab, to find antibody drugs that might provide a new alternative to antibiotics for bacterial infections.

Adimab doesn’t develop drugs. Rather, large pharmaceutical companies—such as Merck & Co. (NYSE:MRK), Pfizer (NYSE:PFE), and Roche—have hired the startup to use its yeast-based system to discover antibodies for those companies to develop. Now it’s got a new way to commercialize its technology—via Arsanis, which Adimab spun out to focus exclusively on applying the technology to the infectious diseases field. And three of Adimab’s previous backers—Obimed Advisors, Polaris Venture Partners, and SV Life Sciences—are investing in Arsanis. The new startup—whose $9.6 million financing I reported last week—has now raised about $10 million, according to Gerngross.

“When we find people who really know what they are doing, and we think the Adimab value can make a difference, we are interested in starting companies around that,” says Gerngross, who is CEO of Adimab and president of Arsanis.

For Arsanis, Gerngross was able to find an expert in infectious disease drug development, Eszter Nagy, to be the new startup’s chief scientist. Nagy will lead the company’s main lab in Vienna, Austria, where the firm is rapidly hiring scientists and plans to grow from about seven employees to 20 to 25 workers within a few months, Gerngross says. The company will be a U.S. entity with most of its staff in Vienna. Nagy was previously a senior VP of research at Vienna-based vaccine developer Intercell, where she and the team had acquired antibody discovery technology from Cytos Biotechnology in May to pursue new antibody treatments for infectious diseases.

Arsansis (which was also co-founded by Adimab chief operating officer Errik Anderson) hasn’t disclosed which specific infections it plans to target. Yet Gerngross, who is also a professor of bioengineering at Dartmouth College, says that Arsanis plans to nail down three lead programs that are worthy of clinical testing, and its financing gives the company enough money to operate for about two years. While Arsanis’s team will be in charge of identifying which disease targets to pursue, Adimab’s job is discover the antibodies that can hit those targets. Adimab will then keep a certain percentage of ownership in the antibodies that Arsanis develops, Gerngross says.

Kreogene, an earlier Adimab spinout with a similar business model as Arsanis, was a bust. Polaris and Orbimed Advisors seeded the little-known firm in 2008 to develop cocktails of antibody drugs to treat cancer. Gerngross, who co-founded the company with Murray Korc, chair of medicine at Dartmouth-Hitchcock Medical Center in Lebanon, NH, says that the startup shut down before it ever really got off the ground.

Gerngross isn’t accustomed to failure in biotech. GlycoFi, the biotech he started before Adimab, was sold to Merck for $400 million in 2006 and its yeast-based system for engineering protein drugs is a key technology in Merck’s effort to develop generic biotech drugs. And Adimab has been on a successful path with multiple pharma deals under its belt and a stable of high-profile investors like Google. In November Gerngross told me that Adimab raised $4 million in a fifth-round financing at a pre-money valuation of about $520 million—a huge number for a four-year-old biotech startup.

Arsanis is a clear signal that Gerngross and his investors plan to continue the strategy of starting new companies to focus Adimab’s technology in specific fields. Indeed, he says that they are also looking at opportunities to start new biotechs dedicated to other treatment areas such as central nervous system diseases and, yes, cancer.

Carl Gordon, a founding general partner at Orbimed in New York, says that he is on board with this strategy after having invested in Adimab and the newer Arsanis.

“Adimab is focused on services,” Gordon says in an e-mail. “We thought it made sense to create product-focused spinouts of Adimab, to create value with a different business model. We believe infectious disease offers a lot of opportunities for antibody drug development.”

Others in the biotech world agree with this. For example, the German biotech MorphoSys said in September that it was licensing targets from Absynth Biologics in the UK to aid in its discovery of antibody drugs for bacterial invaders, with plans to develop treatments for major infections like the “super bug” MRSA, which can withstand attacks from old standby antibiotics such as methicillin.

Both MorphoSys and Adimab say that their technologies yield fully human antibodies to fight illnesses. Adimab, however, has attracted a lot of attention for its engineered-yeast-based system because it doesn’t require its antibodies to be harvested from as many hosts—such as mouse cells, Chinese hamster ovary cells, and E. coli—to get to a molecule that is ready to test in humans. This technology might reduce the time needed to yield quality antibody candidates that can home in on the desired disease proteins really well without causing serious side effects.

We’ll have to see how well this technology can translate into effective anti-bacterial drugs.

“Existing approaches aren’t working,” Gerngross says. “We think that antibodies have a real opportunity to make a difference here.”