Arteaus, With $18M From Atlas and OrbiMed, Forges Ahead on Migraine-Prevention Drug

Xconomy Boston — 

Cambridge, MA-based Arteaus Therapeutics is emerging from stealth mode today, announcing it is has raised an $18 million funding round and is developing a molecule licensed from drug giant Eli Lilly (NYSE: LLY) to prevent migraine headaches. The financing came from Cambridge, MA-based Atlas Venture and New York-based OrbiMed Advisors.

Arteaus was founded in June, says Atlas’ David Grayzel, who is serving as the startup’s CEO. The molecule it acquired from Lilly is an antibody that targets a brain protein called calcitonin gene-related peptide (CGRP). The protein is known to dilate blood vessels and induce inflammation in the tissues that cover the brain. “In the last 15 years, there has been a lot of data implicating CGRP in migraines,” Grayzel says. Arteaus’ experimental drug appears to block the CGRP pathway for up to a month, opening up the possibility of developing it into an injection that can be given just one or two times a month to prevent migraines, Grayzel says.

Grayzel describes the company’s business model as “highly virtual,” saying only half-jokingly that Arteaus has 1.5 employees, including him. “We’re trying to make it as lean as possible,” he says.

Unlike other companies that offload molecules in licensing deals, Lilly isn’t abandoning the drug it licensed to Arteaus. The two companies are working together in Arteaus’ virtual lab, Grayzel says. “We’re able to leverage the expertise at Lilly to rapidly move the compound forward,” he says.

Arteaus is currently completing a Phase 1 study and hopes to start a Phase 2 in the second half of 2012. When the Phase 2 ends, Lilly will have the option to continue developing the drug under terms that were not disclosed, but that will entail milestone payments and royalties paid to Arteaus.

Atlas investing partner Jean-Francois Formela says Arteaus is the flagship project of a new unit the VC firm formed last year, called Atlas Venture Development Corp. The unit’s goal is to form a portfolio of single-asset companies—startups that exist to develop just one drug to the pointwhere the company (hence the asset) is attractive enough for a Big Pharma player to buy. In this case, says Formela, Atlas acquired the migraine molecule knowing that there was a good chance Lilly would eventually buy it back. “We only want things they want back,” Formela says. “It’s an integral part of the model.”

Formela explains that today’s financing is designed to be Arteaus’ first and only private funding round. And the Venture Development unit is out searching for other assets that it can develop in a similar way. “We need to move away from the old paradigm of raising a Series A, then a Series B and C,” he says. “We have one budget. We’re either going to get to success or failure.”

The single-drug startup is becoming increasingly popular in life sciences. Among the growing list of such companies is Somnus Therapeutics, a Bedminster, NJ-based company that’s developing an insomnia drug to treat middle-of-the-night awakenings.

Grayzel, who also serves as the managing partner of Atlas Venture Development Corp., declines to discuss Arteaus’ market opportunity in dollar terms. But the company estimates that 36 million Americans alone suffer from migraines. And according to the International Headache Society, 25 percent of migraine sufferers experience three or more attacks per month.

The migraine-prevention market is currently dominated by Botox, the world-famous wrinkle-erasing injection marketed by Irvine, CA-based Allergan (NYSE: AGN). But as Grayzel points out, Botox is only approved to treat the most acutely ill migraine patients—those who suffer 15 “headache days” per month. “That’s 3 percent of patients, maybe less,” he says. “We hope to address a much larger percentage of patients.”

Still, Botox provides some hint of what companies that succeed in getting a product to the migraine market might achieve. Even though most of Allergan’s $1 billion-plus annual sales of Botox still come from cosmetic uses, some analysts have estimated that sales of Botox for migraine-prevention and other medical uses could surpass $1 billion by 2015.

Arteaus will likely face competition from other companies angling to get into the migraine market. There are some CGRP-targeting treatments in trials, Grayzel says, and Pfizer is working on a CGRP antibody, though it is unclear what the status of that program is.

Grayzel expects that Arteaus’ Phase 2 trial will go on for 15 months, and that the FDA will require the same extensive testing in Phase 3 that it required for Botox—namely two well-controlled trials involving more than 1,000 patients. It won’t be easy, Grayzel admits. But he’s confident the FDA will be open to Arteaus’ approach to preventing migraines. “There has been a lot of progress in treating migraines, but not so much in preventing them,” he says. “This is a major unmet medical need.”

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