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Foundation-Backed Dart Revs Up, Seeks Venture Funds

Xconomy Boston — 

The small Cambridge, MA-based company Dart Therapeutics has been racing along the startup track in recent months. In September, it assembled a veteran executive team headed by CEO Gene Williams, a Genzyme veteran. This month, it in-licensed its second drug candidate for Duchenne Muscular Dystrophy, and made a deal that might identify other potential medicines against the disabling and deadly neuromuscular disease.

Dart is becoming a proving ground, not only for experimental drugs, but also for a new way of creating a drug development company. It’s one of the few enterprises founded by non-profit disease foundations to find therapies for specific illnesses. In Dart’s case, the two founding groups include parents of the young boys who will likely die in early adulthood from Duchenne Muscular Dystrophy (DMD) unless researchers can improve on current treatments.

Bringing a sense of urgency to such quests, patients’ foundations that once simply donated to drug firm research are now moving into business roles themselves—seeking a return on their investment in company R&D, setting up venture funds, and even starting biotechnology firms.

Elliot Goldstein, chief operating officer, Dart Therapeutics

“They’re thinking so much differently from patient education and patient support groups,” says Elliot Goldstein, an experienced drug industry executive who joined Dart as chief operating officer in August.

Dart’s non-profit co-founders, Charley’s Fund and the Nash Avery Foundation, also financed the formation of a Dart affiliate, Halo Therapeutics of Newton, MA. In May, the two non-profits assembled a “syndicate” of 12 foundations that pitched in $1.1 million to support early-stage work on Halo’s drug candidate HT-100. The pill contains halofuginone, a potential remedy for the malformed muscle fibers and inflammation associated with Duchenne Muscular Dystrophy. Goldstein says Halo will eventually be absorbed by Dart, which shares much of the same leadership.

Dart announced March 20 that it has acquired rights from Belgium-based Galapagos NV to a compound it renamed as DT-200, a possible therapy that could rebuild muscle size and strength. On Tuesday, Dart announced a collaboration with Charlottesville, VA-based Biovista, a pharmaceutical data-mining company that will search for drugs Dart can develop for DMD.

With two drugs headed for clinical trials, DT-200 and HT-100, and an appetite for more pipeline candidates, Dart is now looking for Series B funding from venture firms and other investors outside the disease foundation realm, Goldstein says. As the expenses of clinical testing rise, Dart will need to find partners with deeper pockets who can bring drugs through late-stage clinical testing and to the market, he says.

“If you can’t get that kind of investor in, you’re going to have a problem,” Goldstein says.

Drug industry observers have wondered whether a mission-driven biotech company owned by patients’ foundations could mesh with profit-focused investors in the VC world.

Goldstein maintains that Dart’s imperatives will dovetail with VC’s objectives. The company’s prime directive is to produce treatments that will convert Duchenne Muscular Dystrophy, a fatal disorder, into a chronic, manageable disease. Its founders hope for a reasonable return on their investment, but profit is a secondary goal. They’re willing to take half the payoff that VC partners would receive, Goldstein says.

“We can offer them turbocharged returns,” Goldstein says. “They get a much bigger percent of the return.”

The company board, now drawn mainly from patients’ foundations, could expand to represent for-profit investors, Goldstein says. But Dart is looking for investors with a special interest in rare pediatric diseases who can align themselves with its founders’ mission.

Dart has been in discussions with venture firms and individual investors since January, and has no deals to announce yet. The company can finance its operations through the end of the year, Goldstein says. Dart, which began life as an LLC in 2010, was incorporated in December. The total raised so far by both Dart and its affiliates is about $10 million, from a network of 15 foundations with hundreds of supporters. That fundraising haul has helped it build an operation with 15 employees and contractors.

The founding non-profits, Charley’s Fund of Great Barrington, MA, and the Nash Avery Foundation of Edina, MN, have also made contributions or investments in biotechnology companies in which they don’t have a controlling ownership stake. The foundations have supported Cambridge, MA-based Sarepta Therapeutics (NASDAQ: SRPT); South Plainfield, NJ-based PTC Therapeutics; and Netherlands-based Prosensa.

These companies are trying to attack the root cause of Duchenne Muscular Dystrophy, which affects about one in 3,500 boys worldwide, but rarely girls. It stems from a defect in the gene that codes for a protein, dystrophin, that is essential for the formation of normal muscle fibers.

Without the crucial protein, the weak and abnormal muscles formed throughout the body cause a range of debilitating consequences that get worse as the afflicted boys grow older. They often lose the ability to walk by age 12, develop breathing difficulties and heart disorders by age 20, and die of lung disease by 25.

Currently approved therapies can only alleviate some of the damaging consequences of DMD. Certain steroids may slow the loss of muscle strength, and medicines such as beta-blockers may support the functioning of a weakened heart.

The illness can be traced to a variety of different defects in the gene for dystrophin, not a sole mutation. This means it may be tough to develop a single drug that blocks the disease at its source for all patients. Prosensa and Sarepta Therapeutics are testing experimental RNA-based drugs that may help the body produce dystrophin in spite of missing sections, or exons, in the gene. Prosensa’s “exon-skipping” drug drisapersen is in a late-stage Phase III trial. The Dutch company is partnering on the effort with London-based GlaxoSmithKline (NYSE: GSK).

Sarepta reported encouraging results of a mid-stage Phase IIb trial of its RNA-based therapy, eteplirsen, in October.

PTC’s drug candidate, ataluren (PTC124) tries to countermand a gene defect called a “nonsense mutation” that halts production of dystrophin before the full protein can be completed. The company recently announced it has raised $60 million for a Phase 3 trial of ataluren.

Dart may also invest at some point in a drug candidate that aims straight at the cause of DMD, Goldstein says. One tactic is to boost production of a protein, utrophin, that may substitute for dystrophin in the muscles.

But Dart’s pipeline strategy is based on a belief that DMD patients, for the foreseeable future, will need a cocktail of different drugs to extend their lives. The root-cause approach may help only some portion of patients that have the specific exons or other gene defects targeted by companies such as Prosensa, Sarepta, and PTC, Goldstein says. Even those patients will suffer from accumulated problems associated with the disease. So the drug armamentarium also needs to include remedies for the physical consequences of DMD, such as inflammation. The third component needed is a drug to rebuild weak muscles, Goldstein says.

The two drug candidates acquired by Dart and Halo so far aim at the last two goals of the cocktail: reducing the physical damage of DMD, and rebuilding muscles. Both HT-100 and DT-200 are pills taken by mouth.

HT-100, which Halo acquired from the Israeli company Collgard Biopharmaceuticals, has shown the potential to moderate a cascade of effects from deficient dystrophin production— a chronic breakdown of muscle fiber, inflammation, and hardening or scarring of muscle tissue due to deposits of collagen. Goldstein says HT-100 has shown three potential effects in preclinical studies: reducing inflammation, lowering collagen levels in muscle tissue, and regeneration of muscle. If those effects hold up in human trials, the compound might also be useful against scleroderma, certain cancers, and other conditions, Goldstein says.

Halo and its affiliate, Dart, are planning the first clinical trial of HT-100 in May at five US centers where a range of doses will be tested for safety in healthy adults.

Dart is also planning its first clinical trial of DT-200 in the second half of this year. The company is hoping DT-200 will get around the limitation that prevents the use of androgenic steroids such as dihydrotestosterone to build up muscles in DMD patients. Such hormones also induce maturing of the sex organs, which rules them out as treatments for very young boys. In animal studies, DT-200 showed signs of acting selectively on muscles. If it works that way in humans, the compound might also be a remedy in other muscle-wasting diseases, such as spinal muscular atrophy and amyotrophic lateral sclerosis (ALS). DT-200 belongs to a chemical class called selective androgen receptor modulators, or SARMs.

In its search for drug candidates, Dart looks for compounds it can reposition as potential DMD remedies after they’ve been set aside by drugmakers who found them unsuitable for other indications, Goldstein says. Such drugs often have a track record of preclinical and clinical testing by their original developers, who have characterized their mechanisms of action and possible side effects. Dart’s new collaborator, Biovista, specializes in finding drugs that can be repositioned.

Dart also likes to invest in experimental drugs that might work in diseases in addition to DMD, which could increase the potential financial rewards for venture firms, Goldstein says.

Within three years, Dart may have six to eight investigational drugs in its pipeline, Goldstein says. The company founded by the families of DMD patients already has a number of acquisition prospects in mind.

“The clock is ticking and they need to find solutions for their boys,” Goldstein says.