In this recent boom of biotech IPOs, many startups have enlisted crossover investors—institutions that back both public and private companies—early in their lifecycle. It’s been a different story for Deciphera Pharmaceuticals, whose 12-year history includes moves from Massachusetts to Kansas and back. But regardless of the road it’s taken, Deciphera now finds itself joining the ranks of biotechs that are eyeing a trip to the public markets.
Deciphera, of Waltham, MA, this morning raised its biggest round to date—a $75 million haul that’ll fund the company’s plan to develop a particular type of kinase-inhibiting cancer drug. Deciphera hasn’t put together the type of expansive syndicate that has typified the crossover boom. Rather, just one firm, New Leaf Venture Partners, participated in (and led) the funding, which was joined by the company’s lone major longtime backer, an unnamed “high net worth” investor from the Midwest. New Leaf managing partner Liam Radcliffe joined Deciphera’s board as part of the round.
Deciphera operated stealthily for much of its existence, so CEO Michael Taylor says that he’s had to introduce the company to investors and bankers, build relationships, and be “somewhat selective” about adding new investors to the fold. After all, any new investor had to have a good rapport with the company and Deciphera’s longtime, unnamed backer, who along with a few other angel investors has poured some $85 million into the company since its 2003 inception. Hence the board appointment of Radcliffe, who Taylor and Deciphera chairman James Bristol have known since their days working at Pfizer over a decade ago.
The round is a stepping stone for Deciphera. Taylor aims to eventually put together a broad syndicate of crossover investors that can support an IPO, but the $75 million, which should fund Deciphera through 2017, gives the company some time to decide when. It’ll gather clinical data over the next year—two of its drugs have either already started, or are on the verge of, their first trials. If the data look good, it’ll have options.
“We’ve talked to a lot of banks and the advice you typically get is if you’ve got a really strong crossover syndicate, the data show that those companies tend to do better,” Taylor says. “But I think [good] clinical data trumps that.”
Deciphera was started in 2003 in Cambridge, MA, by former Millennium Pharmaceuticals scientist Daniel Flynn to go after kinase enzymes—signaling molecules that regulate a wide range of cellular activities and which are overactive in some cancers—in a novel way.
Drugs that inhibit kinases are well known, of course. A kinase-blocking drug called imatinib (Gleevec) became one of the first targeted cancer therapies when it was approved in 2001, and several have followed. More than a dozen have been approved in the U.S. since the turn of the century.
What Deciphera does differently is home in on what Flynn, in an interview a few months ago, called an “internal switch” that turns kinases on and off, controlling their activity and shape. (Kinases essentially lay dormant in an “off” position most of the time; when they are activated they change shape dramatically and begin sending out signals.) Flynn said Deciphera targets little pockets—it calls them “switch pockets”—embedded within the interior of kinases, that weren’t very well known when Flynn began looking into them. So Deciphera operated in stealth mode for years trying to understand how switch pockets control kinases, and then amassing a pipeline of small molecule drugs that can bind to them.
Taylor contends this approach is distinctive in that it should lead to more durable, longer-lasting kinase-inhibiting drugs, and be applicable to a broader range of cancers. Deciphera’s drugs are designed to lock a mutated kinase in its inactive shape so it can’t begin firing bad signals—say, for a cell to grow uncontrollably.
“Even the most aggressive mutations are controlled by switch control inhibitors to a far greater degree than the traditional types,” Taylor says.
Deciphera will try to prove this over the next few years. Its two lead candidates are altiratinib and DCC-2618. Altiratinib is in Phase 1 trials as a treatment for patients whose tumors have certain types of alterations to the MET gene. DCC-2618, which blocks all mutations of the KIT gene, will begin its first tests by the end of the year in patients with gastrointestinal stromal tumors (GIST) and systemic mastocytosis, an abnormal buildup of mast cells, which normally help protect the body from disease. (Deciphera has some competition here: Another Boston-area biotech, Blueprint Medicines (NASDAQ: BPMC), is also developing drugs for GIST and systemic mastocytosis.)
A third drug, Rebastinib, which inhibits the TIE2 kinase, is being studied as a potential combination treatment with cancer immunotherapy drugs, and is also in Phase 1 testing.
When starting up Deciphera over a decade ago, Flynn had a tough time raising cash post-9/11. So on a holiday visit with his wife and family in Kansas he’d heard of a “couple of families” who were interested in investing in biotech, specifically to turn the Kansas City area into something of a “Midwest mini hub of biotech.” They agreed to back his venture, and Flynn set the company up in Lawrence, KS, where it toiled away for years in relative obscurity. Still, Deciphera’s efforts led to a $130 million drug development deal with Eli Lilly in 2008.
Once Deciphera’s pipeline began to take shape, the company needed to grow and raise enough cash to develop its drugs. Taylor, the former CEO of Ensemble Therapeutics, came aboard in April 2014, and the company opened up an office in Waltham to recruit folks and meet with East Coast investors.
While Waltham will increasingly become Deciphera’s “center of gravity” over time, Lawrence remains its research hub, and there are no plans to change that, Taylor says.
“It’s a nice college town. If you’ve never been there, go there during the basketball season,” he says, referencing the nearby University of Kansas and its team, the Jayhawks. “It’s totally nuts.”