To launch his first biotech startup, Dragonfly Therapeutics, Bill Haney went to private family offices, including one linked to the Disney family, rather than venture firms. Now the tech investor, entrepreneur and filmmaker is at it again, leaning on some of the same investors to fund Skyhawk Therapeutics, a new company joining an emerging race to target RNA with drugs.
The $8 million in seed funding Skyhawk has landed today is by no means a large round, particularly compared to the massive financings biotech startups have been securing of late. But Skyhawk’s funding is noteworthy for its unusual array of investors, which include Tim Disney (Walt Disney’s great-nephew) and the Duke of Bedford, England, rather than a syndicate of venture firms.
Haney, Skyhawk’s chairman and co-founder, used a similar strategy in funding Dragonfly Therapeutics, an immuno-oncology startup he co-founded in 2015 and currently runs. Dragonfly and Skyhawk also share office space in Waltham, MA.
Haney says by leaning on family offices instead of venture firms, his companies won’t have to spend as much time fundraising as others. And family offices, he says, are not necessarily as concerned with getting high financial returns as other sorts of investors. “Almost no family has been untouched by cancer or Alzheimer’s,” says Haney. “Family offices respond with objectives that are not just economic.”
Haney worked with investors who were also willing to buy into Skyhawk’s and Dragonfly’s unusual capital structure: In both cases, investors, including himself, and employees all own common stock. Haney says he prefers this approach over the conventional venture capital model (where investors get preferred stock), because it’s simpler and helps with recruiting in a competitive environment. “You build more loyalty (among employees and investors) and a better sense of commitment to each other when we all own the same thing.” Haney says he isn’t sure if this kind of financing strategy is becoming more common in biotech, but he did say, “Financial investors in this space are increasingly becoming more open-minded about capital structure.”
Haney has been able to use these unusual approaches for Dragonfly and Skyhawk because of the connections he’s made over many years. He’s been friends with the scientific co-founders of both companies—Tyler Jacks of MIT for Dragonfly, and Kathleen McCarthy for Skyhawk—for many years. Haney and Jacks, a leading cancer researcher, have known each other since college. In Skyhawk’s case, Haney first met Skyhawk CEO McCarthy more than a decade ago in a remote part of the Dominican Republic, while McCarthy was doing volunteer work and Haney was shooting a documentary there. They went on to found a nonprofit together.
McCarthy later became a scientist for the SMA Foundation, which funds research on the rare genetic disease spinal muscular atrophy. It was through this work that she first learned about the therapeutic approach that now forms the basis for Skyhawk.
One of the SMA Foundation’s partnerships was with PTC Therapeutics (NASDAQ: PTCT), which was developing a small molecule drug that targets RNA molecules to treat SMA. This disease, which in its most severe form kills affected children before they turn two, is caused by a defective gene called SMN1. This gene makes a protein needed by nerve cells in the spinal cord that control muscle contraction. PTC’s drug is aimed at boosting the production of the SMN2 protein, which acts as a sort of backup to the SMN1 protein. The drug does this by modulating the way the SMN2 RNA is spliced, or edited, by the cell, after the RNA is made from DNA, but before it is used as a template to make protein. Many diseases are caused by defects in RNA splicing, and this essential cellular process has become a new drug target. (The best known example of a RNA splicing drug is nusinersen (Spinraza), which in December 2016 became the first-ever FDA approved therapy for SMA. Nusinersen targets the same RNA as the PTC drug, but is not a small molecule.).
Roche licensed PTC’s technology and is now testing the drug in a phase 2 study for SMA. McCarthy moved to Roche in Basel, Switzerland as a preclinical biologist to continue working on the drug, and saw it move into a clinical trial. After leaving Roche, she started thinking about how small molecule drugs could be used to repair RNA splicing in other diseases, and reached out to Haney about the idea.
Skyhawk is focused on making small molecule drugs to target a RNA splicing defect called exon skipping, where the cell leaves out key protein-encoding parts of the RNA during splicing, causing disease. Skyhawk’s drugs are designed to bind to specific spots on the RNA and alter their shape to prevent or decrease this exon skipping.
Skyhawk now joins a growing cadre of companies, including Arrakis Therapeutics and Expansion Therapeutics, that are trying to target RNA with small molecules. These chemical-based drugs should be easier to deliver to tissues throughout the body (including the brain), and cheaper to produce than other ways of targeting RNA, such as with RNA interference therapies. McCarthy says Skyhawk is different from these other companies because it is focusing on RNA splicing. (Another startup, Stoke Therapeutics, is also targeting RNA splicing, but not with small molecules.)
It’s no surprise that more companies are targeting RNA given the recent clinical successes and approvals of drugs aimed at RNA and the development of new technologies for studying RNA, says Adrian Krainer, a biologist who studies RNA splicing at Cold Spring Harbor Laboratory. Krainer is the inventor of the approved SMA drug nusinersen, the scientific founder of Stoke, and is also on Skyhawk’s scientific advisory board. He says there’s plenty of room for various companies to take different approaches to drugging RNA. “The universe of RNA splicing events and potential targets, as well as the number of rare diseases, are extremely large,” Krainer says.
The seed funding will get Skyhawk to its first clinical trial, which McCarthy says should begin early next year. The company will start with cancer that’s driven by exon skipping, and will also pursue drugs for rare neurological diseases, but the company isn’t saying more about which diseases.
Other investors in Skyhawk’s seed round include Alexandria Venture Investments and other undisclosed private investors.