When a biotech company with one product in development misses its milestones, investors typically don’t throw more money at it.
Not so with the newly renamed Millendo Therapeutics. The Ann Arbor, MI-based drug firm has reeled in a $62 million Series B round to shift from a one-product company seeking a buyer to a pipeline builder with its own commercial ambitions.
The company began life as Atterocor with an experimental compound, dubbed ATR-101, spun out of a University of Michigan lab to treat a rare form of cancer that attacks the adrenal gland. After a $16 million Series A fundraising in 2012, “the intent was to get quickly to significant data in adrenal cancer and potentially flip the company,” said Millendo CEO Julia Owens. “We haven’t gotten as quickly to that answer as we would have liked.”
Once that delay was apparent, the board of directors encouraged Owens to turn Atterocor into a “specialty” pharma company—one that buys experimental medicines and develops them, rather than conducting in-house research—and focus on endocrine disorders, which stem from dysfunction in the network of glands that secrete hormones. Adrenal tumors, for example, can not only grow large enough to press against other organs, they can also produce abnormal amounts of estrogen or androgen, the female and male sex hormones.
The strategic shift led Atterocor last year to license a treatment for polycystic ovary syndrome (PCOS) from international drug giant AstraZeneca (NYSE: AZN), a deal formally announced today along with the new funding and new name. The syndrome prevents women’s ovaries from completing the ovulation cycle. This can lead to problems including ovarian cysts, elevated male hormones, infertility, and metabolic disorders.
The drug, called MLE4901, is meant to dial back the releases, or pulses, of gonadotropin releasing hormone, part of a hormone cascade that goes off kilter and affects the ovaries. AstraZeneca had originally tested the drug in schizophrenia, said Owens, but shelved it for a few years until new research into the biology of PCOS gave the drug new life. AstraZeneca revived the drug and eventually tested it in 65 women. The results were positive, but without a women’s healthcare division, the company decided to hand it off, according to Owens.
In the deal, Millendo pays AstraZeneca an undisclosed fee and potential milestones and royalties. In exchange, Millendo takes over development and receives an undisclosed equity investment from AstraZeneca.
The new round of funding was led by New Enterprise Associates, which didn’t commit until Millendo was in the final negotiations with AstraZeneca last year. “The opportunity to have a PCOS drug piqued NEA’s interest,” said NEA partner Carol Gallagher.
It isn’t quite that simple. Gallagher had insider’s knowledge of the Millendo story; she was already on the Millendo board as an independent director, a position she took after leading Seattle’s Calistoga Pharmaceuticals to an acquisition by Gilead Sciences worth up to $600 million. On the board, the San Diego-based Gallagher was part of the chorus that encouraged Owens to change strategic direction. Gallagher then joined NEA in 2014 and flagged Millendo as a possible investment. Others at the firm conducted due diligence and made the investment decision, she said.
NEA then gathered a syndicate that, despite the notable dollar amounts, is deliberately lacking the heavy presence of so-called crossover investors—hedge and mutual funds that dip into the private markets to gain a better toehold come IPO time. “We didn’t get all the traditional crossovers,” said Gallagher. “We wanted a syndicate that looked more like venture capital.”
When asked if the end of the biotech bull run makes an IPO more difficult, Gallagher said, “Maybe we’ll have to go longer [to get to an IPO], or maybe we’ll go the licensing or M&A route. We’ve played that game and won that too. We have a syndicate that can go long.”
The cash will let Millendo take the two drugs through Phase 2 trials in four different diseases. MLE4901 will enter Phase 2b testing in PCOS. ATR-101 will continue in Phase 1 for adrenal cancer, and Phase 2 for Cushing’s disease and congenital adrenal hyperplasia. It will need more funding to move the drugs from Phase 2 to more expensive Phase 3 trials, and eventually, to market. Owens said the company could build sales teams in all four indications, but no decisions have been made yet.
The new name is a mash-up of “endocrine” and “Millie,” the wife of University of Michigan football coach Bo Schembechler, who died of adrenal cancer and inspired her husband to start a research fund at the school. Why change the name? Owens said the original choice, Atterocor, was hers, but she was tired of people pronouncing it and spelling it wrong.
New investors Roche Venture Fund, Adams Street Partners, Altitude Life Science Ventures, Longwood Fund, and Renaissance Venture Capital Fund joined NEA, along with holdover investors Frazier Healthcare Partners, Osage University Partners, 5AM Ventures, and the Regents of the University of Michigan. Roche’s Tracy Saxton will join the Millendo board. Gallagher will remain on the board and represent NEA.
Photo “Go Blue” courtesy of Andrew Hart via a Creative Commons license.