Seattle’s Accelerator Corp. has been largely silent since it opened up an office in New York a year and a half ago with a $50 million-plus bankroll and a plan to start up some new biotechs in Manhattan. But that’s changing today, because the first of those companies, Petra Pharma, is making its debut with the biggest Series A round a New York startup biotech has seen in some time—and the largest investment Accelerator has made in its 12-plus year history.
Petra this morning closed a $48 million round from Accelerator and a group of the pharma companies, venture funds, and others who backed the startup machine’s latest fund, Accelerator IV—among them Eli Lilly, Johnson & Johnson, AbbVie, Pfizer, and Arch Venture Partners.
The startup is based on the work of two well-known researchers in New York and Boston. The first is Weill Cornell Medical College biochemist Lewis Cantley, a former Harvard Medical School professor best known for discovering a key enzyme called PI3 kinase, which has become the target for a number of cancer drugs. The other is Nathanael Gray of Harvard and the Dana-Farber Cancer Center in Boston, who is known for work developing compounds that inhibit kinases—signaling molecules that regulate a slew of cellular activities. The startup will be based in Accelerator’s New York headquarters at the Alexandria Center for Life Science (pictured above) on Manhattan’s East Side.
While Petra’s plans aren’t totally clear as of yet, the idea behind the company is to treat a range of cancers and metabolic diseases by uncovering new enzyme targets and developing drugs that affect them in one way or another. Petra isn’t disclosing what those targets are, which diseases it’ll try to treat, or how long it might take to get to its first trial, but it’s relying on Cantley and Gray to unearth things that others haven’t. Cantley, for instance, says through his work with Gray, he’s found what could be “new targets for cancer therapies that no one had really pursued before.”
Cantley, who moved from Harvard to Weill Cornell in 2012, says he and Gray had been looking for ways to commercialize their work, and were approached by a number of venture capitalists and companies to form either companies or collaborations. They chose to go with Accelerator for two reasons: they could get a big investment that didn’t leave them “desperately seeking a second round of funding from day one,” and Accelerator’s existing partnership with Weill Cornell has led to a “tight,” five-plus year alliance between Petra and the college that will keep the founders involved and enable them to shift work from the university to the company.
“This is a rather special, unusual relationship,” Cantley says.
Cantley and Gray already have their fingerprints on startups targeting cancer in the biotech hotbed of Boston. Cantley is a co-founder of Agios Pharmaceuticals (NASDAQ: AGIO), while Gray is one of the founders of Syros Pharmaceuticals. Both are now large organizations, and Agios is a publicly traded company with multiple drugs in clinical testing. Cantley says that his experience with Agios taught him the importance of having a major investment up front (Agios got a $33 million Series A in 2008). That helps with recruiting the right people, and getting the breathing room to accumulate data before having to go out and raise more cash, he says.
Now, however, Cantley and Gray are trying to build a big biotech in New York, which for a number of reasons hasn’t so far been able to capitalize on its wealth of academic institutions with homegrown startup companies. One big change of late has been the influx of a number of early stage venture investors, among them Accelerator, that as Cantley says, see “low hanging fruit” in the city. Just last month, three Columbia University professors—Tom Maniatis, Richard Axel, and Charles Zuker—and venture firms Lux Capital, The Column Group, and Polaris Partners formed Kallyope with a $44 million round. On the same day, Versant Ventures helped start a company called Kyras Therapeutics around the work of Columbia’s Brent Stockwell. There’s other venture money in town, too, with Flagship Ventures and Arch backing a $150 million biotech fund from the New York City Economic Development Corp. And Accelerator, CEO Thong Le says, aims to start 8 to 12 companies with this current fund, though some of them will be formed at its headquarters in Seattle.
“There is so much VC money concentrated at these other places that it’s much more competitive to find a good project to fund while in New York City,” Cantley says. “We have all these fantastic institutions but very little tapping of that locally.”
The Petra deal has been a long time coming for Accelerator. The firm was initially formed in 2003 when Leroy Hood of the Institute for Systems Biology teamed with a group of biotech venture capitalists and Alexandria Real Estate Equities to get behind startup biotech ideas that were too early for traditional VC investment. It’s since funded 12 companies with mixed results (read more here about Accelerator’s ups and downs), but had talked publicly for years about expanding into a new market, and eyed New York specifically because of the dearth of on-the-ground early-stage biotech venture capitalists.
That vision finally became a reality in July 2014, when the company raised $51 million, struck partnerships with seven New York city institutions—among them Weill Cornell—and opened up an office at the Alexandria Center. At the time, Le told Xconomy that Accelerator had made its share of mistakes in the past, and that there was going to be much more “discipline and focus” around the types of deals it’d do going forward. Accelerator has since spent a year and a half vetting hundreds of deals and months specifically on Petra before deciding to move forward.
“We have a much tighter business plan around each of these opportunities going into them” than in the past, Le says. “If we’re gonna fail, we’re gonna fail fast. If we’re gonna succeed, we’re gonna succeed through a series of steps that we’ve laid out. That’s why these deals are taking a little bit longer to announce.”
The Petra financing is the largest Series A round Accelerator’s history—prior to this, it had put some $45 million total towards 12 early-stage biotechs, the largest sum being a roughly $5 million seed investment in VLST. The new biotech is named after the ancient Jordanian city of Petra, a historical landmark and once a major center of commerce. It’s a nod, Le says, to Petra’s plans to target enzymes that play a “pretty central role” in a variety of cellular functions—and, perhaps, like Kallyope, to help attract other startup biotechs to New York.
“More of these kinds of deals created in this ecosystem should lead to a flywheel effect,” Le says, “so that more opportunities and more companies will be created.”