Of the more than 7,000 rare diseases that each affect just a sliver of the population, an estimated 95 percent of them have no treatment. The lack of treatments is an economic problem, not a scientific one, says Barbara Handelin, CEO of the BioPontis Alliance for Rare Diseases.
Large pharmaceutical companies see little financial gain from the massive investments required to develop a drug for a small patient population, says Handelin. That’s because such research entails higher up-front financial risk, too high perhaps, even for a treatment with the potential for a stronger return. But Handelin says a nonprofit model can unlock promising academic drug research in rare diseases.
“The philanthropic donation is looking for a return in one way—to make as many tries as possible in this rare disease that affects somebody I love,” she says. “Their return on capital is trying, and hopefully, being successful if you make enough tries.”
BioPontis, which was initially formed as a for-profit venture in 2009, has now relaunched as BioPontis Alliance for Rare Diseases, a Raleigh, NC-based nonprofit organization focused on advancing academic research in rare diseases. BioPontis plans to partner with with patient groups and universities around the world to identify drug technology and bring it to a point where it can be licensed by companies to develop, test, and if all goes well, commercialize.
BioPontis is announcing its first patient group partnership on Monday, a joint venture with the Hereditary Neuropathy Foundation. The New York City-based foundation supports research on treatments for Charcot-Marie-Tooth Disease (CMT), an inherited neurological disorder that affects motor and sensory nerves. The disease causes muscle weakness in the feet and lower legs. CMT is not fatal but as it progresses, motor skills deteriorate and patients often lose the ability to walk. An estimated 2.6 million people worldwide have CMT, which currently has neither a cure nor any treatments.
The partnership with the Hereditary Neuropathy Foundation demonstrates the kind of university research that BioPontis wants to unlock. The genetic cause for the most common form of CMT was first identified in 1991. But screening technology to search for a small molecule drug to treat the disease was not developed until 2012.
Allison Moore, CEO of the foundation, says her organization has provided $1.1 million in funding to universities researching CMT treatments, including the University of Southern California and the University of California, Los Angeles. With BioPontis bringing support and expertise to the universities, Moore says, her foundation can operate more efficiently and devote resources to finding patients who could participate in future clinical trials.
“The most important thing is to get patients that are suffering, treatments,” says Moore, who was diagnosed with CMT in 2001. “What’s the fastest way to get there? This partnership, we believe.”
Foundations have stepped in to fill investment gaps left when pharmas and venture capitalists withdrew from early-stage research and investments, particularly in rare diseases, says Peter Ginsberg, vice president, business & technology development at the North Carolina Biotechnology Center. The center has limited funding capabilities but it works with foundations to connect them to technologies or other resources that can help. Ginsberg says a nonprofit, typically started by a family touched by a rare disease, has the drive to advocate for promising early-stage research in a way a pharma company might not.
Yet foundations can fall short on the expertise needed to prepare a compound for pharmas. BioPontis will work with patient groups to identify promising research at universities; in many cases the foundations are already in close contact with leading researchers in their disease. Universities will benefit from the expertise of BioPontis scientists, who bring experience working with pharmaceutical companies. Where necessary, BioPontis may also provide funding.
With so many rare diseases needing treatments, BioPontis will choose where it goes by looking for the most promising science, says Richard Basile, co-founder and chief operating officer of BioPontis. The research must have enough testing behind it, including some animal studies, to suggest that with help, it could advance far enough to start clinical trials. That’s a point where a pharma company could be interested in taking a look at licensing the technology, Basile says.
Basile has held several executive positions at Bayer (XETRA: BAYN) and was later the first CEO of blood therapeutics startup Hemocellular Therapeutics, which is now the Research Triangle Park, NC, company Entegrion.
Handelin, for her part, views rare diseases through the lens of a geneticist. She founded the DNA testing laboratory at Integrated Genetics, which is now Genzyme, part of Sanofi (NYSE: SNY). She later co-founded gene therapy company Genovo. BioPontis’s board of directors also includes Marlene Haffner, who served 20 years as director of the FDA’s Office of Orphan Products Development, and Eric Tambuyzer, whose experience at Genzyme includes work in Europe on orphan products regulation.
BioPontis took its first run at turning university research into viable drug candidates several years ago as a venture fund. Handelin says the for-profit model at the time was to invest in a portfolio of projects, not companies. BioPontis eventually lined up 10 university partners around the country, which would work with BioPontis to advance academic research far enough to attract pharmaceutical company interest. Securities filings show that a 2012 fundraiser targeting $60 million raised just $7 million. Handelin now says neither the industry nor the investment community was ready for that model.
Two years later, a refocused BioPontis operates as a nonprofit focusing exclusively on rare diseases—changes Handelin believes will help the organization find an audience. BioPontis isn’t the only one embracing a nonprofit approach. For example, Bridges to Cures, a Wisconsin nonprofit, formed earlier this year to mentor and fund university researchers spinning out new companies developing promising new drugs.
Big pharma may have ceded rare disease drug discovery to smaller biotechs, but venture capital hasn’t completely forsaken rare disease investments. Earlier this year, Chiesi Ventures partnered with Durham, NC-based A.M. Pappas & Associates on a new fund focusing on rare disease drugs. Venture capital veteran Art Pappas, who manages the fund, told Xconomy that rare diseases and orphan drugs are an investment opportunity because such drugs require smaller clinical trials, which cost less money and can be completed faster. In turn, orphan drug investments could produce a faster return for investors—if the drugs win approval.
What’s true for venture capital investments also holds true for nonprofit “venture philanthropy.” Handelin points to patient groups that have found success raising funds for rare diseases, such as the Cystic Fibrosis Foundation’s collaboration with Boston biotech Vertex Pharmaceuticals (NASDAQ: VRTX). That foundation’s support included a $75 million investment contributed over 13 years toward development of ivacaftor (Kalydeco), a cystic fibrosis drug that works on patients whose genes lead to a particularly rare form of the inherited lung disorder. Such drugs can produce handsome financial returns— the Vertex drug generated $371.2 million in 2013 revenue.
Basile says milestone payments and royalties from successfully partnered BioPontis compounds will be plowed back into BioPontis’s fund for use in other rare diseases.
While foundations will welcome new treatments, a BioPontis partnership could also prove attractive to universities. Handelin says many pharma licensing deals leave the original university researcher with a small cut—if any cut at all—which is a strong disincentive to scientists. As a nonprofit that also has executives experienced in pharma negotiations, Handelin says, BioPontis can strike fairer deals for researchers giving them a greater share in financial rewards that come from their discoveries.
BioPontis keeps a Raleigh headquarters but operates as a virtual entity; while Basile is based in North Carolina, Handelin works from Pennsylvania. Much of the support that BioPontis will offer universities will come from vendors, such as contract research organizations. Handelin and Basile are the only two full-time employees right now. BioPontis will eventually hire scientists who will lead university projects but it won’t build laboratories of its own or take on a large staff, nor does it expect to conduct clinical trials. Basile says the nonprofit doesn’t want to get involved in the high capital costs of drug development and testing that no philanthropic group can sustain.
Handelin calls BioPontis a “startup nonprofit” and she and Basile, along with BioPontis’s board, have funded the organization to date. A fundraising campaign to support BioPontis’s partnership efforts is planned to launch next month. Handelin says patient groups and other nonprofits are likely to be donors. She also expects pharmaceutical companies to contribute.
“The industry that wants these clinical candidates, they probably have to prime the pump,” she says. “And they can probably do that with their philanthropic arms.”
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