ATyr Pharma Pockets $23M to Create New Class of Protein Drugs, and New Targets

Xconomy San Diego — 

One of the more audacious biotech startups in San Diego just got a big vote of confidence at a moment when few companies of its kind are getting any sort of respect.

San Diego-based aTyr Pharma has pulled in $23 million in its Series C round of venture financing, led by Domain Associates. aTyr’s existing investors, Alta Partners, Cardinal Partners, and Polaris Venture Partners, also participated. Domain partner Jim Blair is joining the aTyr board in connection with the deal. By adding the new round, aTyr has now raised a total of about $46 million since it was incorporated in 2006, according to executive chairman John Mendlein.

The company (pronounced A-tire) was founded by Paul Schimmel and Xiang-Lei Yang of The Scripps Research Institute and John Clarke of Cardinal Partners to do something that would have been in step with the original biotech wave of the 1970s. The idea is to better characterize an entirely new class of biological targets which aTyr is calling “physiocrines.” These are natural proteins that send signals between cells. The plan at aTyr is to develop genetically engineered copies of these physiocrine proteins so they can be given themselves as drugs, and to build a foundation of deep understanding of biology so that these physiocrines could become targets for more classic drugs like small molecule chemicals or antibodies.

“This is probably a once in a lifetime opportunity to be associated with a new class of human protein and make drugs out of them,” Mendlein says. “That doesn’t happen very much. It feels like we’re back at Amgen, Genentech or Biogen in the early days of the industry, where people were creating fundamental discoveries about proteins.”

None of aTyr’s drug candidates have yet made it into clinical trials, but the company has shown it can make physiocrine drug candidates in E.coli bacteria, Mendlein says. The company has identified a lead drug candidate, Tmax, which it plans to test as a treatment for thrombocytopenia—a lack of platelet cells that help people naturally form blood clots. That drug candidate should be ready for its first clinical trial by late 2011, Mendlein says. Other candidates are being prepared in the pipeline as treatments for immune system disorders, he says.

John Mendlein (left) and Paul Schimmel

John Mendlein (left) and Paul Schimmel

The company has rallied some serious talent around the idea. Schimmel is a prolific biochemist, formerly with MIT, and an entrepreneur who has co-founded many major biotech companies, including Waltham, MA-based Alkermes (NASDAQ: ALKS), Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY), Cambridge, MA-based Sirtris Pharmaceuticals (now part of GlaxoSmithKline), and Lexington, MA-based Cubist Pharmaceuticals (NASDAQ: CBST).

Mendlein is also a big name on the biotech scene, who signed on as executive chairman of aTyr back in May. He’s also the chairman of San Diego-based Fate Therapeutics, and was previously the CEO of Waltham, MA-based Adnexus Therapeutics, which also sought to develop a new class of drug molecules, and which was sold to Bristol-Myers Squibb for $430 million in 2007. ATyr’s CEO is Jeff Watkins, a biochemist and the former chief scientist at Applied Molecular Evolution, a unit of pharma giant Eli Lilly (NYSE: LLY).

Mendlein talked in some detail about what aTyr is all about, and what drew him to the company. These proteins have long been overlooked by almost everyone over the past decade of genomic research, but the company has gained increasing confidence over the past three years that they have evolved to alter signaling pathways for a variety of physiologic processes. These are clearly different processes than those used by existing pharmaceuticals, and they appear relevant to blood disorders (like thrombocytopenia), immune disorders, and metabolic diseases.

This essentially adds an important opportunity for therapies that work in completely new ways, similar to other nascent breakthroughs like microRNA-base therapies and epigenetic-based treatments, Mendlein says. No one knew that tiny microRNAs existed in humans a decade ago, much less had any idea how to make compounds to silence their activity in regulating broad networks of genes. With epigenetics, researchers are looking for ways to control methyl groups that dictate how certain genes are turned on and off, without directly interacting at the level of DNA itself.

From a business standpoint, this is important for a few reasons. There are new proteins that biologists can target, that work differently from other therapies, raising the possibility of what’s called “polypharmacy,” in which patients get multiple drugs that work in different ways to corral a complex disease. It’s also possible that patients could get the aTyr therapy by itself to replace the function of a physiocrine that is lacking in a patient, Mendlein says.

The initial plan is to go after thrombocytopenia, in a bigger and broader way than a couple of big companies have done, Mendlein says. Amgen has had some success with its genetically engineered protein (Nplate) for a rare bleeding disorder called immune thrombocytopenic purpura (ITP). GlaxoSmithKline has tried a different tack against that disease with a small molecule drug eltrombopag (Promacta). Those treatments go after just one narrow form of the thrombocytopenia, but if aTyr’s drug has the kind of broader application the company envisions, it could tap into a much bigger potential market worth $2.5 billion to $4 billion, Mendlein says.

No major drug companies have signed on as partners yet to help aTyr pursue this science and drug development program. Right now, aTyr has a team of 27 people, with 20 of them in San Diego and the rest in Hong Kong. The plan is to keep pushing along methodically with its own programs, although the company may choose to form a partnership, Mendlein says. But he noted that aTyr is in unusually good position, having just completed a venture round that was oversubscribed (meaning aTyr raised more money than it needed to) and that it was an “up round,” meaning the investors placed a higher valuation on the company than they did at previous financings. “We will be weighing our options,” he says.

There are certainly a number of biotech companies out there pushing the edge of innovation in San Diego—Regulus Therapeutics in microRNA and Fate Therapeutics in stem cells to name a couple—but there really aren’t many that have raised significant new venture rounds now that the venture business is essentially facing what many people think is an existential crisis in the wake of the economic downturn. You’d never know it from my conversation with Mendlein yesterday.

“This is back to the basics,” Mendlein says. “High patient needs, new markets, innovative drugs. That’s how a lot of great companies have gotten built.”