aTyr Pharma Looks to Strike Balance Between Nonprofits, and Really Big For-Profits

Xconomy San Diego — 

Quite a few biotech entrepreneurs are thinking hard these days about how to reinvent the industry’s wobbling business models, and one of these interesting experiments is happening at San Diego-based aTyr Pharma.

John Mendlein, the well-known entrepreneur who splits time as the executive chairman at both San Diego-based aTyr Pharma and Fate Therapeutics, says that aTyr is working on setting up an unusual corporate structure that he hopes will make it easier to cut deals with a wide variety of partners with both for-profit and non-profit status. He’s not yet going into great detail, but aTyr’s basic idea is to make it so nonprofit disease foundations can support aTyr’s work, alongside government agencies like the National Institutes of Health, and the usual suspects in Big Pharma and Big Biotech.

“As we have explored different levels of therapeutic breadth, we feel it’s incumbent on the company to come up with a different business plan to fully exploit the new biology,” Mendlein says. “We think the proteins we’re working on lend themselves to striking relationships with different entities.”

aTyr is one of those classic biotech stories you don’t see much anymore, in which gobs of venture capital ($47 million so far) gets thrown behind a prominent scientific founder (Paul Schimmel) with a really early-stage idea with potential to crack open a new field of biology. The company (pronounced A-tire) is working on a new class of natural proteins called “physiocrines” that send signals between cells. The company, which we wrote about last October, is seeking to develop genetically engineered copies of physiocrine proteins so they can be given as replacement therapies for people with deficiencies, while at the same time, working to better understand the biology so that physiocrines could become new targets for conventional drugs.

The company dropped a hint of the kind of partnerships it has in mind when it hired Melissa Ashlock as its new vice president of external scientific alliances and human genetics. Ashlock, formerly a researcher at the NIH, was one of the people at the nonprofit Cystic Fibrosis Foundation who helped craft a partnership that poured more than $75 million into developing a cystic fibrosis drug with Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX). Mendlein was one of the people on the other side of that deal, when he was at San Diego-based Aurora Biosciences, the original developer of the drug now known as VX-770. (Vertex acquired Aurora Biosciences in a 2001 deal initially valued at $592 million.) That drug has served as something of a model to many nonprofits and biotech companies—particularly since it went on to become such a clear hit in later clinical trials.

John Mendlein is executive chairman of San Diego-based aTyr Pharma

Mendlein, who’s both a lawyer and a scientist by training, said the Aurora/CF Foundation deal was a “really good model,” for supporting development of a drug for a small patient population. But he doesn’t want to be hemmed in to doing deals just like that, and aTyr wants to keep the proverbial options open to classic Big Pharma/little biotech collaborations.

This effort, Mendlein says, is being driven by the science. For example, there’s one case of a physiocrine that’s associated with a rare genetic disease (like cystic fibrosis) in which a nonprofit foundation might be the right entity to help finance further studies, and help do a lot of the legwork to build a network among patients and academic researchers. In another case, aTyr has a physiocrine program that could have much broader market potential for inflammatory conditions—the sort of thing that excites dealmakers in Big Pharma.

“We want to create a corporate mechanism to accommodate those different kinds of relationships,” Mendlein says.

Balancing the interests of all those different parties, plus aTyr’s investors and early employees, doesn’t sound like it will be easy. He didn’t offer a timetable for when the ink will be dry, and he can talk in more detail about the new aTyr structure. “I’m thinking of getting a second home on Mars, because the days are longer there,” he joked a couple weeks ago, during a break at the Biotechnology Industry Organization’s annual convention.

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