City Hill Leads $6M Financing to Pioneer RA Diagnostics at Ignyta

Xconomy San Diego — 

San Diego-based Ignyta, founded in 2011 as NexDx with a focus on improving the diagnosis and treatment of rheumatoid arthritis, says today its Series B financing has expanded to $5.5 million—about $2.5 million more than its original target. With a $500,000 loan provided in June by Silicon Valley Bank, Ignyta says its Series B financing now totals $6 million.

In a statement today, Ignyta says Dallas, TX-based Colt Ventures joined in the expanded round, along with other institutional and individual investors, including former CEOs and CFOs of publicly listed biotechnology companies.

Ignyta was co-founded by Gary Firestein, a professor of medicine who is now the UC San Diego dean and associate vice chancellor of translational medicine, and Jonathan Lim of San Diego’s City Hill Ventures. (The company, which licensed the diagnostics technology from UCSD and has four patent applications pending, says the scientific discoveries that fueled the founding of Ignyta are described in the July 2012 issue of Annals of the Rheumatic Diseases.)

Jonathan Lim

Lim, who founded City Hill Ventures after taking San Diego’s Halozyme Therapeutics (NASDAQ: HALO) from a startup with five employees to public company, describes City Hill as small and “very hands-on, operational venture firm.”

In an interview a few weeks ago, Lim told me he’s closed his first fund after making only five investments, including Eclipse Therapeutics, which he founded with anti-cancer antibody technology acquired from the closure of Biogen Idec’s San Diego facility. Australia’s Bionomics acquired Eclipse in September for about $10 million, about 18 months after Lim founded the startup and City Hill invested $2 million to advance the technology. (City Hill also has invested in San Diego-based Independa, and was the founding investor in San Diego’s Inhibrx and Medenovo.)

“We’re building companies that are not going to be in JAMA anytime soon,” Lim told me, referring to the Journal of the American Medical Association. “But these are companies that are going to be very important to patients.”

Lim, who is currently the CEO at Ignyta, intends to play an active role in all of City Hill’s deals. He has been joined at Ignyta by Zach Hornby, who was previously a senior director of business development at Fate Therapeutics and served in various roles under Lim at Halozyme. The company has just five employees, including David W. Anderson, the former chief scientific officer of Proprius Pharmaceuticals.

Ignyta was founded to take advantage of an important breakthrough by Firestein’s lab that enables the company to take a fundamentally new approach in diagnosing rheumatoid arthritis (RA), the chronic and systemic inflammatory disorder, but the technique could have widespread applications in diagnosing a variety of autoimmune disorders.

“People have been exploring SNPs (single nucleotide polymorphisms) or mutations in the genes for diagnostic purposes but SNPs have not been particularly informative in RA,” Lim says.

Ignyta’s approach looks for changes in DNA methylation, methyl group modifications that affect the function of the genome without changing the nucleotide sequence. “Methylation analysis is the study of changes in the function of genes rather than changes in the structure of genes, which can capture the impact of environmental effects on DNA that don’t necessarily cause mutations,” Lim says. “Methylation changes turn genes on or off without mutating the genes themselves.”

The new approach offers the promise, Lim says, of “100 percent specificity and 100 percent sensitivity” in diagnosing RA when patients first begin to complain about pain in their joints—and before the autoimmune disease has progressed to irreversible destruction of cartilage and the development of fibrous tissue in the joints. That’s crucial because early treatment can significantly improve the health of RA patients, Lim says.

But RA can be fiendishly difficult to diagnose at the outset, especially in terms of distinguishing the disease from osteoarthritis. Current blood tests are accurate in only about 28 percent of the presenting cases, Lim says.

As a result, Lim says it can take nine months or longer to accurately diagnose RA using existing technology, and that is often too late to intervene before extensive joint damage has occurred. As a systemic inflammatory disorder, RA also can affect other tissues and organs as well, and Lim says related cardiovascular problems are the largest cause of death among RA patients.

Lim says he was so impressed by Firestein’s use of methylation analysis to identify a wholly new set of RA biomarkers that he made City Hill’s initial investment based solely on the data from Firestein’s breakthrough research. “There’s clearly something here,” he says.

About 1 percent of the world’s population suffers from RA. In the United States, about 1.5 million adults have been diagnosed, with more than 100,000 occurring each year, according to the U.S. Centers for Disease Control. In most cases, however, patients undergo repeated testing—at a price point of about $2,000 per test—before getting a definitive diagnosis. Lim estimates the market for a more definitive molecular diagnosis for early RA at about $1 billion.

If Ignyta can follow through in developing such a diagnostic, the company could address a critical shortcoming with existing diagnostic technology. Once proven, Lim says the company’s diagnostic platform could be used to identify therapeutic targets for new drug development—essentially opening the way to a personalized medicine approach for diagnosing and treating RA.

The company plans to use proceeds of its current round in 2013 to begin clinical studies to confirm its molecular based assay for diagnosing RA at its earliest, most-treatable stages. Ignyta also plans to begin the necessary preparations to win CLIA certification for its diagnostic laboratory to support commercialization that tentatively could begin in late 2014 or early 2015.

From there, Ignyta plans to expand its use of methylation analysis for diagnosing lupus and other autoimmune diseases.