Encoded Nabs $104M, Illumina’s Help, to Push Gene Therapy’s Limits

Xconomy San Francisco — 

Despite the progress of gene therapy—a cutting edge medicine promising long-lasting effects from a single treatment—it remains a crude and limited tool. Startup Encoded Therapeutics has raised $104 million to join the race to expand gene therapy’s reach.

The South San Francisco, CA, company has emerged from the startup accelerator of Illumina (NASDAQ: ILMN), and it counts the DNA sequencing giant among its investors along with Arch Venture Partners, Venrock, and others. The $104 million haul it closed today brings its total funding to $158 million and will back human tests of a gene therapy for a rare form of epilepsy called Dravet syndrome.

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The Dravet program is meant to show that Encoded, using an atypical approach that harnesses DNA sequencing and computing tools, can get to diseases that gene therapy currently can’t touch. Its proof so far is only in animal tests. Human studies of the Dravet program should begin by early 2021, says CEO Kartik Ramamoorthi.

After decades of ups and downs, gene therapy has become the source of two FDA approved products, with many more in the pipeline. Gene therapies shuttle DNA material into the body, typically with the help of an engineered virus, or “vector,” to help a patient produce a critical missing protein.

Gene therapies for a rare form of vision loss (Luxturna, from Spark Therapeutics) and the neuromuscular disease spinal muscular atrophy (Zolgensma, from Novartis) are now available in the U.S., a few more are approved in Europe, and others are likely on the way. Several large pharmaceutical companies, after abandoning gene therapy in the early 2000s, have acquired or cut deals with gene therapy developers to capitalize on its progress. Multiple manufacturers of gene therapy tools have also been bought out this year.

The treatments should work in perpetuity, theoretically. Yet the technology is imperfect, relegated to a small group of rare diseases, and its effects are unpredictable. Developers still don’t know how long a treatment might last, or how much of a protein a patient will start producing. “It’s kind of a blunt force,” Stoke Therapeutics (NASDAQ: STOK) CEO Ed Kaye, a former gene therapy researcher at the Children’s Hospital of Philadelphia, told Xconomy in 2018. “It’s either on or off.”

The approved gene therapies have come with massive upfront price tags— the SMA treatment Zolgensma costs more than $2.1 million—so their owners have floated payment options, including pay-for-performance, to  account for this uncertainty.

Technological alternatives are emerging too, and that’s where Encoded comes in. As with its predecessors, Encoded aims to deliver genetic material into the body with the help of engineered adeno-associated viruses, which have proven safe in multiple trials.

The key difference, though, is Encoded isn’t delivering full genes or even shortened versions. The company is packing its viruses with DNA sequences called “regulatory elements,” non-coding portions of the genome that control the expression of genes. There are many advantages to using regulatory elements, says Ramamoorthi, such as size—they can be smaller than a gene that won’t fit into an AAV—and strength, potentially lowering the amount of virus needed to deliver a dose.

The key is finding the right regulatory elements. Encoded is using DNA sequencing technology and computing tools, which Ramamoorthi concedes is not proprietary work. But Encoded has a head start, he says. “These are not things you can simply find in the genome,” he says. “You have to screen thousands of them” to find something meaningful.

With Dravet syndrome, more than 80 percent of patients have a mutation to the SCN1A gene, according to the National Organization for Rare Disorders. The mutation disrupts production of a protein, Nav1.1, that helps regulate the chemical balance in brain cells. When the balance is upset, brain cells become overexcited, leading to seizures. Dravet has long been a possible gene therapy target, but the healthy SCN1A gene is too big to fit into an AAV. Encoded thinks it has found a regulatory element that not only triggers the mutated SCN1A gene to function normally, but also goes to work only in a subset of nerve cells that are dysfunctional in Dravet.

“This highlights the ability of the technology to get at these really complex problems,” says chief scientific officer Stephanie Tagliatela. The company presented results from an animal study at the American Society of Gene & Cell Therapy meeting in May. [Snippets of the data are in abstracts 915, 541, and 548].

“There’s a growing group of companies like us,” says Ramamoorthi.

Generation Bio, for instance, is working on a virus-free gene therapy and has raised more than $125 million. Companies such as MeiraGTx (NASDAQ: MGTX) have been developing “genetic switches” to try to dial up or down the effects of gene therapy. Stoke, which went public last week, isn’t working on gene therapies, but it is nonetheless capitalizing on their current limitations. Its RNA drugs are meant to precisely increase the levels of a protein the body produces.

Encoded’s Dravet program makes it a rival of Stoke, whose first drug should begin clinical testing next year. Call it a second-generation rivalry: Stoke was formed by Adrian Krainer, the scientist who discovered the RNA drug nusinersen (Spinraza), the first-ever marketed medicine for SMA. Encoded’s chairman is Sean Nolan, the former CEO of AveXis, now a Novartis subsidiary, which developed the gene therapy Zolgensma that is locked in a commercial battle with Spinraza.

Existing backers Venrock, Arch, Matrix Capital Management, Illumina Ventures, and Altitude Life Science Ventures participated in the funding, alongside new backers Menlo Ventures, RTW Investments, Boxer Capital, and Alexandria Venture Investments.