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UW Spinoff Resolve Therapeutics Snags $5.8M for Lupus Drug

Xconomy Seattle — 

Resolve Therapeutics, the University of Washington spinoff with a new strategy for the treatment of lupus, has nailed down $5.8 million in its second round of venture financing, Xconomy has learned.

The company has secured the additional cash from its existing investors New Science Ventures and Easton Capital, as well as a new backer, Seattle-based WRF Capital. The company has now raised a total of $7.8 million in venture capital, when combining the new round and its $2 million Series A financing from May 2011.

Resolve, which I first profiled in November 2010, was born from a scientific collaboration between rheumatologist Keith Elkon and immunologist Jeff Ledbetter at the University of Washington, and CEO Jim Posada, a former dealmaker at Eli Lilly. Their idea is to make a new genetically engineered protein drug that shuts down the excess production of inflammatory molecules like interferon alpha, which are implicated in systemic lupus erythematosus. This disease is known for causing flare-ups in which the immune system attacks healthy tissue like a foreign virus, causing tissue damage, swelling, pain, and fatigue. It’s hard to diagnose, and very hard to treat with current drugs. Partly because of the lack of good therapies, and the huge potential market of 1.5 million estimatedpatients in the U.S., lupus has long been considered a big growth opportunity at Big Pharma companies.

Jim Posada

“We’ve had discussions with a number of pharma companies that are excited about our drug,” Posada says. “They’ve done careful scientific diligence and agree it’s an exciting new approach. It’s very different than the other things in development for lupus.”

Thong Le, a managing director at WRF Capital, said the company’s business model helped it secure the additional cash. “Resolve’s therapeutic approach and capital-efficient development model provided a unique and compelling investment opportunity for WRF Capital,” Le says. “We spent several months getting comfortable with the technology and the preclinical data, and at the end of the day, we were quite impressed with what we saw.”

While the specific approach at Resolve is different, it is actually inspired in large part by some work done by researchers at Genentech and MedImmune, who have shown that antibodies that shut down excess production of interferon alpha might have a chance at being good lupus drugs. Resolve is attempting to make a protein drug that could be given in fewer injections, and which would have broad activity against more inflammatory molecules than just interferon alpha. Resolve—like every other company in the field—is also hoping that its drug will be targeted enough to shut down the autoimmune process without suppressing too much of the immune system, and making people vulnerable to infections.

Resolve is looking to go after this opportunity with a pretty conservative business plan. The company plans to use the latest financing to move its one lead drug candidate, RSLV-132, into its first clinical trial in 40 healthy volunteers by the middle of 2013, Posada says. If the drug looks safe there, the company’s next move will be a study of 50-60 lupus patients who will get a variety of doses of the drug. That trial will assess the drug’s safety, and its ability to inhibit a biomarker that’s thought to be linked to lupus symptoms.

The plan is to do all of that on about a $12 million budget, and then strike a traditional licensing transaction with a Big Pharma company that will essentially acquire the drug—not the whole company. Resolve has no employees, just a network of 15 consultants who get compensated through a combination of hourly fees or equity. Through leaning on consultants and vendors to keep expenses low, Resolve hopes to achieve a venture-style return. The exit strategy is to sign a conventional licensing transaction with a Big Pharma company that will provide some upfront cash and milestone payments. Resolve went this route because the founders knew the odds of getting returns via an IPO or whole-company acquisition were pretty slim, and the chances were better of enticing a pharma company to in-license a single compound for the next stages of clinical development.

A few things have happened in lupus since Resolve was getting started. Human Genome Sciences and GlaxoSmithKline made big news in the lupus world in March 2011, when they won FDA approval of an antibody drug called belimumab (Benlysta): it marked the first new treatment for the disease in 56 years. So far, the drug has gotten off to a slow start in the marketplace, and has done nothing to deter other contenders, Posada says. “There’s still quite a bit of unmet medical need in the space,” he says.

The next couple years will be a critical time for Resolve to show its strategy has merit. The company hopes to start its key study of 50-60 lupus patients in late 2013 or early 2014, then have positive results to show prospective Big Pharma partners one year later. Even though Resolve doesn’t need to do any long-term follow-up of patients and their symptoms in this study, the trial will probably take about a year because lupus patients are notoriously difficult to enroll in trials, Posada says.