Biotech Values

[DewDiligence]

FoldRx Receives $22M from Cystic Fibrosis Foundation

http://www.boston.com/business/globe/articles/2007/08/13

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By Sacha Pfeiffer
August 13, 2007

The Cambridge biotechnology firm FoldRx Pharmaceuticals Inc. will receive $22 million from the Cystic Fibrosis Foundation to develop and commercialize drugs aimed at treating the fatal genetic disease, a disorder of the lungs and digestive system that afflicts 70,000 people worldwide.

The deal, to be unveiled today, is the latest so-called venture philanthropy partnership inked by Boston-area pharmaceutical companies, which increasingly rely on charitable foundations and other nonprofit groups to fund early-stage drug development that is too risky to attract traditional private investors.

The money amounts to nearly a third of the total investment capital FoldRx has raised from venture capitalists -- $59 million -- since it was founded in 2003. It will be paid in chunks over five years if the company achieves a series of drug-development milestones.

The award is modest in the grand scheme of drug development; the cost of developing a single drug for commercial sale can easily reach $400 million, according to Robert J. Beall, president and CEO of the Bethesda, Md.-based Cystic Fibrosis Foundation. But FoldRx plans to wield the $22 million as leverage: By using the foundation's award to reach a more advanced stage of research and testing, such as conducting clinical trials, the company hopes to attract bigger dollars from private investors.

In that way, it aims to lift itself out of what is known in the pharmaceutical industry as the Valley of Death, the beginning phase of drug development when many investors are unwilling to spend their money on research that is still more theory than reality.

The problem is particularly acute for "orphan diseases" such as cystic fibrosis, which affect relatively few people and therefore present limited financial incentive for pharmaceutical firms to research treatments.

"At an early stage like we are, it's difficult to get venture capital money…so this partnership with the foundation is very attractive from a financial point of view," said Richard Labaudiniere, president and chief executive of FoldRx, whose research centers on cellular proteins that do not fold properly, causing genetic damage that manifests in diseases such as Alzheimer's, Parkinson's, and cystic fibrosis. "This money will help us to accelerate and expand the scope of this program."

The collaboration also gives FoldRx access to the foundation's deep well of resources and expertise, including a national network of scientists, patient care centers, and facilities that design and run clinical trials.

FoldRx will retain worldwide commercialization rights for any drugs it develops and will own any intellectual property created during the collaboration. The company will pay for some pre-clinical development costs and the foundation will be eligible to receive royalties from sales of any approved products.

Nationwide this year, charitable foundations such as the Cystic Fibrosis Foundation, Juvenile Diabetes Research Foundation, Michael J. Fox Foundation for Parkinson's Research, Multiple Myeloma Research Foundation, and Muscular Dystrophy Association will pump about $75 million into drug-development research by biotechnology firms, according to CenterWatch Monthly, an newsletter that covers the pharma and biotech industries.

Traditionally, private foundations and nonprofit groups founded around specific diseases have funded academic research, which can yield innovative discoveries but isn't aimed at developing actual treatments. So as government and private funding for early-stage, high-risk drug development has shrunk in recent years, those organizations have begun helping to fill that funding gap by pouring their charitable dollars into private drug development.

In 2007 alone, the Cystic Fibrosis Foundation -- whose primary mission, through an affiliate called Cystic Fibrosis Foundation Therapeutics, is to keep the drug-development pipeline filled with promising prospects -- has earmarked $48 million for drug investment in pharmaceutical companies.

And it has invested more in Boston-area biotech firms -- $138 million -- than in any other market in the country. Local beneficiaries of its funding also include Epix Pharmaceuticals in Lexington and Alnylam Pharmaceuticals, Altus Pharmaceuticals, CombinatoRx, and Vertex Pharmaceuticals, all in Cambridge.

This type of partnership is "really starting to become another way to support your research," said Labaudiniere of FoldRx, "and I think it will be more and more common in the future.”
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