Monday, July 30, 2007

Biotechs benefit as science foundations invest in research

By Ryan McBride

With philanthropic support from wealthy Massachusetts businessman Joseph O'Donnell, the Cystic Fibrosis Foundation has raised more than $100 million to invest in new treatments.

But rather than dole out the money in grant form, the foundation -- like more and more similar organizations -- is taking a real stake in some of the labs doing research for its cause.

FoldRx Pharmaceuticals Inc., of Cambridge, for example, appears to be in line for such a deal with the Bethesda, Md.-based foundation.

Such deals underscore an increasingly popular way of doing business for disease foundations. Once focused solely on funding academic studies, several of the nonprofit groups have begun to act more like venture capital firms, investing in the development of actual drugs to treat the patients for which they advocate.

Just this month, the Leukemia & Lymphoma Society launched a new program to usher new blood-cancer drugs into clinical trials, in part by investing in private firms such as Cambridge's Ensemble Discovery Corp., a society official said.

And the Michael J. Fox Foundation for Parkinson's Research, founded by the famous actor after he was diagnosed with Parkinson's disease, announced in June a commitment of $5 million toward a similar effort.

As for the CF Foundation, spokeswoman Laurie Fink confirmed that it is in "discussions" with FoldRx, but declined to provide further details as negotiations continue. FoldRx CEO Richard Labaudiniere did not return phone messages.

By expanding the nature of the grant-making process, foundations have been able to advance research for treatments of rare diseases that biotechs may otherwise have overlooked.

"I'm not sure we would have went into (developing) a product for cystic fibrosis," said Robert Gallotto, vice president of strategic planning and alliance management at Altus Pharmaceuticals Inc. "It doesn't exactly bring the investors behind you for such a niche product."

Cambridge-based Altus has garnered about $18 million from the CF Foundation since 2001 to support the firm's efforts to gain approval for ALTU-135, an enzyme-replacement treatment to boost pancreatic function in cystic fibrosis patients that entered Phase 3 clinical trials in May.

The foundation has agreed to provide up to $25 million to Altus, which in turn would give the group an undisclosed payment and royalties on sales of ALTU-135, if the treatment is approved.

Gallotto said the foundation's support helped Altus obtain data on the treatment, for which private equity investors and public stockholders have provided the bulk of development dollars. The market for the product in 2006, he noted, was about $210 million in the United States and $750 million worldwide.

Still, just 30,000 Americans suffer from cystic fibrosis, a genetic disease that causes potentially lethal lung infections and metabolic dysfunction, according to the New York-based American Lung Association -- a niche compared with the market for treating more than 20 million U.S. diabetics, for example.

That's one reason the CF Foundation has committed a fortune to prompt biotechs to develop new treatments. The group has allocated more than $130 million to Bay State biotechs Altus, Alnylam Pharmaceuticals Inc., CombinatoRx Inc., Epix Pharmaceuticals Inc. and Vertex Pharmaceuticals Inc.

A national CF Foundation fund-raising campaign -- chaired by O'Donnell, CEO of food services firm Boston Culinary Group Inc. -- had brought in a total of $110 million of a targeted $175 million as of March, the group reported. And much of the funding has been slated for drug development.

Last year, the New York-based Leukemia & Lymphoma Society tested the private-sector waters with a deal to provide Cambridge's Ensemble with a $400,000 contract to develop technology to locate cells that trigger blood-cancer relapses, said Louis DeGennaro, chief medical officer of the nonprofit.

DeGennaro said the deal was a pilot for the society's Therapy Acceleration Program, launched this month, which has a $5 million budget this year to partner with biotechs and provide cancer researchers with resources to enter clinical trials. The society, which last year awarded $65 million in academic research grants, aims to increase the annual budget of its new drug-development program to $35 million by 2011.

Though the society, like the CF Foundation, expects to gain returns from its investments that yield approved products, DeGennaro emphasized his group's main focus remains on patients.

"The goal (of the program) is completely focused on patients," he said. "The goal is to get more therapies to patients faster."