January 01, 2009
By Bari Faye Siegel
Pat Furlong of Middletown, Ohio, remembers the moments back in 1984 when she first learned that her sons had been diagnosed with Duchenne muscular dystrophy (DMD).
Nothing in her life has been the same since.
"When this word enters your house, everything changes. Every day and every moment of the day, you are asking yourself questions," said Furlong, president of Parent Project Muscular Dystrophy. "These questions range from, 'what do we know about this Duchenne' to 'what do we need to know,' to worries about a future that physicians predict will not be available."
Furlong's boys died in 1995 and 1996 at ages the ages of 15 and 17. A day doesn't go by when they are not in her thoughts. In fact, every move she makes in her attempt to rid the world of Duchenne is in their honor.
The mission of biomedical companies is often laser-focused. Success, however, is sometimes – mostly for financial reasons – beyond the companies' eventual grasp. PTC Therapeutics' President and CEO Stuart W. Peltz, Ph.D. won't let that happen. His reasons are scientific and patient-focused and his passion is obvious.
"From our inception in 1998, we have pursued innovation in every facet of our business, from our integrated scientific approach to our hiring strategy to our funding plan. We've made tremendous progress over the last 10 years in building a sustainable business," said Dr. Peltz.
With close to 200 people working at headquarters in South Plainfield and with clinical studies being conducted around the world, PTC is a much bigger endeavor than it was a decade ago. "Yet, the company remains focused on innovation -- as the key to success for all our constituencies: patients and their parents, our investors, our employees, and our partners."
PTC is committed to the discovery, development and commercialization of orally administered, proprietary, small-molecule drugs that target post-transcriptional control of RNA processes. DMD and cystic fibrosis (CF) are at the top on the PTC's hit list.
The company's most promising drug is PTC124, which is currently in late-stage clinical trials. It's a compound that targets a particular genetic alteration known as a nonsense mutation. Thirteen to 15 percent of boys with DMD have a nonsense mutation. If PTC124 works, it will be the first real treatment for DMD.
"PTC124 was identified from our nonsense suppression technology and is a paradigm shift in the approach to the treatment of genetic disorders. It is one of the first examples of the possibility of truly personalized medicine. The same drug has the potential to treat a subset of the patients with DMD, CF, and over 2,400 other genetic disorders," noted Dr. Peltz. "These are diseases marked by great unmet medical need. In targeting a nonsense mutation, we have an opportunity to address the underlying cause of the disease. It is incredibly exciting and gratifying to be involved with a program like this."
Utilizing what PTC terms "a new way of looking," GEMS (Gene Expression Modulation by Small-Molecules) is another novel and proprietary screening technology. Compounds identified through the GEMS technology modulate gene expression by targeting the post-transcriptional control processes that act through the UTRs of mRNA molecules. GEMS was utilized in the discovery of PTC299, in the HCV program, and in multiple ongoing drug discovery programs.
According to Dr. Peltz, PTC's GEMS technology has many advantages to traditional drug discovery efforts, including: the ability to address a wide variety of genes as potential targets for drug discovery; the ability to avoid the drug delivery challenges associated with biologics, antisense, gene therapy, or RNAi; and PTC's approach offers the opportunity to address these targets with orally delivered small-molecule drugs.
Money Makes It Happen
Innovative thinking? Absolutely. But, all of these ideas take capital. And lots of it, said William "Chip" Baird, chief financial officer. That's why the entire company takes a novel approach to every aspect of the business. It's not only the scientists who have "a new way of looking."
At PTC, there are three aspects to the funding strategy: venture capital, collaborations and grants. To date, it's a $400 million funding strategy, said Baird, which enables PTC to "have multiple shots on goal."
"The challenging part of being a biotech is that business is often binary. There is one program and it works or it doesn't. We try to think more broadly; the fate of the company doesn't hinge on one program."
Dr. Peltz co-founded PTC in 1998. It's a homegrown New Jersey story if there ever was one. The company's technology was innovated here and the entrepreneurial spirit at the University of Medicine and Dentistry of New Jersey (UMDNJ) was a fertile ground to grow it and spin it out into a viable company.
In the beginning, explained Baird, PTC was funded primarily through venture capital. The company raised $1 million in 1998-99 which was enough money to write a full business plan and bring on initial employees.
Things started moving very quickly following the PTC's move out of UMDNJ and into the current South Plainfield facility in 2000. A full venture round occurred that year ($15 million was raised) and a second in 2001 (for another $40 million in new and follow-on funding). Some big names from the U.S., Europe and Asia led the round including Credit Suisse Private Equity, Swiss fund HBM, Bay City Capital of San Francisco and Vulcan Ventures (Microsoft's Paul Allen's fund).
"We went around the world to raise those rounds," Baird added. "We really brought a very diverse and strategic set of investors to the table. I believe you need a global view to attract venture capital dollars to build a stable business."
In 2003, PTC raised another $50 million in yet another round. And, despite what he termed "a difficult financing environment," Baird said PTC finished its five-year VC blitz with a final round of $26 million in 2005.
"At that point we looked at the IPO market pretty seriously and did a lot of work to get ready for it and to pursue it. But ultimately the market conditions were not right and it appeared to be a fairly expensive way to fund the company. At the same time we started to be quite successful on the business development front," Baird said.
In March of 2006, PTC began its focus on collaborations. The company partnered with Schering-Plough Corp. for a preclinical HCV program. The deal included $12 million up front and $200 million in potential milestones. Plenty of money for research, Baird said, and PTC works with the company to this day noting, "local partners are a great advantage in making a successful collaboration."
In June of 2006, PTC did a deal with CV Therapeutics in the San Francisco Bay area, utilizing the GEMS technology to pursue cardiovascular targets of interest. The terms were financially attractive: $10 million up front and $335 million in potential milestones. The companies continue to collaborate today.
Building momentum, PTC next collaborated with Pfizer on a drug discovery deal in January of 2007, landing $20 million in upfront payments. And, later that same year, Summit, N.J.-based Celgene made a $20 million investment in the company with a collaboration option that the PTC team hopes will turn into a full-blown collaboration down the road.
Capping off this string of partnerships, PTC entered into a collaboration with Boston-based Genzyme this past summer to commercialize PTC124 outside the U.S. and Canada. PTC retains control over clinical development and preserves the right to commercialize PTC124 in the U.S. and Canada. Genzyme paid PTC $100 million in a non-equity upfront payment, with potential milestones of $337 million and sales-based royalties.
Third Leg of the Stool: Grants
Remember Pat Furlong of the Parent Project Muscular Dystrophy? PPMD and many other similar organizations, such as the Muscular Dystrophy Association (MDA) and the Cystic Fibrosis Foundation (CFF), truly believe that hope is where the heart is; they know the promise of a Duchenne-free world lies in the work being done at the heart of PTC Therapeutics.
PPMD's investment, a series of grants totaling $5 million, provided the early seed funding for some of the work that led to a $15 million grant from the National Institutes of Health.
"For us, PTC has come into a space, once barren. It has paved the road to our home with PTC124. They understand Duchenne and its impact. They have thoughtfully and carefully developed the first rigorous clinical trial in DMD and with that monumental effort, set the precedent for all future trials."
Similarly, a $1.5 million grant from the MDA and a $1.7 million grant from the CFF helped support early clinical development of PTC124. The data from these early proof-of-concept studies precipitated the larger funding from Genzyme and a recent $25 million follow-on grant from the Cystic Fibrosis Foundation.
According to Sharon Hesterlee, Ph.D., vice president of Translational Research at the Muscular Dystrophy Association, these types of grants are crucial in niche markets. "MDA recognizes that many of the diseases we cover, such as Duchenne muscular dystrophy, represent small markets and increase the risk for biotechnology companies working in these areas. Our translational research program is designed to infuse funding at earlier stages of projects to lower entry barriers for future, larger investors."
Baird said money from foundations and patient advocacy groups is just one part of the grant strategy. PTC has enjoyed much success winning government grants, including early-on SBIR, STTR and small business innovation grants. More recently, due to a more complicated eligibility structure, the company turned to other government agencies.
In 2006, it won a $17.2 million grant from the Defense Threat Reduction Agency (a Department of Defense entity). The two-year grant program will focus on finding a broad spectrum antibiotic.
"In order to become a defense department contractor, you have to do things differently. The Boeings of the world know how to do that better than a private biotech," Baird said. "We've figured it out and done it."
Other government grant programs include: $2.2 million for a breast cancer clinical trial on PTC299 and a $15.4 million NIH grant which has enabled work on other DMD targets of interest in conjunction with the University of Pennsylvania.
"Ours are long-lead-time products," Baird said. "You need to collaborate with academic institutions of excellence and government. And, when it works, it's an ideal intersection. You can't do what we are doing with one part of this puzzle. All together, though, we can really make an impact on many diseases."
For more information, visit www.ptcbio.com, www.mdausa.org, www.cff.org or http://www.parentprojectmd.org/.
EisnerAmper's Catalyst: Winter 2009
Welcome to Catalyst
Nurturing New Businesses
New Jersey's Thriving Incubator System Aids Entrepreneurs
A New Way of Thinking
Varied Funding Strategy Gives PTC Therapeutics 'Multiple Shots on Goal'
Fresh Ideas in Times of Economic Uncertainty
Life Science Financing: A Needle in a Haystack?
Investment Experts Weigh in on Myriad Funding Strategies
Venture Capital and Private Equity: Influencing Growth and Exit