Third Rock bets $35M on upstart Sage Therapeutics in risky CNS market

Third Rock Ventures is taking its first shot on a biotech focused on the market for central nervous system (CNS) disorder drugs. The venture firm has fueled start-up Sage Therapeutics with a $35 million Series A round and brought together neuroscience experts such as former Eli Lilly ($LLY) R&D head Steven Paul to discover and develop new drugs in the field.

Sage Therapeutics officially "launches" this week, but Third Rock has been working with Paul for more than a year to compile licenses to technologies and corral key assets--such as the upstart's platform for discovering allosteric receptor modulators. Now the group wants to develop new treatments against some known targets, with an initial focus on conditions such as depression, pain, schizophrenia and traumatic brain injury.

Some of Sage's research includes non-benzodiazepine targeting of GABA receptors and non-glycine modulation of glutamate receptors. The start-up plans to get rolling with human trials within two years, says Kevin Starr, a founding partner at Third Rock and the upstart's interim CEO. Paul and Douglas Covey, a biochemistry professor at Washington University School of Medicine, are founders of the company.

Third Rock is betting big on Sage even after a parade of Big Pharma outfits like GlaxoSmithKline ($GSK), Merck ($MRK) and Sanofi ($SNY) cut back on CNS drug R&D in recent years. While developing drugs in all disease areas is difficult, Paul explained in an interview with FierceBiotech, CNS drug programs have had high failure rates because of factors such as placebo responses in studies of drugs for mood disorders. Yet there are ways to overcome some of the historic hurdles to developing such drugs, he said.

Other themes in the CNS field might also play in Sage's favor. Though the multibillion-dollar market for antidepressants and other CNS drugs is one of the biggest in the pharma business, existing treatments often fall short of meeting the needs of patients. For instance, about two out of every three people suffering from depression don't respond adequately to their meds, according to figures cited by Sage. And existing schizophrenia drugs have been linked to such side effects as weight gain and diabetes. "CNS disorders remain one of the largest underserved markets in the world, burdened with a tremendous degree of patient unmet need," Paul said in a statement.

Though Big Pharma groups have pulled back on their own in-house early discovery efforts in neuroscience, Third Rock sees some of these companies as potential partners for Sage's programs as the large drugmakers look to stay in the CNS market.

"We did spend a lot of time over the past two to three years talking to potential pharmaceutical partners" about the CNS market, Starr told FierceBiotech. "We were very encouraged that despite their disinvesting in their own R&D, there's a very high level of enthusiasm for drugs that could treat these important disorders."

In the meantime, big players in the CNS game such as Eli Lilly and Forest Laboratories ($FRX) face the loss of patents on key brands such as Zyprexa and Lexipro, respectively. Forest, for example, bought small drug firm Clinical Data early this year for $1.2 billion to gain control of its recently approved antidepressant Viibryd. More recently Forest signaled that it was interested in building its pipeline of earlier-stage assets. Sage's Paul led CNS drug R&D at Lilly during the development of Zyprexa and other big sellers.

Sage is now operating in Third Rock's offices in Boston with a small staff and plans to move over the river to Cambridge, MA, early next year, Starr said. With its core technology and strategy in place, the firm appears poised to meet future demand for new CNS assets in the years ahead.

"This is not atypical of what we like to do," Starr said, wearing his Third Rock partner hat. "When we start early in the discovery process like with Sage, we try to look forward three to 5 years or 10 years and say, "Where is the world of the disease area that we're going into [heading]?"'

- here's the release