UPDATED: Ex-Genentech dream team garners $217M to launch neurodegenerative player Denali

Denali CEO Ryan Watts

A group of high-profile ex-Genentech execs has rounded up a monster $217 million A round to launch Denali Therapeutics with plans to tackle neurodegenerative diseases like Alzheimer's disease, Parkinson's disease and ALS.

Drawing on some rich support from a group of A-list investors are three key co-founders: Ryan Watts, the acting CEO, CSO and the former director of the department of neuroscience at Genentech; Alexander Schuth, COO of Denali, the former head of neuroscience partnering at Genentech; and Marc Tessier-Lavigne, the former CSO at Genentech and a neuroscientist who is now president of The Rockefeller University and will be chairman of Denali. Soon after the news about the startup hit, Tessier-Lavigne announced that he was bowing out his board seat at Pfizer, which has its own neuroscience division.

Putting together a record-setting round like this took some deep-pocketed groups in early-stage biotech financing, along with some unusual players. Fidelity Biosciences, ARCH Venture Partners, Flagship Ventures and the Alaska Permanent Fund all participated, along with some unnamed investors that include "sovereign wealth funds, public mutual funds and private family offices, with significant reserves for additional future financing."

For now, the emphasis will be on early-stage translational research in a field that has seen more exits than entries in recent years as some big players in the pharma world grew disenchanted with the heavy risks involved in developing new drugs for neurodegenerative treatments.

Denali COO Alexander Schuth

The Denali founders have been talking about a venture like this for the past 5 years, Schuth tells FierceBiotech this morning. Those discussions began to take harder shape last summer, adds Watts, with the investors coming in late in 2014 and early in 2015 to put together the big round.

All of the players noted that the industry was getting increasingly cold feet around neuroscience years ago, adds Watts, particularly on the psychiatric side of the equation. But in more recent times there have been a slew of discoveries on the genetics of these diseases as well as the biomarker front that opened the door to taking a whole new approach to the field. Four key pathways, including inflammation and axon degeneration, will help guide R&D at the new company. And with a heavy reliance on biomarkers--an approach that guides much of the work at their old company, Genentech--they expect to build up a portfolio of programs which will set out to establish early on if there's clear evidence of target engagement. That approach differs dramatically from the kind of guesswork that has gone into much of the work around, for example, amyloid beta in Alzheimer's.

"We do have programs in house," says Schuth, but the company also expects to work with industry as well as academic collaborators.

There's a lot that the two aren't talking about. Asked how big the company would be in a year, neither offered a figure on staffing. At this stage, they say, there's still a lot to work out. But one thing is certain, they add: Denali won't be a virtual company.

"We are actively recruiting," says Watts.

They'll have plenty of money to make an ambitious start. The fledgling biotech not only got an A-list group of biotech investors, but some of the top people in the venture community (with some of the deepest pockets) will now also take a place on Denali's board.

The founding board members include:

  • Robert Nelsen, Managing Director and Co-Founder of ARCH Venture Partners
  • Stacie Weninger, Executive Director of Fidelity Biosciences Research Initiative
  • Douglas Cole, Managing Partner of Flagship Ventures
  • Stephen Knight, Managing Partner of Fidelity Biosciences
  • Jay Flatley, CEO of Illumina
  • Vicki Sato, Professor of Management Practice at Harvard Business School
  • David Schenkein, CEO of Agios Pharmaceuticals (who was just named one of FierceBiotech's 25 most influential people in biopharma)

"Flagship has sought an opportunity in this field for many years," says Cole. "We believe that neurology has now reached a turning point in understanding disease mechanism and translational medicine that, for the first time, creates real opportunities to develop disease-modifying drugs. The founding Denali team comprises indisputable world leaders in the field. The time is right to take on the challenge of neurodegenerative diseases, and Denali has the people, science and resources for success."

- here's the release

Special Report: The 25 most influential people in biopharma in 2015 - David Schenkein - Agios Pharmaceuticals