Atlas R&D group banks $8M in virtual development deal

Atlas Venture's fledgling early-stage development group has hatched its second pact, banking $8 million to back the virtual research team assembled to work on a new anesthetic. 

Formed 18 months ago, Atlas Venture Development Corp. has penned an unorthodox biotech model. Rather than form a company to develop a pipeline of new drugs at considerable cost while requiring years of labor and great risk--all in search of a big payoff at the end of the rainbow--AVDC hunts for pre-clinical or very early-stage programs, then executes on a low-cost, quick-march plan to snag proof-of-concept data with a pre-arranged deal to hand off the asset to a buyer. The model resembles the one used by Velocity Pharmaceutical Development, a development umbrella group put together by CMEA's David Collier and Karl Handelsman, which has a virtual team assembled to do the same kind of proof-of-concept research work on a project-by-project basis.

Atlas's new company, Annovation Biopharma, illustrates how it works. Atlas Venture, Partners Innovation Fund and a new strategic investor, The Medicines Company, are putting up the cash in a Series A that can scale up to $11 million. The AVDC is taking a lead drug from Dr. Douglas Raines's laboratory at Mass General and will advance it through PoC, with a deal already structured that allows The Medicines Co.--active in the acute care field--to buy out Annovation under a pre-arranged set of terms, including milestones. 

"The innovation is in the business model," says Jean-Francois Formela, a partner at Atlas and the chairman of the new virtual developer, which was initially set up with seed cash from Atlas, PIF and Mass Medical Angels. AVDC's first deal was the $18 million financing package it put together with Orbimed for Arteaus Therapeutics, which is taking a migraine treatment in-licensed from Eli Lilly ($LLY) and advancing it up the pipeline, with Lilly holding an option to re-acquire it. And the group is looking over plenty of similar deals as pharma and biotech look for external development partners.  

"We've looked at dozens (of these externalized research deals) since Dave Grayzel (the managing director at AVDC, who trained at Mass General and was earlier in charge of development at Infinity Pharmaceuticals) joined us," says Formela. "When you pioneer something you have to walk before you run."

"We put together a virtual organization the entities need," says Grayzel. "Annovation has a core group of dedicated people, with a cloud of consultants and experts" lending a hand. Grayzel says more of these deals are in development.

- here's the release