Mystery solved: Star biotech team rallies behind a $36M diabetes spinout from Salk

Rich Heyman

The mystery of Ron Evans' new biotech startup has been solved. Armed with $36 million in cash from A-list venture investors and backed by a pro team recruited from Rich Heyman's Aragon/Seragon starring cancer drug startups, the prominent Salk investigator and his old buddy Heyman are coming out of stealth mode today with a new company called Metacrine.

"We have two assets out of Salk," says Takeda vet Neil McDonnell, who was brought in to run the show as CEO of the San Diego-based company. "One is an insulin sensitizer and the other has applications in NASH and other kinds of liver diseases."

Evans specialized early on in the role that nuclear hormone receptors play in cancer, and he's also been working on a new treatment that controls the formation of fat cells--which could play a big role in treating Type 2 diabetes.

The news resolves a mystery that first popped up last April as Metacrine filed a form with the SEC on its fundraising work. The combination of Evans' name alongside the Aragon/Seragon crowd quickly fanned rumors over the biotech's drug target and plans.

Neil McDonnell

Diabetes is a big field dominated by a small herd of pharma giants like Sanofi ($SNY), Novo Nordisk ($NVO), Eli Lilly ($LLY) and Johnson & Johnson ($JNJ). Lining up alongside that major league rivalry you'll find 14 staffers currently on board at Metacrine, including a medicinal chemistry team and business staffers who helped create--and sell--Aragon (a $1 billion deal) and Seragon ($1.7 billion-plus) to J&J and Roche ($RHHBY), two of the biggest players in biopharma. And Metacrine is also aiming high.

"If you look at what most drugs do," says McDonnell, the main job is to "produce more insulin, safely." The trick is to differentiate yourself somehow, which helped inspire a wave of new drugs like SGLT2 therapies. "Now," he adds, "the Holy Grail is to find drugs that improve insulin sensitivity."

Conventional wisdom in biotech would assert that Metacrine is facing tough odds. Phase III diabetes programs require multiple, expensive studies with thousands of patients to demonstrate a clear safety profile for a primary care disease with millions of patients. That can leave a biotech out twisting in the wind unless a major partner comes along to collaborate following proof-of-concept data. NASH, meanwhile, has been attracting a growing number of developers as the patient crowd afflicted by fatty liver disease swells rapidly.

In part because the diabetes field is so competitive, Metacrine isn't saying much by way of explaining the biologic pathway that it's blazing. But McDonnell says that he has solid animal data from multiple models in hand, and given the way the drug works, he expects that the company can start to nail down its own proof-of-concept data among diabetics early on in the clinic.

Just don't ask the CEO for a timeline on clinical studies, because he's not providing that right now either.

McDonnell first got involved with the close-knit group at Metacrine at JP Morgan last January. The former diabetes R&D chief at Takeda has close ties to UCSD Professor Jerry Olefsky, a Takeda adviser who had worked with Evans on some of the early diabetes research. When Evans said they were looking for a CEO, Olefsky offered McDonnell's name. Heyman, the executive chairman at the company, and Evans go all the way back to their postdoc days.

Arch Venture Partners, which has been tilting against a score of biotech windmills in recent years in pursuit of groundbreaking scientific advances, joined EcoR1 Capital, Polaris Partners and venBio in the round.