Scripps spinout aTyr grabs $59M in venture deals with a public twist

Sometimes venture deals in biotech seem like preludes to initial public offerings. In one such financing, aTyr Pharma has raised $49 million in a Series D financing that included money from "one of the largest public funds in the world," Executive Chairman and CEO John Mendlein said.

aTyr Pharma CEO John Mendlein

The San Diego startup also secured a $10 million debt deal from Silicon Valley Bank to help the company advance its first candidate from a novel class of proteins known as "physiocrines" into clinical trials for rare immune disorders. The company had previously raised $47 million through three rounds of financing, so this latest influx of dollars more than doubles its total funds raised.

On the question of going public during an interview, Mendlein made no promises or declarations to do so. However, he hinted that he is steering the biotech outfit toward an IPO while answering a question about future plans for pharma partnerships, of which the company has none.

"I think eventually [corporate partnerships] will be part of the strategy," Mendlein says, "but public investors often like … a clean pipeline opportunity because they get to own more of the pipeline that way."

Mendlein declined to disclose the "household name" of his new public investor, which joined previous backers from Alta Partners, Cardinal Partners, Domain Associates and Polaris Venture Partners in the fourth-round financing. He also demurred when pressed for details about why his company was hiding the identity of its public fund investor.

Biotech companies often secure backing from major public investors prior to their IPOs. Tesaro ($TSRO), which did an IPO in 2012, had already found funding from T. Rowe Price and Deerfield Management before going public. Fidelity has also been a frequent investor in biotech startups prior to their public debuts.

Nearly 30 biotech outfits have plunged through the IPO window this year, a resurgence of such deals after the 2008 financial collapse all but shut off privately held drug developers from access to the public markets. Only 11 biotech groups went public during 2012.

A Soliris-like opportunity for immune disorders

ATyr researches proteins known as physiocrines, which serve as signaling agents for cells to keep them in balance and alive in extreme situations such as injuries and inflammation. Scripps researchers and aTyr co-founders Xiang-Lei Yang and Paul Schimmel helped expose the potential of the proteins to work as drugs.

Mendlein believes that the protein class could inject innovation into pharma pipelines for years to come, yet his 30-person company aims to initially tackle rare immune disorders with a lead candidate called Resokine. (In 2011 the upstart ditched plans for human studies of a platelet-boosting drug for thrombocytopenia.)

While blockbusters such as Humira aim to block inflammation-driving pathways, Mendlein says, the Resokine candidate aims to boost the level of a protein that brings inflamed tissues back to normal. Yet rather than focus on the "big-ticket" causes of inflammation such as arthritis, aTyr wants to treat rare immune disorders.

Mendlein wouldn't say which specific diseases the company aims to select for clinical trials. However, last year his company revealed research during the American College of Rheumatology annual meeting, where it detailed preclinical studies of interstitial lung disease and inflammatory myopathy.

Those two diseases together affect about 30,000 people in the U.S. and lack drugs developed specifically to treat them, making any therapeutic for the ailments a prime candidate for the FDA's orphan designation for drugs against diseases that afflict fewer than 200,000 people nationwide.

Resokine factors into a variety of rare immune ailments, Mendlein said, comparing the protein with the blockbuster therapy Soliris from Alexion ($ALXN) because the drug treats multiple rare blood disorders.

"We can use one drug to treat many rare diseases," Mendlein says, "and we think that is a very special thing scientifically; it's a special thing for patients and it also is a very special thing from a business standpoint."

- get the press release on the financing
- and the debt

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