Entrepreneurs and venture capitalists–piercing the “pall of gloom” over obesity drugs

Brown fat deposits in a young woman. Source: Hellerhoff. http://bit.ly/9RNG69

As we said in our November 3, 2010 blog post, “The withdrawal of Meridia from the market, coupled with the FDA rejections of lorcaserin and Qnexa, has cast a pall of gloom on the obesity drug market. Some commentators have declared the field to be dead….”

Nevertheless, a few hardy entrepreneurs and venture capitalists continue to found and fund start-ups, whose goal is to discover and develop truly innovative classes of drugs for obesity and metabolic disease.

A November 3, 2010 Xconomy article focused on the Cambridge, MA startup biotech firm Energesis Pharmaceuticals. Energesis was confounded by Olivier Boss, PhD (formerly of Sirtris Pharmaceuticals), Brian Freeman, MD (former Venture Partner at GreatPoint Ventures), and Jean-Paul Giacobino, MD (Professor Emeritus, University of Geneva Medical School, Switzerland). Dr. Boss serves as Energesis’ Chief Scientific Officer, and Dr. Freeman as its Chief Operating Officer.

Energesis focuses on the discovery and development of drugs for the treatment of obesity, diabetes, and related metabolic diseases. The company plans to develop therapeutics that work by increasing energy expenditure, rather than the usual approaches of decreasing appetite or blocking absorption of fat in the gut. Energesis researchers intend to discover and develop drugs that increase the amount and/or activity of brown adipose tissue (BAT) to combat obesity and other metabolic diseases. BAT is a type of mitochondria-rich adipose tissue that burns fat and dissipates the energy as heat rather than storing it. The mitochondrial protein UCP1 (uncoupling protein 1) is the key biomolecule that makes this process possible. BAT has long been known to be central to non-shivering thermogenesis in rodents, for example to maintain body temperature when they are exposed to cold.

Until recently, researchers believed that in humans, significant populations of BAT cells were found only in infants. However, in recent years researchers found that adult humans possess reservoirs of brown fat in the neck region and other areas of the upper body as well as in skeletal muscle. (See the figure above.) Adult human BAT can be stimulated by acute exposure to cold and via the sympathetic nervous system, and by various pharmacological agents. Energesis’ drug discovery technology is based on the use of brown fat stem cells. The company has provided few details on its technology in published sources.

In October 2010, Energesis was named as one of the winners of the 2010 MassChallenge Global Startup Competition, where it was the top life sciences company. In that competition, Energesis was also one of the top 111 entrants that were invited to participate in a 3-month accelerator program. This provided intensive mentoring, and access to such resources as office space, legal counsel, and introductions to funding sources. Energesis, which has temporary office space in the Cambridge MA incubator Dogpatch Labs (created by venture capital firm Polaris Ventures), is now seeking additional seed-stage funding.

Brian Freeman is key to Energesis’ financing strategy. As a Venture Partner at GreatPoint Ventures, Dr. Freeman cofounded another Cambridge MA company that focuses on obesity, Zafgen. Zafgen was founded in 2005. We discussed Zafgen briefly in an earlier blog post. Zafgen’s drug discovery and development profile is based on targeting the vasculature of adipose tissue, similarly to targeting tumor angiogenesis. Zafgen already has a compound, ZGN-433 (which is a methionine aminopeptidase inhibitor), in Phase I development, and is working on earlier-stage compounds. Thus, like Energesis, Zafgen targets a novel weight-control mechanism that does not involve appetite control in the CNS or fat absorption in the gut.

Zafgen has venture funding not only from GreatPoint, but also from Atlas Ventures and Third Rock Ventures. It was named as one of the “Fierce 15” leading biotechnology companies of 2009 by FierceBiotech.

Meanwhile, another Cambridge MA biotech company, Acceleron Pharma, discovered a compound, ACE-435, which targets BAT.  ACE-435 inhibits signaling of members of the TGF-beta protein superfamily. in preclinical studies in obese animals, ACE-435 increased brown fat, decreased white fat, increased skeletal muscle, and dramatically lowered serum cholesterol and triglyceride levels. Acceleron is developing ACE-435 for treatment of metabolic diseases. The company was named as one of the “Fierce 15″ biotech companies in 2010.

Acceleron, which was founded in 2004 and has three products in the clinic, has raised three rounds of venture capital, and has a major corporate alliance with Celgene. In September 2010, it also signed a $498 million agreement with Shire to develop muscular dystrophy drugs. Acceleron is thus a more mature company than Zafgen or Energesis. Unlike Zafgen and Energesis, Acceleron works in several therapeutic areas, not just obesity and metabolic diseases.

The entrepreneurs who founded obesity specialists Zafgen and Energesis–as well as the venture capitalists who funded Zafgen, and the executives and researchers at Acceleron who have been developing ACE-435–are working on obesity drug development despite the pall of gloom caused by the failures of nearly every antiobesity drug, and the increasing currency among leaders of health insurance companies and health care providers of the old idea that obesity is entirely the fault of the obese, due to “lack of personal responsibility” or “food addiction”. This is despite the abundant evidence that obesity is a complex disease with a large genetic component. Health care leaders, as well as obese people themselves, are frustrated with the lack of solutions to the growing obesity problem, and thus may be tempted to fall back on old, discredited explanations.

The entrepreneurs, researchers, and venture capitalists behind Energesis, Zafgen, and Accleron, however, see the failure of most antiobesity drugs as an opportunity. The failed drugs target common neurotransmitter receptors in the CNS, and thus would be expected to have serious adverse effects, since these receptors are involved in multiple physiological processes in the CNS and elsewhere in the body. Drugs that target physiological pathways other than appetite control in the CNS, and which are based on superior biology-driven drug discovery strategies, may avoid the safety problems of the CNS-acting drugs, as well as exhibiting much greater efficacy. Such drugs may fulfill the major unmet medical need in the obesity area, where there are currently no good solutions.

The founding of Zafgen and Energesis also flies in the face of the current negative situation in the venture capital and credit markets, and in the economy in general.  Small companies (especially including startups) continue to find it difficult to raise cash. More established biotech companies, as well as pharmaceutical companies, also feel the need to cut budgets and especially to cut their workforces to save cash. In the Boston area, Big Biotechs Genzyme (which has been facing a hostile takeover from Sanofi Aventis, and which is in discussions to sell itself to Takeda) and Biogen Idec have slashed workforces and budgets, as has contract research firm and animal model supplier Charles River Laboratories. Acceleron also cut its workforce in November 2010.

Nevertheless, both Acceleron and Zafgen (the latter under the leadership of Brian Freeman) have managed to raise significant amounts of venture capital in this tough market. In the case of Zafgen, this is despite the generally gloomy prospects for antiobesity drugs, which are its dedicated focus. We hope that Energesis, in Dr. Freeman’s capable hands, will also be able to bring in Series A venture funding.

The type of entrepreneurial innovation shown by Energesis, Zafgen, and Acceleron has implications beyond the obesity area. In a recent speech, the CEO of Lilly, John C. Lechleiter, Ph.D. outlined the components of an environment that supports medical innovation. (We citied Dr. Lechleiter’s speech in an earlier blog post on the obesity drug market.) Among these components is what Dr. Lechleiter called “a larger ‘ecosystem’ that allows innovation to flourish”.  Such an ecosystem would include an “atmosphere” that allows innovation to thrive, “nutrients” in the form of monetary investments, and the “seeds” of human talent in relevant scientific disciplines.

The development of Zafgen and Energesis illustrates the importance of the Boston area biotech and pharmaceutical innovation hub in fostering the initiation and growth of biotech companies with innovative strategies that are potentially game-changing, by providing such an ecosystem. This has included entrepreneurial researchers with innovative ideas and intellectual property, lead venture capitalists willing to back their ideas (and, as in the case of Brian Freeman, to leave their venture capital firms and to join with the researchers in a start-up), universities such as Harvard, MIT, Tufts, and Boston University, the large numbers of biotech companies, both large and small, in greater Boston, the presence of Big Pharma facilities including Novartis’ R&D world headquarters, incubators such as Dogpatch Labs, and entrepreneurship competitions such as the MassChallenge and the MIT Enterprise Forum’s 100K competition.

The United States has other biotech/pharma innovation hubs as well, most notably the San Francisco Bay area and greater San Diego. As shown by the example of ZymoGenetics (see our November 11, 2010 blog post), Greater Seattle has been such an innovation hub, although biotech leaders in Seattle are afraid that their hub has been eroded by acquisitions such as that of ZymoGenetics by Bristol-Myers Squibb and the earlier Amgen-Immunex merger, with the resulting substantial layoffs. Other major U.S. biotech/pharma hubs include the Research Triangle Park area of North Carolina and greater New York/New Jersey/Philadelphia. Canada and several Western European countries also have biotech/pharma innovation hubs.

Various other cities and states in the U.S., as well as cities and countries in Europe and South and East Asia, are working to build new biotech hubs to bolster their economies. Big Pharma companies, with their massive need to acquire or partner for new, innovative drugs, must also develop strategies to foster ecosystems for innovation, both within their own organizations and in seedbeds for potential partners such as existing and emerging biotech hubs. The example of the role of the greater Boston area in spawning such companies as Energesis, Zafgen, Acceleron, and several others that have been covered in this blog may provide case studies to help Big Pharmas in formulating new strategies to foster innovation.

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As the producers of this blog, and as consultants to the biotechnology and pharmaceutical industry, Haberman Associates would like to hear from you. If you are in a biotech or pharmaceutical company, and would like a 15-20-minute, no-obligation telephone discussion of issues raised by this or other blog articles, or of other issues that are important to  your company, please contact us. We also welcome your comments on this or any other article on this blog.

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