Tesaro – 2011 Fierce 15
The Scoop: There’s a huge opportunity for life sciences entrepreneurs to hunt down potential gems among the many developmental cancer drugs available for licensing and sale. Big changes in Big Pharma R&D groups, for example, have led companies to shed some of their cancer assets. But the hard part is sorting the jewels from the junk. Enter Tesaro. With a proven team of cancer drug business vets led by CEO Lonnie Moulder, who helmed MGI Pharma through its $3.9 billion sale to Eisai in 2008, Tesaro has the expertise to dig into the piles of available assets in oncology and strike gold. And Moulder has raised an impressive $121 million from investors to fund the firm since its opening less than two years ago, providing means to license drugs for cancer patients and develop them for the market.
What Makes It Fierce: Tesaro turned heads with its $101 million Series B round revealed in June. The amount of the deal and the quality sources of capital–including firms such as lead investor Kleiner Perkins Caufield & Byers and founding backer New Enterprise Associates (NEA)–sent a clear signal that Tesaro is onto something big.
As venture folks often say, they like to invest in great entrepreneurs, which really means people who have the chops to succeed. Moulder and his co-founders–chief scientist Mary Lynne Hedley and financial chief Rick Rogers–already came away as winners as part of the team at MGI.
The trio later worked together at cancer drug firm Abraxis, but parted ways with that company–which was later acquired by Celgene ($CELG)–to set up shop on their own.
“We were at Abraxis, and it was obvious that the strategy was changing from what we set out to do,” Moulder said. “So, we decided, ‘why not start a biotech company from scratch with people that are like-minded with regard to vision, strategy and culture-building, and leverage our experience base and network in oncology.'”
And that’s what they’ve done. Unlike biotech upstarts that sprout directly from lab discoveries, Tesaro has licensed drugs and quickly moved toward having a product on the market. NEA was the first venture firm to bet big on Tesaro’s gambit, leading the firm’s $20 million Series A round last year and underwriting an early expedition to find and license promising oncology drugs.
“We look at Tesaro as a company that unearths buried treasures, things that other companies wouldn’t do, couldn’t do,” Hedley said, noting that the name of the company is based on the word ‘tesouro,’ which is Galician for treasure. “We see the diamond in the rough.”
What could become pharma treasure is Tesaro’s lead candidate, rolapitant, which it’s readying for a Phase III trial for reducing nausea experienced by cancer patients on certain chemotherapies. The company gained exclusive rights to the drug–a selective neurokinin-1 receptor antagonist–through a licensing deal late last year with OPKO Health. OPKO had picked up the drug in 2009 from Schering-Plough during the latter’s merger with Merck ($MRK), which has the only existing neurokinin-1 blocker for chemo-induced nausea on the market, Emend.
If the late-stage studies confirm previous results from a randomized Phase II trial of rolapitant, it could potentially provide both dosing advantages and reduced risk of adverse drug interactions that could set it apart from the Merck drug, Hedley said. “Those could be significant benefits for patients,” she added. “Just based on the convenience of single-day oral or IV dosing, and the lack of observed drug-to-drug interactions to date from a safety perspective, it could make this a much better choice for patients.”
The company plans to conduct three Phase III trials of rolapitant, with the first trial slated to begin late this year, Moulder said.
Tesaro is also looking to gain rights to drugs at an earlier stage of development, and the firm has already in-licensed from Amgen ($AMGN) small-molecule inhibitors of anaplastic lymphoma kinase (ALK). It plans to push one of the molecules toward the clinic to combat ALK-positive non-small cell lung cancers. Think a next-generation version of Pfizer’s ($PFE) crizotinib, but one with potential advantages over that drug.
While most biotech start-up chiefs are loath to predict IPO dates, Moulder isn’t afraid to say that a public debut is part of the plan. He talked about doing an IPO in the second half of 2013, or sooner, depending on how the firm progresses.
That kind of winning attitude is very much in the spirit of Fierce 15.
Venture Backers: Kleiner Perkins Caufield & Byers, NEA, InterWest Partners, T. Rowe Price, Pappas Ventures, Oracle Partners, Deerfield Management, Leerink Swann and company management, which contributed $2 million to the Series A round.
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