Wisconsin VCs draw Missouri biotech firm to state

Wisconsin VCs draw Missouri biotech firm to state

The Milwaukee County Research Park Center. ZyStor will have labs at the research park.

An investment of $8.5 million from a venture-capital syndicate has drawn a St. Louis niche-market biotech company to Wisconsin, where it will inhabit brand-new lab facilities at Milwaukee County Research Park.
The company is targeting a type of debilitating genetic disease that is often fatal, sometimes in young children, using a new technique.
Symbiontics, Inc., which drew about $3.5 million in first-round financing and asked for $5.75 million in the second, got more than it was looking for from a group of seven investors, five from Wisconsin. Investors formed a new company, ZyStor Theraputics, to buy Symbiontics’ intellectual property and other assets and bring them to Wauwatosa, in the Milwaukee metro area.
Dan Broderick, managing director of Milwaukee-headquartered venture firm Mason Wells, said he discovered the company about a year ago through the Mid-America Healthcare Investors Network. Spanning 10 states, the network helps life-sciences investors exchange tips and form syndicates.
ZyStor will work on intravenous drugs to treat lysosomal storage diseases, genetic conditions that leave the body with too few of certain essential enzymes. These enzymes break down substances into useful or waste products. When there aren’t enough, excess buildup inside cells can damage tissues, including bones and the brain.
More than 40 types of the disease exist, affecting different enzymes and requiring different treatments. Most have no cure and are often fatal, some in early childhood.
Symbiontics will maintain a presence in St. Louis to fulfill a research contract with St. Louis University, CEO Loren G. Peterson said. Peterson, Chief Scientific Officer Jonathan H. LeBowitz and another senior scientist are moving to Wisconsin, where they expect to hire about 7 people over the next six months. Broderick said the company might employ as many as 20 in a few years.
The venture group, in addition to Mason Wells, includes Venture Investors of Wisconsin in Madison, Stonehenge Capital Company and Hexagon Investments in Milwaukee, the State of Wisconsin Investment Board, Apjohn Ventures in Michigan, and original investor Prolog Ventures in St. Louis.

The market

The company’s competitive proposition is a new way of formulating lysosomal treatments, which replace the missing enzymes in the body.
In order to get to their destinations inside cells, enzymes must be attached to special molecules that target needy cells. Existing treatments use carbohydrate targeting molecules that are stripped away in the liver, Broderick said, while ZyStor will use proteins, which are expected to survive longer and deliver more enzymes.
One of the conditions ZyStor will tackle is Pompe disease, which Broderick estimated affects 5,000 to 10,000 people worldwide. It will also research treatments for Fabry’s and Gaucher’s diseases, which affect similar numbers of people.
Even with the relatively small market, treatments are potentially lucrative.
“Genzyme is the 800-pound gorilla in the space,” said Chris Raymond, an analyst with Robert W. Baird & Co. Inc. Its 12-year-old drug for Gaucher’s disease, a better-known lysosomal condition, pulls in about $800 million a year, he said. That’s because the cost of a year’s treatment is about $160,000.
Pompe disease is newer and not as well understood, Raymond said, but could have a similar market.
“You really don’t get the full flavor of how big the market is until you have a drug available,” he said. “That’s what we saw with Gaucher’s: Patients have been sort of coming out of the woodworks every year.”
The FDA offers expedited testing and 7-year exclusivity for “orphan” drugs, which treat conditions that affect fewer than 200,000 people. Because the clinical trials are smaller, the process may only take a few years. ZyStor will apply for orphan status for its drugs based on its new targeting mechanism.
“In order to get orphan status you have to be able to show clinical superiority,” Peterson said.


“This has the potential to reach those completely untreated patients, and I think it also has a chance of significantly improving the outcomes for those patients who are already receiving the treatments available on the market,” said George Arida, a senior associate with Venture Investors, LLC, of Wisconsin.
ZyStor could be a good candidate for a public stock offering one day, Arida said, but more likely it will become an attractive acquisition for one of the established companies in the field, such as Genzyme.
Genzyme bought a related company, Novazyme, in 2001 for $137.5 million in stock up front and $87.5 on approval for two products. Novazyme was researching therapies for Pompe disease.
Investors said the decision between Madison and Milwaukee was a difficult one, and Madison’s University Research Park was also under consideration. Milwaukee County Research Park edged it out on factors such as proximity to the Medical College of Wisconsin, Broderick said.
“The two communities are close enough that there are still opportunities to be part of the synergy of Madison’s life sciences,” Arida said.
Jason Stitt is WTN’s associate editor and can be reached at jason@wistechnology.com.
Mike Klein contributed reporting to this article.