News Life Sciences Investment combos help ProNAi advance to clinical trials of new drug
Investment combos help ProNAi advance to clinical trials of new drug
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By Andy Domino | LabWork
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KALAMAZOO — Starting up a new life science business calls for industry knowledge and a willingness to take risks. It’s just as adventurous for firms with a track record of turning their funding into profit.
ProNAi Therapeutics is one of them. Formed in 2004, with offices in Kalamazoo’s Southwest Michigan Innovation Center and a similar business incubator in Ann Arbor, ProNAi is developing a cancer-fighting drug, PNT2258. In September, the company started Phase 1 clinical trials.
Like other West Michigan life science companies, ProNAi picked up funding for PNT2258 from several sources, including Apjohn Ventures and the Michigan Economic Development Corp. ProNAi President and CEO Charles Bisgaier said his business also saved on its early expenses thanks in part to laboratory equipment donated by Pfizer. It was recipient of money from Michigan’s 21st Century Jobs Fund, created in 2006 to boost the state’s financial stake in high-tech businesses. ProNAi reports more than $15 million invested in the company over the past seven years.
All of that funding has led to this point, where ProNAi is able to continue its past successes with a new wave of investing. The MEDC has helped fund ProNAi, bridging the gap between its early days as a startup company to its current role as a firm with enough experience to bring in larger grants for drug testing.
ProNAi isn’t the only life sciences business that has looked for financial help, said Carsten Hohnke, team leader for portfolio management at MEDC. It’s a big risk for an investor to take, betting on an entrepreneur who needs more than his own money to get his drug into production, but who at the same time doesn’t have enough of a reputation to attract big-budget finances.
“The real challenge is about $1-$3 million, between the start and going to venture capitalists for $10 million,” Hohnke said.
Bisgaier said small businesses like ProNAi — privately held and with only a handful of staff members — can turn to the federal government. The U.S. Small Business Association has two grant programs for science and technology, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR).
“The SBIR/STTR programs are a good source of Phase 1 start-up funding for companies to test the feasibility of their program,” Bisgaier told LabWork in an email. Both programs offer follow-up funding for Phase 1 projects that have proven their value, he said.
There’s also state money from the 21st Century Jobs Fund, the Michigan Accelerator Fund and other sources. The pool of investors in Michigan isn’t as big as Hohnke would like. He said it doesn’t take long for an entrepreneur to discover everyone in the region who has money to put into a life sciences project. Some firms ask a young company to come back when it’s a little more established. And there’s always the potential for money from investors outside West Michigan, most notably from California, a national headquarters of life sciences business.
Investors usually stick around for later rounds of funding, as the farther a project goes, the less the chance of it falling apart. Having more security also attracts new funders, Bisgaier said, ones less interested in taking a chance on an unknown project. But their contribution is often necessary.
“As the company grows and gets closer to market, the financial needs often grow exponentially,” he said. “Although not without risk, the value of an investment at this point in a company’s cycle can be very lucrative.”
If a company gets the funding it needs to move its product to testing, like ProNAi has, the search for money isn’t over.
“You can have multiple series of fundraising,” Hohnke said. “IT (another sector the MEDC is helping to fund) can ramp up pretty quick, but with drug development, it could take $100 million to take a drug to market, and in that time you don’t have a penny in revenue.”
That’s when acquisitions may come in to play.
“Maybe one of the big pharmaceutical companies comes in and is a co-developer,” he said. “They say, ‘You don’t have to rely on venture capitalists because you have pharmaceutical money.’”
Unlike other industries where one hit is enough to satisfy a creator, the process of developing a drug or medical procedure is what drives most life sciences investors.
“The primary objective is to have an exit,” Hohnke said. “Getting to that stage is what you enjoy. Then you can get back to starting another company on the ground floor.”
Bisgaier agrees, saying ProNAi isn’t betting it all on PNT2258.
“The plan for ProNAi is to fund through the Phase II clinical development while working to bring forward another lead from the pipeline, and complete a successful merger and acquisition with a large pharma/biotech player in the not-too-distant future,” he said. LW
