Three former top researchers at Genentech, the legendary biotech that is now part of Roche Holding , have raised $217 million in venture capital to start a new company, Denali Therapeutics, focused on treating and curing neurodegenerative diseases like Alzheimer’s, ALS, and Parkinson’s.

The news is another sign of both the large amounts of money available to all biotechnology startups and for a financial turnaround for research efforts against brain diseases that have been tough to beat. NeuroPerspective, a newsletter that tracks neurological treatments, says in the past five years the number of drugs being developed by large drugmakers for brain and nervous system disorders fell 50% to 129 – but that last year, investors poured $3.3 billion into the field, more than in any of the last ten years. The raise for Denali is a series A, the very first round of getting funding for a new company. It is the largest such round in biotech history.

One reason for the overstuffed purse: One co-founder, Denali’s chairman of the board of directors, is Marc Tessier-Lavigne, a well-known neuroscientist and president of Rockefeller University in New York. He served as Genentech’s head of drug research during its legendary run in the late 2000s, before the company was bought by Roche in 2009. He’s also giving up a board seat at pharma giant Pfizer PFE +0.01% in order to make time for his new company.

“The science in the field has been breaking open and this has been accelerating over the past decade,” says Tessier-Lavigne. “Denali is based on the idea that the time is right to tackle these diseases systematically and deeply.”

Leading day-to-day operations as chief executive will be Ryan Watts, until now director of neuroscience at Roche’s Genentech division. Alex Schuth, who headed technology innovation and diagnostics business development at Genentech, is the third co-founder. The company will be based in San Francisco.

The company is named after the tallest mountain in North America. “For me it means an inspiring challenge,” says Watts. “We wanted a name that was recognizable that represents a huge unmet need.”

To climb this particular mountain, Watts says that Denali will be avoiding already crowded areas in the development of drugs for diseases like Alzheimer’s. For instance, companies including Biogen, Eli Lilly , Merck, and Genentech are all trying to slow the progression of Alzheimer’s with drugs that block a substance called beta amyloid, which is present in tangles in the brains of Alzheimer’s patients. Watts says Denali won’t pile in.

Instead, Watts sees a new generation of drug targets emerging from human genetics. He says that just as oncogenes – cancer genes – have lead to a flood of cancer drugs, newly discovered genes linked to degenerative brain disease (the Denali guys called them degenogenes) will provide a basis for a new generation of brain medicines.

Denali will also focus on how inflammation drives brain disease; how the trafficking of substances between cells is involved in Parkinson’s and Alzheimer’s; and on factors that influence how brain cells die that are common to all brain diseases. Already, the company is looking at least 12 different drug targets in these areas, though it will not disclose more about them yet.

Investors include Fidelity Biosciences, ARCH Venture Partners, Flagship Ventures and the Alaska Permanent Fund (represented by Crestline Investors). Additional investors include sovereign wealth funds, public mutual funds and private family offices, with significant reserves for additional future financing.

Robert Nelsen, co-founder of ARCH Ventures and an investor in other hot biotech startups like JUNO Therapeutics and Agios, both of which now sport $4 billion market capitalizations, says that combining forces in a big effort is already drawing attention among researchers even before the company officially launches.

“The best scientists in the world are now calling us, “ Nelsen says. The next step, he says, is engaging the Food and Drug Administration about how to develop brain drugs more quickly, as has happened in HIV, hepatitis C, and cancer. “ You can’t wait 10 or 20 years for the perfect study in Alzheimer’s when it’s going to cost us a trillion dollars in today’s dollars by 2050. The societal cost of these diseases is mind-blowing.”


By Matthew Herper
Forbes Staff

Pharma & Healthcare 5/14/2015 @ 8:00AM