Neuroscience deals a no-brainer: VCJ

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Since the summer of 2013, an army of scientists has been scrambling to launch an all-out, decade-long, $3 billion research effort to map the human brain.

They are responding to President Barack Obama’s call to build a large-scale simulation of how the brain works, much as scientists sequenced the human genome by the early 2000s.

Despite the push, don’t expect any drugs to appear anytime soon at a pharmacy near you.

Extracting new treatments out of this decade-long research project could be years, if not decades, in the future, said Kevin Kinsella, co-founder of La Jolla, California-based venture firm Avalon Ventures, one of several investors exploring the space. Others include Third Rock Ventures and the accelerator Rock Health.

“The human brain is the most complicated structure in the universe, and we’ve never seen anything like it,” Kinsella said.

“While mapping the human brain is very worthwhile, I personally don’t see a payoff of that in terms of therapeutics for brain-related and cognitive diseases,” he added.

Of course, there are exceptions.

Life science IPOs have been spiked in 2014. The latest came in mid-July when Sage Therapeutics. The Cambridge, Massachusetts-based company, which has been promised a quick review of its new drug in development for a rare form of epilepsy, launched a successful IPO on Wall Street, floating 5.75 million shares at $18 a share and raising $103 million in cash.

The company increased the number of shares offered by 1 million to fatten the kitty, with the price per share surging 60 percent in the first day of trading.

It was solid validation for Chicago’s Arch Venture Partners and Third Rock Ventures, which launched Sage in 2011. In March, the two were among an A-list of biotech investors participating in a $38 million Series C round, including OrbiMed Advisors, EcoR1 Capital Management, Foresite Capital Management and two unnamed “blue chip” public funds.

The Sage success story aside, Kinsella noted that Avalon is not waiting for a national initiative for new investment ideas involving brain diseases, and the firm has explored the sector on its own. He and his partners have jumped on new opportunities as they surface from academic laboratories.

Avalon launched and funded Afraxis, which developed a treatment to combat Fragile X syndrome, an inherited mental impairment in boys, as well as other disorders affecting the central nervous system, such as Alzheimer’s disease and autism.

According to the Centers for Disease Control and Prevention, one in every 42 boys is diagnosed with autism, which could be a big market for impactful drugs.

Avalon has not disclosed how much cash it has pumped into Afraxis. The Thomson Reuters database reports that the La Jolla, Calif.-based company has raised $2.73 million, but published reports say it is as high as $12 million.

In January 2013, Genentech, now a F. Hoffmann-La Roche AG subsidiary located in South San Francisco, licensed one of the company’s compounds in a deal that could be valued up to $187.5 million if Afraxis hits its targets.

Like a treatment for autism, a successful treatment for Alzheimer’s could be huge.

The Alzheimer’s Association predicts the cost of care for those with the dreaded disease will be $214 billion this year.

“The diseases of the brain are still a vast mystery to us, whether we’re talking about Alzheimer’s or schizophrenia or manic depressive illness,” Kinsella said. “There are clues, but they are like surface clues, and we have yet to get to the core of any of them.”

This story first appeared in Reuters Venture Capital Journal. Subscribers can read the original story here. To subscribe to VCJ, click here for the Marketplace.

Photo illustration of human head and brain from Shutterstock.

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