Inside the $50 Billion Biotech Sugar Daddy that Invested in Startups Like Denali, Juno

March 3, 2016
By Mark Terry, BioSpace.com Breaking News Staff

When one thinks about biotech startups, Cambridge, Mass., Silicon Valley and the San Francisco Bay Area usually come up — not Alaska. But Alaska, driven by oil money, has made some significant forays into biotech startup funding.

Alaska’s entry into biotech funding began in 2013, incited by a chance meeting between David Fallace, who at that time was head of special opportunities for the Alaska Permanent Fund, and Larry Corey, who at that time headed the Fred Hutchinson Cancer Research Center. After a lengthy chat, the Alaska Permanent Fund invested in a company Corey started, now called Juno Therapeutics . Over time, Alaska invested $129 million, or about 25 percent interest, in Juno. The investment is now worth $1.04 billion.

Juno has been a frontrunner in the CAR-T therapy market, a significant component of the hot immuno-oncology market. The Motley Fool recently reported on the company’s fourth-quarter financial results and red-hot pipeline, with stock rising 10 percent or more on the news. The company also has a $1 billion collaboration with Celgene Corp. that’s just starting. As part of that deal, Celgene took on a 9.1 million share stake in the company.

One of the standout differences of the Alaska Permanent Fund’s approach is its willingness to sit on investments. Stephen Mosely, who now directs the fund, told Bloomberg, “When I worked on my first biotech deal in the ‘90s, this old industry sage said to me, ‘You know, Mosely, it’s called the life sciences because it takes a lifetime to get your money back.’ Liquidity is a risk, but it’s one that’s identifiable and ironically kind of attractive to us.”

To date the fund has invested more than $280 million into three biotech startup companies, Juno being one of them. In July, the fund invested $153 million in Denali Therapeutics, headquartered in South San Francisco. The company was founded by three former Genentech researchers, and focuses on translational research to develop drugs for neurodegenerative diseases like Alzheimer’s, Parkinson’s, ALS and others. At that time, the founders raised $217 million in venture capital. Other investors included Fidelity Biosciences, ARCH Venture Partners and Flagship Ventures.

In November, the fund dropped $80 million into Codiak BioSciences, located in Woburn, Mass. The company’s chief executive officer is Doug Williams, who left Biogen in July to found and run the company. The company focuses on exosome biology. In January, the company indicated it had closed on its Series B financing round worth $61 million.

Codiak BioSciences focuses on exosomes, which for a long time were considered to be the cells’ garbage cans, whose job was to carry unnecessary cellular materials out of cells. But research has indicated they act as messengers, taking information to distant tissues, and have the potential to carry cell-specific proteins, lipids and other genetic material—and potentially drugs.

If the names of these three biotech companies ring a weird Alaskan bell, it’s not a coincidence. The companies agreed to adopt Alaskan-sounding names when they received the funding. Juno was originally incorporated as FC Therapeutics. “’F’ being a four-letter Anglo-Saxon word and ‘c’ being cancer,” Hans Bishop, Juno’s chief executive officer, told Bloomberg. “It’s a really, really motivating guiding call for all of us. But we realized we thought it was a superb name, but it probably wasn’t without its limitations.”

Juneau is Alaska’s capital city. The state’s brown bear is the Kodiak, and its tallest mountain is Denali. None of the companies are actually located in Alaska.

The Alaska fund works closely with Arch Venture Partners, who are experts in biotech startups. The goal is to raise money for Alaska, not to become a hub of biotech companies. “It’s not our job or expectation that we’ll create some Kendall Square in Juneau, Alaska,” Moseley told Bloomberg.

But the fund is interested in long-term biotech investments. So if there are any biotech companies looking for funding and willing to rename themselves Anchorage, Fairbanks, Grizzly or Freezing, the Alaska Permanent Fund might come calling.