Cancer researchers Kolltan Pharmaceuticals raises $40 million

SAN FRANCISCO (Private Equity Week) - The costs are high and the path to approval notoriously arduous. Nevertheless, investors in recent months have backed several early stage rounds totaling tens of millions of dollars each for startups promising a novel approach to development of cancer therapeutics.

Most recently, Kolltan Pharmaceuticals, a New Haven, Conn.-based developer of cancer treatments based on the research of a Yale School of Medicine professor, announced last week that it closed an expanded Series A venture financing round totaling $40 million. The round, a large portion of which was raised earlier this year, included investments from Purdue Pharma, HBM BioCapital and the Pritzker/Vlock family.

Kolltan CEO Michael Schmertzler says the company plans to use the funding to develop drugs based on a protein molecule called tyrosine kinase, which has been shown to play a key role in the development and progression of many types of cancer.

Schmertzler declined to specify which types of cancer his startup aims to treat. However, he notes that "the first target is clinically very well validated and very addressable and the patients for the trial are readily available… that's reflected in the amount of money we were able to raise."

Schmertzler says that the decision to raise a large early stage round was, in part, motivated by the financial crisis. By raising $40 million this year, the company will have enough financial backing to operate for a number of years, says Schmertzler, who also serves as chairman of drug developer PTC Therapeutics and is chairman of the investment committee of Credit Suisse First Boston Equity Partners.

Kolltan's therapies are based on the research of Joseph Schlessinger, who is chief scientist and chairman of the pharmacology department at Yale University. Schlessinger co-founded the company with Chairman Arthur G. Altschul Jr., managing member of Diaz & Altschul Capital Management.

The company has also licensed rights to intellectual property from Yale. Other companies that have raised large, early stage rounds to develop cancer therapies include:

• Clovis Oncology, a Boulder, Colo.-based company focused on commercializing anti-cancer agents. Clovis raised $145 million in startup funding in May from New Enterprise Associates, Domain Associates, Frazier Healthcare and Technology Ventures, Abingworth Management, ProQuest Investments, Aberdare Ventures and Versant Ventures.

• Aileron Therapeutics, a Cambridge, Mass.-based developer of cell-permeable peptide technology to help treat cancer. Aileron raised $40 million in June from S.R. One, Excel Venture Management, Novartis Venture Fund, Roche Venture Fund and Lilly Ventures.

• FORMA Therapeutics, a Cambridge-based developer of small molecule drugs, with applications in cancer treatment. FORMA raised $25 million in initial funding in January from Novartis Venture Fund and Bio*One Capital.