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On 8 May, the biotechnology company Nimbus Discovery announced an agreement with the specialty pharmaceutical developer Shire plc (NASDAQ: SHPG) that combines an innovative technology for drug discovery with a novel financing method to move that technology forward. The deal should bolster Shire's pipeline in rare diseases, one of its four main product lines along with neuroscience, gastrointestinal disorders, and regenerative medicine. In 2012, Shire spent $966 million on R&D, with total revenues of $4.7 billion.

Rare diseases are both a scientific and business challenge, due to a small pool of potential patients, and few academic scientists engaged in basic research. At the same time, these conditions offer opportunities for drug developers able to find imaginative researchers and technologies that can engineer breakthroughs in discovering and testing new treatments.

In addition, the Food and Drug Administration in the U.S. sweetens the pot with incentives under the Orphan Drug Act, a 1983 law that allows the FDA to designate therapies to treat rare diseases as orphan drugs, defined as disorders affecting less than 200,000 Americans. The law offers incentives to drug developers that would not otherwise cover their costs, including eased clinical testing regulations -- it's often difficult to find large enough numbers of patients with whom to test drugs for rare diseases -- as well as grants for research and development.

FDA says its orphan drug program has led to 400 new approvals for treatments since the law was passed, compared to less than 10 such approvals in the decade preceding the bill. The European Medicines Agency offers similar incentives leading to the European Commission so far authorizing 69 orphan medicines.

Nimbus Discovery is a privately-owned biotech in Cambridge, Massachusetts founded in 2009 by Schrödinger Inc., a developer of computational chemistry systems, and the venture capital company Atlas Venture, which figures prominently in the Shire-Nimbus deal. Schrödinger's systems use high-throughput computer technology and mathematical models to rapidly simulate chemical interactions that would otherwise take weeks or months in the lab. Nimbus Discovery adapts Schrödinger's technology to drug discovery, focusing on biochemical interactions and screenings of voluminous genomic data.

The deal between Nimbus and Shire covers lysosomal storage diseases, a collection of some 50 rare genetic conditions caused by a lack of enzymes in cells called lysosomes that in healthy people break down unwanted cellular material into basic substances to build new cells. The individual disorders, including those known as Fabry disease and Gaucher disease, result from a build-up of unwanted substances in cells seriously affecting various organs: heart, kidney, liver, spleen, and skeleton. Shire currently has drugs on the market for Fabry disease (REPLAGAL) and Gaucher disease (VPRIV).

Under the agreement, Nimbus will apply its computational chemistry technology to screen lysosomal storage disease molecules against potential drug targets. Based on those screenings and early preclinical testing, Nimbus will provide Shire with a treatment candidate for final preclinical tests, clinical trials, and commercialization. If accepted by Shire, the company will have an exclusive license to take the candidate to market. Nimbus, in turn, will be eligible for unspecified preclinical, clinical development, and commercial milestone payments.

The Shire-Nimbus deal is underwritten by Atlas Venture, a venture capital company active in the life sciences also in Cambridge. In late 2011, Atlas agreed with Shire to collaborate on development of rare disease therapies, with the Nimbus deal being the first under that arrangement. Given that Atlas Venture is a co-founder, seed, and series A investor in Nimbus Discovery, probably made Atlas's participation in the Shire-Nimbus deal that much easier.

Although financial arrangements were not disclosed, the agreement with Shire appears to put Atlas in the middle of the deal's financing, which relieves Shire of at least some of the financial burden. If the drug candidate accepted by Shire is designated as an orphan drug by FDA and EMA, it should reduce that burden even further.

Atlas Venture partner and Nimbus board member Bruce Booth argues in his Forbes Magazine blog that biotechnology is a different animal from information technology, and should not be judged by the same rules. The deal with Shire and Nimbus suggests Atlas Venture may be making new rules, or at least new financing opportunities, for biotech companies.

Source: Shire's New Rare Disease Deal: Interesting Science Meets Unique Financing