Cyclica Series-B

This is the Cyclica pitch deck to raise a $17m series-b round in 2020.

About

Cyclica is the partner of choice for data-driven drug discovery. We advance molecules that embrace the complexity of disease.

Cyclica, a Toronto-based biotech startup that uses artificial intelligence to discover and develop potential new treatments, closed a $17 million ($23 million CAD) Series B funding round on Wednesday, Business Insider has learned.

The round was led by Drive Capital, a venture firm based in Columbus, Ohio, and included pharmaceutical company Chiesi Farmaceutici, GreenSky Capital, and members of Cyclica’s management team. The company did not disclose its valuation.

Cyclica CEO Naheed Kurji told BI in an interview that the startup’s technology is designed to “flip the problem of drug discovery on its head.”

Drugs are often designed under what’s known in the pharmaceutical industry as a “target-centric approach.” The idea is that a drug is specifically designed to fix a particular problem that is causing a disease.

But drugs have unintended consequences. Tylenol, for example, will get rid of your headache, but it can also cause gastrointestinal issues.

“When you take a drug, it’s doing more than one thing,” Kurji said. “That’s because when a drug is placed into a more complex biological system, like a cell, an animal, or a human, it’s interacting with more than just one protein. It’s interacting with dozens to hundreds, many of those could be linked to other biological effects.”

That notion, that drugs interact with hundreds or thousands of proteins on their way to treating a disease is called polypharmacology. And that’s where Cyclica comes in.

Cyclica uses machine learning tools — what Kurji calls computational polypharmacology — to find drugs that interact safely with all the different proteins they may come across in a human body. That requires a lot of computational resources, and Cyclica has developed software to carry out this approach.

Getting an early start is crucial to fundraising, Kurji said

In order to raise the Series B round, Kurji says that Cyclica opened the round shortly after closing its Series A in July. He says it was crucial to get an early start on fundraising — even though Cyclica had plenty of cash in the bank and had been generating revenue — since the startup had hit all of its milestones, and that advisors had predicted that the healthcare and biotech market would enter a compression, and it would get more challenging to raise money.

Kurji says they reached out to 40 or 45 different venture firms and met with 20, of which 18 immediately put them under a non-disclosure agreement, a common practice for venture firms that are evaluating deals. Fifteen of those firms were more traditional healthcare VCs, while the remainder were strategic partners such as pharmaceutical companies that have in-house venture funds.

In January, Kurji and his team sat down with a number of investors at the JPMorgan healthcare conference in San Francisco. Those conversations ultimately led to Drive Capital leading the round.

Kurji says that in pitch meetings, investors would ask four main questions. First, they’d want to understand the startup’s management — who they’re giving money too.

Next, they’d ask about what Kurji calls competitive differentiation, or how a given startup will stand apart from the competition, both scientifically and commercially. Then, they’d look at the startup’s business model, or how it plans to generate revenue over the long term.

Last, they’d ask about what the startup plans to do with the capital it’s raising, Kurji said.

“We probably spent 40% of our time in these pitch meetings on competitive differentiation,” Kurji said, and then about “25-30%” of our time explaining our management team.

“There is so many cutting edge companies in our space. I empathize with the VCs,” Kurji said.

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