The Dementia Discovery Fund (DDF), a SV Health Investors (SV) fund specialized in pursuing transformational therapeutic approaches for dementias including Alzheimer's disease, is pleased to announce the acquisition of its portfolio company, Caraway Therapeutics, Inc. by Merck, known as MSD outside the United States and Canada. The companies have entered into a definitive agreement under which Merck will acquire Caraway Therapeutics for a total potential consideration of up to $610 million, including an undisclosed upfront payment as well as contingent milestone payments.

Caraway Therapeutics was founded in 2017 by two SV funds, DDF and SV Fund VI, with co-founders including SV Venture Partner, Tim Harris. The firm was created to pursue innovative approaches for the treatment of neurodegenerative and rare diseases by targeting pathways informed by human genetics, and has since built a pipeline of novel, small-molecule therapeutics for the treatment of these diseases. Specifically, Caraway has advanced drug discovery programs against several lysosomal drug targets for Parkinson’s disease, including TRPML1 and TMEM175.

“We are excited to have been an investor in Caraway from concept to acquisition, with the end goal of addressing the huge unmet medical need in dementias such as Parkinson’s Disease Dementia and Dementia with Lewy bodies,” says Jonathan Behr, Partner at SV, investing out of DDF, and Director of Caraway at the time of the acquisition.

The company was originally incubated and seeded as ‘Rheostat’ by the SV funds. In 2018, the renamed Caraway raised $23 million for its Series A, co-led by MRL Ventures Fund and AbbVie Ventures, with participation from Amgen Ventures, Alexandria Venture Investments and Mayo Clinic, and the SV funds.

“The acquisition by Merck is great recognition of the strong science and therapeutic programs the Caraway team has developed, and we are excited by the capabilities and resources that Merck can bring to bear to develop these important medicines,” says Caraway’s former President and CSO, Magdalene Moran.

“SV is committed to transforming healthcare through diverse investments,” says Tim Harris, “Through the SV funds’ company creation efforts and focus on providing disease-modifying therapeutics to patients, we are very pleased to advance differentiated science toward treating neurodegenerative diseases and generating returns for our investors.”

Under the terms of the agreement, Merck, through a subsidiary, will acquire all outstanding shares of Caraway with earnout milestones associated with the development of certain pipeline candidates. Additional financial details were not disclosed.