VC & Financing | Biotech Strategy Blog

Blueprint Medicines: a start-up to watch in Boston receives $40M in funding

By Pieter Droppert on April 11, 2011

The Boston Globe today reported that Blueprint Medicines had received $40M in Series A venture funding.

The VC funding from Third Rock Ventures to the Boston/Cambridge based company is reported to be the largest early-stage funding for a New England life sciences start-up.

Many thanks to @rndubois for his tweets about this that drew it to my attention. You can read more about the financing in Blueprint’s press release.

What makes this exciting news? First it adds to the growing reputation of Boston/Cambridge as a hot-spot for cancer research. Blueprint Medicines will be focused on translational medicine and the development of new kinase inhibitors for the treatment of cancer.

Secondly, it confirms what is taught at business school, that investors back management expertise and their belief in the entrepreneurs ability to execute. In the case of Blueprint Medicines the scientific co-founders are Dr Nicholas Lyndon and Dr Brian Druker, who were instrumental in the development of imatinib (Gleevec/Glivec), a tyrosine kinase inhibitor that revolutionized the treatment of chronic myeloid leukemia (CML).

Blueprint Medicines is a company to watch for the future and Biotech Strategy Blog wishes it well in the quest for personalized medicine and more effective cancer treatments.

The launch of the company in Boston/Cambridge adds to my view that Boston is emerging as the premier biotech region on the East Coast for start-ups interested in oncology and translational medicine.

Making a difference to Parkinson’s Disease Research, an interview with Dr Todd Sherer, Michael J Fox Foundation

Biotech Strategy blog recently had the privilege to do a phone interview with Dr Todd Sherer, the Chief Program Officer of the Michael J Fox Foundation. In this two- part interview, Pieter Droppert asks what the MJFF approach to research funding is and what the future holds for Parkinson’s disease research?

Part 1: Research Funding

Research funding is key to science. Without it there would be no translational medicine that takes basic research and turns it into clinical applications that benefit humans. One organization that is making a difference and bridging the gap between patients and research is the Michael J Fox Foundation (MJFF).

Biotech Strategy Blog: What does a Chief Program Officer do?

Dr Sherer: My role as Chief Program officer is to lead the research efforts at the Michael J Fox Foundation. My background is as a neuroscientist so I have a PhD in neuroscience, and my lab work was in Parkinson’s disease before I joined the foundation. At the foundation we have a number of additional scientists, seven in total. They work closely with people with business backgrounds in a collaborative way. What we are trying to do is apply business principles to scientific research. So, select the best scientific projects and then design them in a way where there are deliverables, milestones and goal directed research with the ultimate aim to improve treatment for Parkinson’s patients.

Biotech Strategy Blog: MJFF receives 800 grant applications a year, what is your approval process, is it similar to the National Institutes of Health?

Dr Sherer: It is modeled after the NIH process with the one main difference being that our internal scientific staff has a proactive role in making the final funding decisions. We take the peer review panel to help us evaluate, but the ultimate decision lies with our internal staff. We do a rapid turn around of those reviews so from receiving an application to funding is usually for us 3 to 4 months total.

Biotech Strategy Blog: What business principles do you use in managing the research that you fund?

Dr Sherer: One of the main things we do with every grant we make is laying out from the beginning: what is actually the goal of that grant. This probably seems logical, but actually a lot of scientific research is very open ended – it is kind of “let me see what I discover”. But we are really trying to define from the beginning: what are we trying to accomplish? Then what we can do is set milestones along the way to that goal to make sure during the course of the project, we are making the progress we need to achieve that goal.

Biotech Strategy Blog: Are grant payments linked to performance?

Dr Sherer: The payments for the grants are all tied to the milestones, and I would say that we are realistic in that we are experienced in how research works. This is not manufacturing, and we know that you can have the best plan, but it is all based on a hypothesis and things can come up in the course of the research. Our scientific staff here will always work closely with those grantees to make the rational adjustments in the plan based on what we are learning along the way.

Biotech Strategy Blog: In addition to the grant applications that you receive, does the Michael J Fox Foundation initiate its own projects?

Dr Sherer: Yes. We have identified specific priority topics within Parkinson’s disease, whether they be specific therapeutic targets, or something like a biomarker, where we are more proactively working with the research community to develop projects to address critical challenges in those areas. We also do conduct some research using a virtual research model where the scientists here may outsource some work with contract research organizations. We have been particularly doing that around research tools so that we can make those tools widely available to our researchers — things like antibodies, plasmids, vectors — we want to quickly get these made without any licensing or intellectual property restrictions and then make them broadly available to the research community.

Biotech Strategy Blog: Why does MJFF fund research by commercial entities e.g. biotechnology & biopharmaceutical companies?

Dr Sherer: The goal of the foundation, the goal of all the research that we are supporting is to develop new therapies for Parkinson’s disease patients. We understand that will involve all players in the research space, so it involves academic researchers. But really to convert those discoveries into therapies for people, we want to proactively engage and interact with the biotech and biopharma community because they are the ones who in the end make the therapies for patients. About 5 or 6 years ago we decided to more proactively outreach to the biopharma community to determine: if we provided funding, could we induce more companies to work in Parkinson’s disease or accelerate their work in Parkinson’s disease.

Biotech Strategy Blog: What types of biotech & biopharma companies do you fund?

Dr Sherer: There are some companies that have worked in related diseases, like another neurodegenerative disease, and our funding allows them to apply that technology to Parkinson’s disease. Another category would be a platform type of company that we have supported, where they could really go to any disease, but the Fox funding allows creates a rationale to choose Parkinson’s. Then we have funded some companies who are interested in Parkinson’s but for budgetary reasons have made some trade-offs in the design of that study. With additional funding from the foundation they can increase the sample size, hone the end points or what have you, to really make that study more robust. We have seen a lot more companies working in Parkinson’s as a result of this outreach.

Biotech Strategy Blog: Do you take any rights in any commercial research you fund?

Dr Sherer: In most of our projects we do not have any stipulation like that, particularly in the case where we are funding some preclinical testing. That said, in our largest, multi-million dollar grants, particularly those in late-stage clinical development, we usually have an agreement that there is a return payment after some amount of sales. That is more the exception than the rule.

Biotech Strategy Blog: Thank you

Part 2 of this interview with Dr. Todd Sherer, Chief Program Officer of the Michael J. Fox Foundation, will provide insight on the current status of research into Parkinson’s disease, and what we can expect the future to hold?

Artificial Retina Project shows power of collaboration to bring new products to market

I wrote last week about Second Sight’s European Marketing Approval for the Argus II “artificial retina”. What this news also stands for is the success of collaboration as a route to innovation.

The Artificial Retina Project (“Restoring Sight through Science”) through which Argus II was developed is a collaborative effort between six United States Department of Energy (DOE) research institutions, 4 universities and private industry.

Each offers unique scientific knowledge and specialist expertise, without which it is unlikely the project (that is continuing with the development of a more advanced Argus III artificial retina) would have been successful.

I’ve listed the collaborators below and as recorded on the DOE website, what they bring to the Artificial Retina Project.

DOE National Labs:

Argonne National Laboratory – Performs packaging and hermetic-seal research to protect the prosthetic device from the salty eye environment, using their R&D 100 award-winning ultrananocrystalline diamond technology.
Lawrence Livermore National Laboratory (LLNL) – Uses microfabrication technology to develop thin, flexible neural electrode arrays that conform to the retina’s curved shape. LLNL also uses advanced packaging technology and system-level integration to interconnect the electronics package and the thin-film electrode array.
Oak Ridge National Laboratory – Measures the effect of increasing the number of electrodes on the quality of the electrical signals used to stimulate the surviving neural cells in the retina.
Sandia National Laboratories – Develops microelectromechanical (MEMS) devices and high-voltage subsystems for advanced implant designs. These include microtools, electronics packaging, and application-specific integrated circuits (ASICs) to allow high-density interconnects and electrode arrays.
Brookhaven National Laboratory – Performs neuroscience imaging studies of the Model 1 retinal prosthesis.

Universities:

Doheny Eye Institute at the University of Southern California – Provides medical direction and performs preclinical and clinical testing of the electrode array implants. Leads the Artificial Retina Project.
University of California, Santa Cruz – Performs bidirectional telemetry for wireless communication and chip design for stimulating the electrode array.
North Carolina State University – Performs electromagnetic and thermal modeling of the device to help determine how much energy can be used to stimulate the remaining nondiseased cells.
California Institute of Technology – Performs real-time image processing of miniature camera output and provides optimization of visual perception.

In October 2004, Second Sight Medical Products and the DOE signed a Co-Operative Research and Development Agreement (CRADA) in which the above institutions agreed to share intellectual property and royalties from their research, with Second Sight chosen to be the commercial partner. As part of the CRADA, Second Sight obtained a limited, exclusive license to the inventions developed during the DOE Retinal Prosthesis Project.

You can find more information about the history of this fascinating project on the Artificial Retina Project website, that also has links to several patient stories from around the world.

The Artificial Retina Project is a case study on the success of collaboration. Whether such an ambitious project that was funded by the US Government would ever have taken place in the private sector is the question that comes to my mind? Would a private company have been able to harness the intellectual power of 10 research institutions in this way?

If not, then do governments have a role to play in biomedical innovation by drawing partners together so that advances in basic research can be applied to new products, whether they be new drugs or novel devices?

And if you agree that governments do have a role to play what should be the extent of government funding? In the case of artificial retina, the DOE has funded this since 1999, with its contribution rising from $500K to $7M per year. Those numbers may also be direct costs, and not reflect the cost of investments in buildings, research facilities etc.

I’d be interested in any thoughts you would like to share on this.

Letter from San Francisco

I was recently in San Francisco so thought I would continue my theme of writing about biotechnology regions that I visit around the United States.

Growing up in England, I remember listening to the radio broadcasts of the late Alistair Cooke, who from 1946 to 2004 shared his “Letter from America“; the longest running radio programme ever produced. In the pre-internet era his mixture of anecdotes, insights and reflections reminds me of modern day blogs.

San Francisco remains a favorite city of mine. Fueled by access to venture capital and proximity to major research universities such as Stanford, University of California at Davis, Berkelely & San Francisco, start-up companies continue to thrive in the Bay area. BayBio, Northern California’s Life Science Association runs many excellent events. Their annual conference in April is focused on “Powering Global Innovation.”

The anchor tenant in the San Francisco biotech mall remains Genentech, and no other company in the area has had the same growth trajectory. What catapults a company forward is a combination of a breakthrough product and ability to capture its value. The licensing deals and acquisitions we see today in the biotechnology industry, to some degree limit the ability of emerging biotech companies to repeat Genentech’s model. Risk sharing, partnering and the desire of venture capitalists for an early return on investment, all limit the ability of a biotech company to make it to the major leagues. In the end, even Genentech ended up being acquired by Roche.

What’s the future in San Francisco? It remains a high cost place to live but with a pool of talent in the entrepreneurial culture of the West Coast. There is also the uncertainty about the California economy and the cost of doing business, which is most likely set to increase. In some way, my impression is that San Francisco has not quite taken off as a biotechnology city in the same way that Boston and Cambridge has. Feel free to comment if you disagree or have an opinion otherwise.

Gilead acquires Calistoga and CAL-101 for $375M

In an acquisition that highlights the importance of cancer and inflammation, Gilead Sciences today announced the acquisition of Seattle based Calistoga Pharmaceuticals for $375M.

Calistoga’s pipeline is focused on the development of PI3 kinase inhibitors for cancer and inflammation. Sally Church on Pharma Strategy Blog has written extensively about “The potential of the PI3K pathway inhibitors in lung cancer”, and discussed Calistoga’s CAL-101 compound and its development for hematological malignancies in her report on “What’s hot at ASH in 2010”.

I encourage you to read (if you already don’t) Sally’s excellent Pharma Strategy Blog for further information on the science and mechanism of action of the PI3K pathway (way beyond my pay grade) and her view on CAL-101’s potential.

Sally will also be at the timely AACR meeting on targeting PI3K/mTOR signaling in cancer that is being held in San Francisco later this week.

What makes CAL-101 interesting to me is its potential in targeting inflammatory mediators. CAL-101 is a first in class PI3K delta specific inhibitor; the delta isoform of phosphoinositide-3 kinase (PI3K) is expressed in leukocytes involved with a variety of inflammatory, autoimmune and hematological cancers. Increasingly I think we will see companies investigating the cross-talk between inflammation and other diseases.

In addition to the upfront payment of $375M, there are potential milestone payments of $225M. The deal is set to close in the second quarter of 2011.

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Biotechnology Innovation – is a systems based approach the way forward?

By Pieter Droppert on February 21, 2011

Thanks to Justin Chakma, a student at the University of Toronto, who brought to my attention an interesting article on innovation that he published on Vijay Govindarajan’s Harvard Business Review Blog.

Justin discusses how in emerging markets, venture capitalists (VC) create intentional links between the companies they invest in, compared to the more typical stand-alone investment model we see in Western countries.

By creating an innovation ecosystem, VC’s in emerging markets are able to leverage their investment in multiple companies. I encourage you to read Justin Chakma’s article, in which he discusses the advantages of this approach in emerging markets.

However, he takes the analysis further and argues that a systems based approach to innovation also has relevance in developed markets. As an example he states:

“It’s possible for a drug discovery start-up to identify the most relevant patients, and improve clinical trial success and reimbursement rates, if the VC invests in diagnostics or biomarkers at the same time.”

I certainly think that in emerging markets, where there may be a lack of infrastructure and service providers, taking a portfolio or systems based approach can help bring products to market, and capture value for the VC.

However, are venture capitalists in developed countries really interested in creating an ecosystem around their investments? A VC investing in a biotechnology company has no need to buy a contract research organization for clinical trials, plenty exist nor is there a need to develop the whole system of outsourced service providers necessary to bring a drug to market. I am also not sure that VCs in America are interested in the huge cost of biomarker and diagnostics development for start-ups.

Many VC’s already diversify by investing in a range of companies within a sector. Is there additional value to them in creating formal links and synergies within this portfolio, turning VC’s into mini-conglomerates? I think we need to see more data in support of the idea that a systems based approach does in fact speed-up innovation and time to market.

Antares Pharma has promising gel based contraceptive

As reported today by BBC News, a NJ based specialist pharmaceutical company, Antares Pharma has developed a gel based contraceptive, Nesterone® that is as effective as taking a pill, acccording to phase 2 clinical trial data presented at the annual meeting of the American Society of Reproductive Medicine (ASRM) in Denver.

According to researchers, the contraceptive delivered by the gel is as effective as that delivered by a traditional pill, but doesn’t show many of the adverse events and side effects such as weight gain & acne. As always with promising phase 2 data, there is no guarantee that the phase 3 trial will show the same results, but this is definitely an innovative product to watch.

Nesterone® is being jointly developed with the Population Council (a non-profit organization). According to the lastest Antares Pharma investor presentation, they are looking for partnership opportunities for this product. Based on the positive phase 2 data and a market worth $1B, I am sure they will now have some business development interest.

Also, the company has a number of other injectable and transdermal gel products in development and collaborations with Teva, Uman Pharma and BioSante Pharmaceuticals. It will be interesting to watch how this small, emerging company and its products develop. A company to watch.

Big pharma needs to continue to do its own R&D

By Pieter Droppert on February 24, 2010

Although the market for biotech IPOs is opening, capital constraints remain a key issue for biotech companies. Recent years have proven difficult with limited access to financing, and venture capital in particular has been virtually non-existent. Biotech companies with limited resources have focused on core development activities.

This has resulted in delayed development of pipeline products and is likely to have a future impact on the availability of new drugs for licensing and acquisition by big pharma. One of the consequences is that big pharma cannot rely on biotechnology companies to be the sole source of new products to keep their portfolio's stocked. They will have to continue to invest in their own R&D, however inefficient this may be. However, the trend of big pharma is to outsource and divest R&D as evidenced by the recent layoffs at AstraZeneca and GSK, and the loss of R&D facilities post-merger at Wyeth/Pfizer. The current strategy of big pharma is only likely to exacerbate their pipeline shortages in the face of the generic cliff many companies are facing.

Additionally, as reported earlier this week in the FT, the benefit to pharmaceutical companies of investing in their own R&D is that early stage development is cheap compared to the high cost of buying developed research. Late stage products come at a price premium reflecting their lower risk.

An example of this is the $1.2B licensing and development deal that AstraZeneca did last week with Rigel Pharmaceuticals (Nasdaq: RIGL) for their rheumatoid arthritis drug, fostamatinib disodium (R788). The Pharma Strategy Blog has further insight on this.

Big pharma cannot rely on outsourcing and biotech for all their new drug development and need to invest in their own R&D.

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