To be (briefly) on the front lines

For many of us working in the life sciences and passionate about the biotechnology sector, our motivation often stems from the power of medicine to help people.  Somewhere on the career path, one may have thought about the doctor route. For me personally, the potential there ended in high-school with an aversion to blood and sensitivity to bearing bad news to patients.

However, during the final year of my PhD this year on financing global health, I had the opportunity to attend Oncology Summer School at the University Medical Centre at the University of Gronigen, in the Netherlands. The course brought together 36 medical students from six continents to attend a course on clinical and experimental oncology. I was the only student without prior clinical training, but I had experience in drug development and financing. I was very excited about this opportunity – and the course did not disappoint.

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Africa’s Way Forward

In my last contribution, I wrote that the gene revolution is finally arriving in Africa. Now I would like to explain what must be done to consolidate and progress this effort.

As a first initiative, Africa needs to focus on networking, which is necessary because the critical mass of scientists in developing countries is somewhat limited. When this is the case, networking can be viewed as partnering with equivalent institutions, which allows these projects to be done on a global basis.

 Even the best agricultural science has no effect if quality seeds do not reach the farmer. In the US, the non-profit Crop Improvement Association is responsible for monitoring seed production and for the process of seed certification for a limited number of generations. In Brazil, EMBRAPA has Foundation Seed, which sells to seed producers under strict rules, before being sold to farmers. In both countries seed laws have been in effect for decades. Brazil passed a simple law to regulate the commercialization of seeds: the seed inside of a container or bag should correspond to the label outside. This law, which went into effect in 1965, changed agriculture in Brazil and in effect stimulated the seed industry in the country.

In addition, Africa needs a law to protect its breeding achievements and varieties, something similar to the Cultivar Law, essentially based upon the UPOV System. For reference, examine the Law # 9456 sanctioned in Brazil in April of 1997.

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The Innovation in India

The current issue of Nature Biotechnology contains a news brief, which can be found here, that focuses on the commercialization of clot-specific streptokinase by Institute of Microbial Technology (IMTECH), based in Chandigarh, India.

Coincidentally, I attended a Biosummit organized by the Confederation of Indian Industry with the support of Government of Maharashtra and MCCIA in Pune on 18 January 2011. IMTECH Director Dr. Girish Sahni mentioned in his lecture about the clot-specific recombinant STK becoming ready for commercialization.

Up to this point all of the clot-buster drugs used in India, and in fact for most of the developing world, have been imported and relatively expensive (streptokinase costs about $100 per dose, while tissue plasminogen activator [tPA] is about $1,000 per dose). But the first clot buster available in India, which was a natural streptokinase, was developed by IMTECH and commercialized by Cadila Pharma in 2002 for about $20 per dose. Later in 2009, recombinant streptokinase (rSK) by IMTECH was commercialized by Shasun Drugs & Chemicals for about $50 on the open market, but Shasun said it would supply to hospitals at a 50% rebate.

However, structure-function studies in 2006 on the mechanism of human plasminogen activation lead to the design of improved versions of clot-specific streptokinase (CSSK) by IMTECH, which signed a technology licensing agreement with the US-based firm Nostrum Pharmaceuticals for clinical development and commercialization. This CSSK had advantages, such as reduced systemic reactions (in other words, less side-effects), localized plasminogen activation and decreased doses/economic benefits (greater efficacy at low doses).

Looking at it historically, IMTECH’s patenting has gone like this:

  • Patent No. 183828, for “An Improved Process for the Simultaneous Preparation of Extracellular Streptokinase and Its New Analogus”; grant date: 15/12/2000 in India.

And for Clot-specific SK:

  • Patent No. EP 1024192, for “Novel Clot Specific Streptokinase Proteins Processing Altered Plasminogen Activation Characteristics and a Process for the Preparation of Said Proteins”; grant date: 02/08/2000 inEurope.
  • Patent No. 190822, for “A Process for the Preparation of Clot-Specific Streptokinases Processing Useful Plasminogen Activation Characteristics”; grant date: 23/12/2005 in India.
  • Patent No. 7163817, for “Clot-Specific Streptokinase Proteins Possessing Altered Plasminogen Activation Characteristics and a Process for Their Preparation”; grant date: 16/01/2007 inU.S.A.
  • Patent No. 7250503, for “Nucleic Acid Molecules Encoding Clot-Specific Streptokinase Fusion Proteins Possessing Altered Plasminogen Activation Characteristics”; grant date: 31/07/2007 in U.S.A.

These incremental jumps made by IMTECH beg the question of whether this is the type of innovation likely to keep occurring inIndia. In essence, the firm has made a biobetter. It’s also worth asking if European and US-based firms will continue to be the ones picking up the most innovative discoveries at Indian research institutions. After all, IMTECH’s first products were commercialized by Indian companies, but then a foreign partner (though Nostrum Pharmaceuticals is owned by a person of Indian origin) is handling the clot-specific drug, probably in an attempt at a better return on investment. Will the Indian biopharmaceutical space grow enough to handle worldwide commercialization of the country’s truly breakthrough discoveries?
Regardless, IMTECH is readying the next-in-class clot buster – a pegylated streptokinase, a polyethylene glycol-(PEG) fortified enzyme that liquefies blood clots. It’s set to cost around $1,000 a dose, which is considerably reduced from competitors while still being potent, targeted, easy-to-deliver and eliciting fewer allergic reactions. To me, this stands as a validation of the Indian government’s two policy initiatives:

  1. The Small Business Innovation Research Initiative (SBIRI) for early-stage funding of small and medium enterprises.
  2. The Biotechnology Industry Partnership Program (BIPP) for gap funding of larger, higher-risk projects by enterprises of any size.

These policies have helped Indian research find funding and thus, clinical progress.  The type of innovation seen with CSSK – both incremental improvement and affordability – can also be called “micro-innovation,” and it is what India is already known for: adapting existing biotechnologies to meet local needs.

Viren Konde

Non-Dilutive Financing for Biotech Startups

In a series of posts we introduced the Leverage Startup and how non-dilutive sources of capital can be used to accelerate the commercialization of academic biotech projects.  In this post we discuss the use and sources of non-dilutive financing in biotech startups.

We define non-dilutive funding as financing that does not require the sale of your company’s shares, and hence does not cause dilution of the existing shareholders.  The use of non-dilutive funds as a component of your financing strategy is important and has many benefits.  First, non-dilutive funds can provide critical cash to support your company’s development.  Second, because non-dilutive funds do not require the sale of the company’s voting equity, it allows founding teams and existing shareholders to retain company ownership and control.  Third, as many non-dilutive funding sources require approval from expert stakeholders with deep domain knowledge like funding agencies, important validation of the team and technology can be provided for future customers, partners, and equity investors.

The following gives an overview of non-dilutive sources.

Government research grants. (for example: NIH).  Certain research focused government grants include companies as eligible awardees.  The National Institute of Health (NIH) is a good example, where companies can compete for R01 and R21 grants alongside traditional University applicants. These government research grants typically fund basic research or its commercial translation, with the required stage of development clearly outlined in the call for proposals. Such monies typically fund salary and consumables, but limit their contribution of overhead or other non-research activities.

Government industry grants (for example: SBIR, NRC IRAP).  With the aim of enabling the commercialization of cutting edge technologies, various governments have established industry specific grant programs.  These grants typically emphasize the commercialization of research and the application often requires a strong market argument for the future product.  These grants usually fund commercialization activities rather than basic research and sometimes can be partially used to support the filing of intellectual property, conducing a market analysis, and other business development actives.  Many of these funds require the company involved to provide matching funds in the form of in kind (i.e. additional salary support) or cash, and to demonstrate that the business will provide a conduit for commercialization.

Foundations (for example: Gates, CF, Ellison, Lou Gehrigs, X Prize).  Foundations are becoming an increasingly important driver of biotechnology innovation. Foundations are typically focused on improving the health of individuals inflicted with a specific disease, for example the Cystic Fibrosis Foundation, and are primarily funded by donors with a connection to the ailment.  To increase the research being conducted for the given indication as well as the effectiveness of that research, Foundations are taking a very pro-active approach to funding R&D.  For companies, this can represent a significant opportunity to obtain R&D funds to push forward a technology that can impact a given disease. In addition, Foundations also provide a conduit to clinical expertise as well as potential access to patients and stakeholders, giving a program a larger chance of translational success.  There are also new initiatives specifically focused on biotechnology entrepreneurship.  For instance, Breakout Labs, an initiative from the Thiel Foundation, has been set-up to bridge the gap between early-stage research and venture capital-ready technologies.

Industry partnerships.  Industry partnerships are the life blood for pre-revenue biotech firms. Typically, partnerships involve a transfer of technology from a small biotech to a large company in return for cash and/or co-development rights.  These partnerships can involve significant sums of upfront and downstream cash flows and often represent the first major validation of the technology by an established pharma or large biotechnology company. Although these funds usually do not involve an equity stake in the selling company, such transactions usually involve a license or option-to-license of the selling firms intellectual property.  It is important to keep such licenses non-exclusive or narrowly-exclusive such that the startup remains positioned for long term growth.

Venture Debt (for example: Silicon Valley Bank). Venture debt is a useful tool in Biotech financing.  For example, debt can be utilized to extend the runway of an existing financing round to allow the company reach critical proof-of-concept achievements prior to follow on investments.  A financing round is usually required before accessing Venture Debt, and the lenders are anticipating that the company will raise another financing round or other capital injection to receive their payback.  Lastly, as with all debt, there is insolvency risk associated with it and careful consideration is required before taking such funds.

Revenue (for example: contract research, early product release).  Building a company on the back of a successful revenue stream is an ideal financing approach, however this can be challenging for nascent ventures.  For biotech firms will little to no regulatory involvement (i.e. tools companies, certain medical devices, industrial applications, etc.), establishing customers to use and test early prototype products is feasible and recommended.  For firms with significantly more regulatory barriers (i.e. therapeutic, diagnostic, etc.) revenue can sometimes be generated through auxiliary products or services, for example contract research or consulting.  In these cases however, the founding team needs to be diligent to not be distracted from the ultimate product goal of the firm and needs to weight the value of these funds over the delays it will create in achieving overall long-term goals.

Although non-dilutive sources are a great way to finance an early stage biotech, it should be noted that they are not “free” and can have important implications and associated costs.  For instance, certain funding agencies require that the invested cash be returned if the company is acquired by a foreign company, that they receive a multiple of their investment upon commercial success, or that they have certain rights to the IP.  Additionally, non-dilutive funds are typically allocated to a given project, rather than to the company at large.  As such non-dilutive funds are more ridged to business pivots that require a change in a said project, and do not fund other business development and overhead of running your business. A combination of dilutive and non-dilutive financing is often the strongest mix for early biotech.

Thanks to Euan Ramsay  & Mike Koeris for edits and input on the post.  This post was originally posted on BiotechStart.org.  Please provide any insights you may have to the use of non-dilutive funds, and sources of non-dilutive funds in countries outside of North America.

James Taylor

 

Becoming a Bioentrepreneur

The word entrepreneur is thrown around a lot (including on this blog), and when it’s used that frequently, it can begin to lose its meaning. The term sounds vaguely swashbuckling, as if every person it applies to is flippantly quitting a secure academic job to roll the dice on a sexy, but probably doomed, start-up.

That may or may not be accurate, but the best way to define an entrepreneur is to go talk to one. Or several. Along those lines, Index Ventures (with support from Nature Biotechnology), is hosting a day-long event on October 18 in London, bringing together five experienced biotech entrepreneurs to explain just what it’s like to be at the forefront of biotech company formation.

The idea is to put seasoned execs in front of what might turn out to be biotech’s next generation of company founders, and discuss the ups, the downs, the excitement and the disappointments of forming start-ups. I’ve sat with countless CEOs as part of my responsibilities for Nature Biotechnology, and I can tell you perhaps the most interesting question you can ask is, What was it like to start your first company? The answer is rarely boring.

There will also be a business pitch workshop. For those of you in the London and surrounding area, take advantage of the opportunity to hear successful company founders talk about their experiences. And one more thing – the event is at The Brewery.  This is important because the biotech industry (like any other) thrives on networking, and networking thrives on alcohol, and alcohol will be served at the reception.

Here’s the best part: The event is free for academics.  See the flyer below for more information and details on how to RSVP (click to enlarge).

Hope to see you there.

Brady Huggett

 

Harnessed Serendipity

In the late 1960s Spencer Silver, a chemist at the Minnesota Mining and Manufacturing Company, was hard at work developing a super strong adhesive.  Eventually, however, what he produced was fantastically weak glue.  But Silver simply refused to allow his “failed” experiment to dissipate into the ether.  So do you know what he did?  He did precisely what scientists don’t do often enough: he started talking to people and asking for help.  He gave formal company presentations, he dragooned colleagues in the hallway, and he generally chatted with anyone who’d listen.

For five years he couldn’t find a viable application; a purpose for his weak glue. Then one Sunday Silver’s colleague, Arthur Fry, himself a chemical engineer, was failing to keep up with his hymn book in church.  He liked to cut  pieces of paper and use them as bookmarks, but they fell to the floor when he opened the page.  On this Sunday Fry recalled Silver’s lecture and the connection was made. He went back to work, placed Silver’s shoddy adhesive on the back of yellow scratch paper, and helped his employer (since renamed 3M) create one of the most successful franchises of the 20th century.  Today Post-It Notes bring in over $1B in annual revenue, and have become a cultural icon.

Ok. So let’s rewind for a second and imagine that the invention-to-application cycle didn’t take five years, but rather happened in say… a few weeks?  It would have introduced every day people to a helpful product five years earlier.  It would also have added another half-decade of patent-protected revenue to 3M’s top-line.

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