A Rock Star CEO Places an Unusual Bet on a Biotech

By Steve Dickman, CEO, CBT Advisors

July 29, 2013 (originally published on Xconomy)

Just because a biotech company has landed a high-profile chief executive, does that mean its product is going to work? I’ve been asking myself that question in the wake of the unexpected July 11 announcement of the hiring of a biotech superstar, the Novartis veteran and former Millennium Pharmaceuticals CEO Deborah Dunsire, by the Boston-area central nervous system (CNS) therapeutics company EnVivo Pharmaceuticals. Dunsire takes the reins in mid-August.

Deborah Dunsire, CEO of Envivo Pharmaceuticals

Photo courtesy Millennium: the Takeda Oncology Company

At the very least, the hiring of Dunsire is a bullish sign for EnVivo’s late-stage product, an alpha-7 nicotinic receptor agonist. The product, called EVP-6124, is in the midst of two 700-patient, late-stage clinical trials in the very challenging indication of schizophrenia. Given the lack of new therapeutics for schizophrenia, that is exciting enough, but the real potential for EVP-6124 is in the even more challenging indication of Alzheimer’s disease. Two Phase 3 trials are due to begin by the end of 2013 and run through 2015.

It is impossible to say today whether any of these trials will result in an approved drug. But Dunsire’s choice to join EnVivo was deeply surprising to a Boston biotech community that had eagerly awaited news of her next move. A look at the reasons we were caught by surprise will illuminate the risks in drug development for tough CNS indications; the side benefits that will accrue if the drug works; and the synergies inherent in the combination of Dunsire and EnVivo.

When I considered why Dunsire’s choice was so unexpected, I came up with three basic reasons:

(1) EnVivo has flown a bit under the radar. With a single VC investor, the company is anything but a “Boston mafia” biotech investment. Under the steady-handed direction of its former CEO Kees Been, EnVivo has quietly grown from perhaps 30 people when I briefly consulted there in 2005 to a recent headcount of 130. So it has competed successfully in the region’s ever-sharper “war for talent.” But in terms of its stakeholders at least, it is far from the biotech mainstream.

(2) The indications that EnVivo is pursuing are exclusively in the CNS arena. They do not include cancer. That seems like a jump for Dunsire, who focused on oncology for much of her time at Novartis and all of her time at Millennium.

(3) Unlike at Novartis, where Dunsire was in a position to work with a whole portfolio of therapies and focus on the ones likely to perform the best, and unlike at Millennium, where the blockbuster product Velcade (bortezomib) was already approved and on a path to success when she joined in July, 2005, here Dunsire is jumping into a very tough field, betting most of her chips on a single product and doing so without the benefit of CNS experience.

Let’s take those one by one. They’re easy to demolish. First off, EnVivo is not, in fact, a traditional VC-backed biotech. The partners and staff at a single Boston-area venture firm, Fidelity Biosciences, have played a very active role in managing it. One staff member negotiated the license for EVP-6124 in 2004 and a different one, partner Robert Weisskoff, has actually been running the company as interim CEO since March of this year. Still, the company is, according to a Boston-area biotech CEO, “not market tested” because it never had to raise money from other (skeptical) venture capitalists. One could say that comments like this are motivated by jealousy: what CEO wouldn’t want a company to run for which he or she is unlikely to ever have to raise outside capital? But there is also some substance to this critique, since it points to a higher than usual level of uncertainty about the company’s products and its value proposition.

This uncertainty about EnVivo’s prospects would stand – were it not for the general eagerness that I’ve heard about in the pharmaceutical industry to offer generous partnership terms for EVP-6124, terms that EnVivo has chosen not to accept. Pharma has been wrong about neuro compounds many times before. But EVP-6124 has plenty of would-be backers in the industry and I have to believe that Dunsire spoke to at least some of them before making her decision to join.

Second, EnVivo does not work on cancer therapeutics. The highlight of Dunsire’s 17-year career at Novartis was when she led the launch of Gleevec (imatinib), which at the time of its launch in 2001 was the most exciting (if narrowly applied) cancer drug to come along in years.

At the Convergence Forum life sciences conference in Chatham, MA, in mid-May Dunsire appeared in a “fireside chat” with fellow Boston biotech entrepreneur Katrine Bosley. It felt like everyone in the room had one big question for Dunsire: What next? There, Dunsire spoke in tones both humble and proud of the impact Gleevec has had. Gleevec, she said, “has turned CML into a chronic disease.” One patient Dunsire knows personally was “told that she would die before being treated with Gleevec in 1998.” That patient, Dunsire said, “is still running marathons. People who lived three to five years are now living fifteen years and showing no evidence of disease.”

So, like an Olympic champion returning to competition after some time off, it would make sense that Dunsire would try to get “runner’s high” again from launching a meaningful drug. How many more Gleevecs will there be in cancer?  At Convergence, Dunsire said that there are “vanishingly few cancers in which we might get there.”

Perhaps more to the point: how many of those rare drugs are wholly owned by small biotech companies that are not financially compelled to partner them with the pharmaceutical industry? Sticking with cancer might well have pushed Dunsire over to the pharma side of the industry. And arguably, Dunsire could have joined an oncology-focused pharmaceutical company as CEO. She certainly has the street cred. But by getting out of cancer, she has given herself a chance for a second compelling success that outstrips expectation and, more importantly, helps patients. Dunsire even gave a clue to the audience at Convergence when she said “I want to focus on the areas where we don’t have good therapies. Cancer. Neurosciences.”

Finally, what about the risk? Isn’t EVP-6124 a risky bet? The answer to that has to be an unequivocal “yes.” No drug in this class (the alpha-7 agonists) has worked. Targacept, the publicly traded CNS company in North Carolina, in 2012 was the latest to fail with an alpha-7 agonist, albeit in attention deficit hyperactivity disorder (ADHD). The Targacept drug, TC-5619, is still in trials in schizophrenia and Alzheimer’s. Like EVP-6124, that drug had had positive data in an earlier Phase 2 study.

But in biotech, it is always critical to look not just at the risk but also at the upside. Imagine what will happen if EVP-6124 works. It will not only become a multibillion dollar blockbuster, the likes of which have not been seen in the pharmaceutical industry for some time. (Acetylcholinesterase inhibitors that act symptomatically, not mechanistically, and that cause unpleasant and debilitating side effects in briefly delaying the inevitable cognitive decline in AD, currently earn north of $2 billion in revenue). It will also help patients in a palpable way.

There is another factor to consider in contemplating the potential for EVP-6124 and for EnVivo. Any analysis of Dunsire’s motivation to join EnVivo cannot ignore the man behind its sole VC investor. That is Edward “Ned” Johnson III, 83, whose family owns Fidelity Investments. At a $6.5 billion net worth, Johnson is the 52nd-wealthiest person in the country according to Forbes. Among his many contributions to AD research, he founded and funded the important AD research portal Alzforum.org. As if to underscore his commitment to the company and the field, Johnson supported Fidelity Biosciences when it bought out all the other investors in 2008, becoming the sole shareholder in one of the few biotech companies developing a novel AD therapy. This is an unusual model but also one that might help explain how Dunsire could be convinced of the investors’ support for the company no matter what. The investor (singular, not plural) has a burning desire to leave a legacy.

The fact is that EnVivo is the rare biotech that can commercialize its own product. Johnson’s wealth makes that possible – even if, as some have speculated, the eventual cost to his firm’s fund for product development of this one product tops $600 million.

After so many failures of bold and not-so-bold products, AD drug development lately has contracted a bad case of incrementalism. The cost of Phase 3 trials is so prohibitive at $100 million per trial and up – and some products may require more than one Phase 3 trial before receiving regulatory approval – that until now only pharmaceutical companies have been able to afford these trials and even those companies are becoming skittish about anything but those approaches that, judged by today’s science, seem most likely to succeed. A successful EnVivo could change that paradigm and tackle the development of truly innovative drugs, including those based on full-on mechanistic approaches. Now that’s what I call upside. And it explains Dunsire’s choice better than any other explanation I can imagine. Now, EVP-6124 just has to work. As Johnson told me in a chance encounter on an airplane last year, it is way too early to credit him with improving the odds for Alzheimer’s drug development. Wait until we see if EnVivo’s alpha-7 works, he said.  “The proof of the pudding,” he went on, “is in the eating.”

# # #

1 Comment

Filed under Uncategorized

“Alternatives to VC” panel video (actually very much about VC, especially in Europe) – BioEurope Spring, March 2013

This is not a traditional post but rather a link to a video of a fun panel that I moderated at BioEurope Spring in Barcelona in March, 2013. The discussion touched on several hot issues in funding innovation in life sciences, especially translational research.

Here’s the link: http://www.partnering360.com/insight/showroom/id/0_p9ec32p3

To help you find points of interest, I’m listing some approximate time stamps below.

PANEL DATE: March 11, 2013

PANEL DESCRIPTION

With the shortage of classical VC investing and the ongoing boom in early opportunities and strong entrepreneurs, traditional VC is beginning to share the spotlight with alternative models. For therapeutics companies that have already raised some capital or especially those that have products in the clinic, there are some new alternatives to choose from, including option deals, one-product financings from VCs, and pre-IPO royalty-based financing.

Moderator:
Steve Dickman – CEO, CBT Advisors

Panelists:

  • Sinclair Dunlop – Managing Partner, Rock Spring Ventures
  • Joël Jean-Mairet – General Partner, Ysios Capital
  • Kevin Johnson – Partner, Index Ventures
  • Melissa Stevens – Deputy Executive Director, FasterCures

CONTENTS

  • 0:00 Panel intro (Steve Dickman)
  • 3:19 FasterCures (Melissa Stevens), channeling non-dilutive foundation cash into therapy development
  • 4:29 Index Ventures (Kevin Johnson) intro and description of pharma-backed fund
  • 4:50 Rock Spring (Sinclair Dunlop) intro – UK VC
  • 5:20 Ysios (Joel Jean-Mairet) intro – Spanish-European VC
  • 7:25 What are the mechanics of asset-based financings? We’ve done 27 of them… (Johnson)
  • 12:15 Ysios (Jean-Mairet) view on asset-based financing “experiment” in molecular diagnostics
  • 14:00 Why Index would love to invest in diagnostics but can’t do it (Johnson)
  • 18:30 How things are better in lean, asset-based companies (Johnson) “Working in a tinpot biotech is more fun” than in an old-fashioned fully integrated company.
  • 19:55 How Rock Spring (Dunlop) does early-stage platforms & products
  • 21:15 Refinancing risk has grown (Jean-Mairet)
  • 22:45 How times have changed in LS VC (Jean-Mairet)
  • 24:15 The key to avoiding “zombie” companies – suicide (Johnson)
  • 25:40 More (interesting!) details on FasterCures and how foundations are changing the investing game (Stevens)
  • 28:48 National MS Society’s “Fast Forward” venture-like group (Stevens)
  • 30:55 CF Foundation and its Vertex and now Pfizer relationships (Stevens)
  • 32:55 American Heart Association (AHA) learning more about venture philanthropy (Stevens)
  • 36:15 Venture philanthropy in Europe (Dunlop)
  • 46:15 Tech transfer report card (Dickman, panel)
  • 57:00 How European & Israeli seed funds are trying to bridge the venture gap (panel)
  • 1:04:00 How to ensure succession in biotech (Johnson, panel)
  • 1:08:00 Why there are not more young entrepreneurs in life sciences (Johnson)
  • 1:15:00 The Andrew Lo “Megafund”: will it fly (Stevens, panel)
  • 1:18:00 Other debt models for supporting translational work (Jean-Mairet)
  • 1:22:00 Cross-border seed-stage investing (Dickman)

 # # #

Leave a comment

Filed under Uncategorized

Moderna Therapeutics as the next Genentech? Not so fast

By Steve Dickman, CEO, CBT Advisors

December 10, 2012 (slightly shorter version originally published on TechnologyReview.com)

Quick biotech PR tip: When exiting stealth mode, heralding your company as the next Genentech is one way to get above the noise. That was the approach of Moderna Therapeutics, a Cambridge, MA-based startup that announced itself last Thursday, revealing that it had raised more than $40 million and attracted an all-star set of board members and scientific advisers.

Announcing that you just might be on the way to becoming Genentech II raises the bar a wee bit. And, at first blush, Moderna looks like it might even get over that very high bar.

Central Dogma of Molecular BiologyThe concept is intriguing, to say the least. Biology’s central dogma is “DNA to RNA to protein.” Although Nobel Prizes have been won for discoveries that expand upon that central dogma (the discovery of reverse transcriptase, for example), the core approach underlies the first several generations of biotech products. Think EPO, Neupogen or the grandfather of them all, human insulin. You manipulate the DNA in the lab and then express the protein in the production facility. Then you put it in a vial and sell it to the patient, who gets an injection or an infusion. The main role for the dogma’s middleman, messenger RNA (mRNA), is a passive one: get transcribed from the DNA then, in turn, get translated into protein.

Moderna turns the dogma on its head: go straight to the RNA, do some fancy chemical tricks to it and deliver it directly into the body. This makes the patient herself into the production facility. All of us carry around cellular protein factories, known as ribosomes, and if properly activated, those can be harnessed (at a much lower cost) to produce proteins in which we have deficiencies.

One report on Moderna, published on Xconomy, quoted venture investor Noubar Afeyan of Flagship Ventures as saying that the company “builds on lots of things that have been tried before.” One of those things is gene therapy, providing genes (that is, DNA) via viruses or other delivery vehicles and trying to get cells to express those genes. Those approaches, too, tried to use the body as a manufacturing facility. Unfortunately, with some recent intriguing exceptions, most of them have failed.

Aside from this novelty, three things make Moderna so interesting:

Breadth of application

Since the mechanism is potentially so universal, proteins could be produced that address any number of diseases. The company said it will focus first on areas where protein therapeutics are already well-established: oncology supportive care, inherited genetic disorders, hemophilia and diabetes. But the company also claimed that it can also induce production of intracellular proteins that could never be given exogenously due to efficacy or immunogenicity concerns. Should this approach work, and it’s a bit of a long shot, it opens up new areas of application to the pharmaceutical industry.

Repeat dosing

Unlike many gene therapies, which could potentially be curative, in Moderna’s case the patient will need to be dosed with the mRNA over and over again. Think “recurring revenue stream.”

Intellectual property

When Genentech and Amgen were founded, neither one had a monopoly on the production of all human proteins in bacteria. When monoclonal antibodies were invented in Cesar Milstein’s laboratory in Cambridge, UK, Milstein was discouraged from patenting the concept. But in Moderna’s case, filing broad and deep intellectual property was the company’s central focus and a big reason why the company remained in stealth mode for the past two years. This means that even if other companies manage to enable the use of mRNA-based techniques in areas not yet explored by Moderna, the company could still demand royalties.

Yet another reason to pay attention to Moderna: unlike many other biotech companies, Moderna was not based on work published soon after its founding. The original publication that drew interest from Afeyan didn’t involve using patients as protein factories at all. The paper, published by company founder Derrick Rossi in 2010, involved using injected mRNA to produce cells that resemble embryonic stem cells. According to the Xconomy article, Afeyan did not want to invest in a stem cell company, which he perceived as too risky. Instead, he suggested that Rossi use the mRNA as a way to induce protein production in patients. That led to the key experiments, as yet unpublished, that were the basis of the company’s intellectual property and its initial financing. According to Moderna’s triumphant press release, the publications are supposed to come in 2013.

At the same time, there are three big questions:

Delivery

Isn’t Moderna facing a double hurdle, first in selectively getting into the right kind of cell and then in achieving the right therapeutic dose level? The first of these hurdles represents the same kind of delivery problem that has presented such an enormous challenge to RNA interference (RNAi) companies like Alnylam. For all its promise, RNAi was born amid a hail of questions expressing doubt about delivery. How to use systemic delivery to propel nucleic acid molecules with strong negative charges and potentially vulnerable to ribonucleases into the right cell types in the right organs at high enough concentrations to have a biological effect? That was the question. (The early results, as I viewed them in a cramped biochemical laboratory in Kulmbach, Germany, in 2002, looked blotchy at best.) More than ten long years later, despite some powerful efforts that cleverly take advantage of biological reality, for example, the “leakiness” of tumors, those questions have still not been completely laid to rest.

The other part of the delivery challenge has to do with what happens to the mRNA once it is inside the right kind of cells. How many cells exactly has it penetrated? What are the expression levels over time of the desired proteins on a per-cell or per-tissue basis? Will the levels in one patient be the same as in the next one? Achieving appropriate dosing without setting off alarm bells at the Food and Drug Administration will be tough.

Where are the other investors?

The only institutional investor named in the press release was Flagship Ventures. If other VC firms were involved, one would expect to find them sharing the limelight. So either Flagship decided that what it had in Moderna was so good, it did not want or need to share or other VC funds were approached and said no. It will be interesting to learn over the coming weeks which of these explanations, or which combination of them, pertains.

What’s the value in its first applications?

Let’s assume that the Moderna approach works. Suddenly EPO, Factor VIII and beta-globin can all be produced in patients deficient in these proteins simply by dosing them regularly with mRNA. But so what? There are already therapies on the market that will be doing this. In fact, some of those will be going generic and will be joined on the market by “biosimilars” that will presumably cost less than the existing (expensive) drugs. Furthermore, many of today’s most successful protein therapeutics have been modified (e.g. pegylated) to improve their half-lives. Where would be the advantage of an injection of mRNA over one of protein, especially a second-generation, long-acting protein such as Amgen’s Neulasta®?

Perhaps the advantage would come in proteins that cannot be injected as such because they elicit unwanted immune reactions from patients. But there are not too many examples that come to mind (thrombopoietin is one). That might be one reason why Moderna CEO Stéphane Bancel said that the company would be partnering the largest-market indication areas, like cancer, while retaining only rare diseases (in which intracellular protein production might make sense) for itself.

In summary, Moderna reflects a novel approach. For that, its founders and visionary investors deserve their well-earned day in the spotlight. It is especially commendable that a venture investor in the current no-whip, Splenda-only funding environment would create a good old-fashioned full-fat latte of a biotech company. Funding it exuberantly, vigorously protecting the IP and keeping the shares to yourself are all probably wise moves. But for the rest of us to see Moderna as a new Genentech, Moderna will have to publish in a peer-reviewed journal, partner with a pharmaceutical company or at least explain how it addresses basic questions like delivery and consistent dosing across tissues and patients.

# # #

2 Comments

Filed under Startup

Genomes-R-Us: Is BGI now Complete?

By Steve Dickman, CEO, CBT Advisors

September 25, 2012 (originally published on Xconomy)

The sad endgame in the acquisition of Complete Genomics (CGI; NASDAQ: GNOM) came last week: having failed to create a sustainable business, CGI was put up for sale in June of this year, culminating in a takeover by sequencing powerhouse BGI for $117.6 million in cash plus $30 million in bridge financing.

Behind that headline is a fascinating story: a US company losing despite being right about its market; a Chinese company succeeding by vigorous price competition and then buying its rival; and a glimpse of the future of genomics-driven medicine.

On the surface, the sale of Complete Genomics looks like a case of overreach by the company’s investors and management coupled with poor execution. Complete, founded in 2005, had early on identified a superior business model for the coming era of cheap and frequent sequencing: take the sequencing activity and much of the interpretation out of the hands of hospitals and other healthcare providers and instead provide it on an outsource basis – both the sequence data itself as well as the all-important interpretation. For an apt analogy, think of Google’s core search business: why own a server farm when what you need are the search results?

I strongly remember meeting the late, visionary venture capitalist Alex Barkas of Prospect Ventures at the JP Morgan Healthcare Conference in early 2008 and hearing him forecast a glorious future for Complete Genomics. Even though the market was at that time buzzing about the next high-speed sequencing technology play, Pacific Biosciences (PacBio; NASDAQ: PACB), Barkas was supremely confident that CGI’s innovative business model would rule the day. That vision, driven by Complete Genomics CEO Cliff Reid as well as by Barkas and other investors, brought in VC and public investment of more than $250 million. The company went public at $9 a share and sold for as much as $17 a share before plummeting into the $2 a share range, where PacBio also now languishes. BGI’s purchase price correlates to $3.15 a share.

There were some momentary triumphs along the way, including technical breakthroughs, such as increasing the accuracy of sequencing. But, as Technology Review put it, “Though a 2011 paper published in Nature Biotechnology found that Complete Genomics produced more accurate DNA data than competitors, superior accuracy never translated into financial success.” CGI scored some small commercial successes along the way, such as landing the Mayo Clinic as a client in February of this year. Along the way, CGI was able to drop the price of a full human genome sequence to $4,200 in 2011, down from $12,000 in 2010.

But CGI’s revenues and, presumably, its margins dropped along with the price and the company never made up the difference on volume. Even worse, the company lagged in processing the genomes it had promised to sequence. The backlog in the end numbered in the hundreds of genomes. And even if CGI had been able to keep up with the influx of genomes it had, the customers did not come in sufficient numbers to create growth. A CGI business development executive told me in February that the only thing that would drive a higher stock price would be when the company proved its value and thereby showed big revenue gains. That executive has since left the company and, far from being able to build a sustainable business around this model, CGI first had to downsize and then had to be sold. And the buyer, in what must seem to insiders like a bitter irony, is a former competitor, the US subsidiary of Shenzhen, China-based BGI.

BGI is not just any competitor. In fact, BGI had arguably represented the biggest obstacle standing in the way of Complete’s success. As CGI tried to increase its market share by cutting prices, BGI responded by cutting them still further. BGI, using sequencers from Illumina, had a lower cost of capital due to the patience and strategic orientation of its investors. Like Amazon.com, the company and its investors focused not so much on quarterly earnings statements, but rather on BGI’s market share. They chose to operate BGI at what must have been a loss for several years and succeeded at driving CGI to the auction block. (BGI was founded in 1999, and in 2010 it received $1.5 billion in funding from the China Development Bank to expand its operations, according to Isaac Ro of Goldman Sachs.) BGI apparently succeeded in a big way. In January, 2011, Nature estimated that of the 30,000 human genomes that would be sequenced that year, BGI would be responsible for 10,000 to 20,000 of them. The lower prices were good for customers but bad for competitors (bye, bye, CGI).

A transition waiting to happen

So if BGI emerged triumphant from the bruising price war, why did it buy its former rival? Several reasons, all of them interesting. Like every other player in the commercial world of genomic sequencing and analysis, China-based BGI is on a journey from research to clinical applications. BGI hopes that the market finally (finally) expands once sequencing becomes a routine clinical activity ordered by physicians and reimbursed by insurance companies. In other words, like CGI was, BGI is eagerly preparing for sequencing to become part of routine disease diagnosis and determination of therapy.

The transition to clinical adoption of sequencing has been “just about to happen” for the last five or six years. If and when it does (and I am still betting that it will), BGI needed to be prepared. It was facing several obstacles, all of which can be overcome or at least reduced with the pickup of CGI:

  • Reduce or eliminate dependence on Illumina: Illumina is increasing and speeding up its service offerings. BGI had become dependent on sequencers from Illumina, the market leader in sequencer sales with over 60 per cent share, which had provided most of its 100-plus machines. (According to a research note published by Wall Street analyst Peter Lawson of Mizuho on Monday, Sep. 24, Illumina’s market share has actually reached 66 per cent.) Now that Illumina is moving into sequencing-as-a-service in a much bigger way, it will be more of a competitor to BGI. Thus, owning CGI and its proprietary sequencing technology (and different reagent suppliers) will give BGI an advantage.
  • Improve turnaround time: Shipping samples across the Pacific was not an efficient way for BGI to deliver data to customers in the U.S. market. Research institutes might have put up with it but clinicians will not. By buying Complete Genomics and its California-based sequencing “factory,” BGI is moving closer to its customers.
  • Add customers and capacity. BGI picks up not just CGI’s customers (like the Mayo Clinic) but also its 25 or so sequencers. Isaac Ro of Goldman Sachs last week told GenomeWeb that the deal accelerates BGI’s expansion into the US and gives it “an immediate infrastructure and service offering that will complement the facilities in China.” Former CGI developer Zhanzhi Hu told me in a phone interview that “If CGI has a healthy factory, it could crank out 1000 genomes a month – a not insignificant number.” BGI will need that capacity and more. A reliable industry source told me that the Mayo Clinic deal is expected to require sequencing of 200,000 human genomes over the next five years. Too bad for CGI that they could not hang on long enough to do all that sequencing!
  • Become a clinical laboratory. This is perhaps the most important reason. CGI applied in July to the US government to attain status as a CLIA lab. The decision, expected to be positive, should come in late 2012 or early 2013. The decision to buy CGI echoes the recent $50 million acquisition of former personal genomics company Navigenics by the second-largest sequencing manufacturer Life Technologies (LifeTech). In its acquisition announcement, LifeTech declared that it will shut down the Navigenics consumer business while maintaining its CLIA lab. (Illumina has had a CLIA lab since 2009).

Growing up and being clinical

If sequencing goes clinical, BGI will be able to play sooner and better based on its pickup of CGI. Although BGI already has a US sales presence, it has no way of serving clinical customers in the United States. If the CLIA lab designation comes through, then BGI will be able to sell clinical sequencing right away. One of the immediate drivers of the deal may have been Illumina’s predicted hesitancy (according to my industry sources) to sell clinical-rated instruments to BGI rather than research-only instruments once Illumina receives its expected 510(k) clearance from FDA.

There is also a cultural aspect. BGI has built a stellar reputation as a provider of genome sequence data. But it is not a US company. By keeping CGI up and running as a US subsidiary, BGI can – assuming that the deal goes through – sell its services more easily as it competes with US players like Illumina and LifeTech.

The race for improved sequencing hardware will not slow down. But as this acquisition shows, the more interesting battlefield, at least for the healthcare field, is in the interpretation of clinically obtained genomic data. The same week that CGI was acquired, Foundation Medicine secured a $42.5 million financing (funded in part by major clinical diagnostics players Roche and Laboratory Corporation of America) to pursue forward-looking genomic medicine in oncology; and the University of Texas M.D. Anderson Cancer Center announced an up to $3 billion “Moon Shots” initiative to significantly improve cancer care outcomes, in part by paying closer attention to genomic data.

Clinical sequencing is coming, first in diagnosing especially pediatric diseases of unknown origin and in oncology, then later in gastrointestinal disease (gut microbes…) and perhaps even, much later, in population screening. It just (barely) did not arrive in time to make a success of Complete Genomics. I suspect that BGI and its patient investors will have a better chance.

END

1 Comment

Filed under Uncategorized

How I stopped worrying and learned to love Twitter: Top Hundred Life Sciences Twitterers to Follow

By Steve Dickman, CEO, CBT Advisors

Amsterdam, Monday, March 19, 2012

Twitter last month hit a half-billion users and no wonder. What a valuable business tool! Adoption is accelerating in the biotech world. Initially I was skeptical – “What, me ‘tweet?’ You’ve got to be kidding!” But now I’m a believer.

Twitter has helped me find clients; introduced me to new and interesting people, increased the speed and accuracy of my responses to industry news; and given me ideas for blog posts. I’m even starting to say the dreaded word “tweet.”

For all the hype about Twitter’s role as a real-time wellspring of trivialities, and for all the righteous blather about its disputed role in fomenting revolution, the fact is that Twitter greatly enhances both my network and my appreciation for the news.

Now it’s time to give back, both live and online. Today (Mon. March 19, 2012), two Twitter veterans, Michael Gilman (@Michael_Gilman) of Stromedix (now Biogen Idec) and Simon Meier (@Venture_Invest) of Roche Venture Fund, and I will share some of Twitter’s benefits with the audience at a panel discussion at the BioEurope Spring conference (hashtag #BES12) in Amsterdam. This post will give my Boston Biotech Watch readers a quick way to increase the value they can derive from Twitter.

Below, my associate Ovid Amadi and I have created ten “Top Ten” lists of whom to follow on Twitter. Once you have opened a free account on Twitter, go to my feed and simply subscribe to whichever one of these lists you like. Or pick and choose among these top Twitterers as you build your own custom feed.

For those who cannot attend the session, you can still get an in-depth and hands-on intro to Twitter from this video, kindly posted by EBD Group after the “social media and biotech” panel that I moderated at the BioPharm America conference in Boston last September. On it, you will see how biotech execs and communications pros are using Twitter and other social networks to improve their access to industry intelligence, find jobs and project a strong professional image.

According to the invaluable summary graciously provided by blogger and tweeter Maude Tessier (@Maude_Tessier), “the savvy panelists made a compelling case for Twitter as:

An ideal source for real time data/news to inform business strategies

  • A helpful forum to poll the community on a subject
  • A platform to comment on the state of the life science industry
  • A way to better understand how people think
  • A tool to make new connections with companies and patient groups
  • A medium to build credibility for you and your organization.”

Another ringing endorsement for Twitter in life sciences came from Xconomy’s indefatigable Luke Timmerman (@ldtimmerman): http://www.xconomy.com/national/2011/09/12/what-most-biotechies-are-missing-by-avoiding-twitter-a-huge-networking-opportunity/

I can enthusiastically vouch for all that. Twitter: it’s the bomb.

# # #

Ten “Top Tens” for Twitter in Life Sciences

Compiled and annotated by Ovid Amadi and Steve Dickman (@cbtadvisors), CBT Advisors

Each tweeter’s name and handle is accompanied by a brief description as well as a classification as “PERSP” – providing primarily perspective, commentary, and opinions on topics; “INFO” – providing timely factual information and news stories; or both.

CONTENTS
I. Genomics
II. Health IT
III. Investing/Finance
IV. General News
V. Biotech News
VI. Science
VII. Healthcare/Medicine
VIII. VC/Entrepreneurship
IX. Service Providers
X. Benchmark Biotech/Life Sciences Twitter Users
Appendix

I. Genomics

1. INFO, @genome_gov – National Human Genome Research Institute
- Provides useful information and headlines in concise uncluttered format.
- Does not draw upon a single resource.
- Includes technical, policy, and commercial headlines
- Moderate tweet frequency

2. INFO, @GenomeBiology – Genome Biology
- In addition to scientific news features multiple links to blogs and opinion articles
- High tweet frequency

3. INFO, @genomeresearch – Genome Research
- Covers broad range of genomics topics
- Presents some opinions and personality in posts
- Multiple retweets from a variety of sources
- Moderate tweet frequency

4. INFO/PERSP, @23andME – 23andME
- Offers perspective articles with less focus on news
- Includes social perspective on implications of human genomics advancement
- Limited self promotional content and maintains relevance of such posts
- Exhibits noticeable personality and tone.
- Moderate tweet frequency

5. PERSP, @dgmacarthur – Daniel MacArthur
- Postdoc in genetics whose interests extend well into societal and commercial realm.
- A member of the genomes unzipped project aiming to disseminate information on and analysis of the field of genetic testing.
- Participates actively in conversations, retweeting, and original links
- Maintained an active blog.
- Informal tone.
- High tweet frequency

6. PERSP, @genomicslawyer – Dan Vorhaus
- Editor of Genomics Law Report
- Offers unique perspective of legal advisor specializing in genomics and personalized medicine.
- Much of linked content includes personal/professional opinions with nuanced and detailed discussions.
- Clear conventional and twitter specific syntactical organization
- Moderate tweet frequency

7. PERSP, @MishaAngrist – Misha Angrist
- Explores ethical, social, and health implications of personalized medicine
- Recently published a unique text and maintains populated blog
- Generally maintains focus on relevant issues while expressing commentary
- Moderately high tweet frequency

8. INFO, @NatureRevGenet – NatureRevGenetics
- Provides “Ahead of Publication” notifications of pertinent scientific reviews (more tractable than primary article)
- Moderate Frequency, useful for those interested in details of scientific advance

9. PERSP, @DivaBiotech – Ruby Gadelrab
- Affymetrix employee with primarily genomics focus
- Presents appropriate balance of retweet and original content and extraneous information is minimally distracting
- Abundant dialogue and interaction
- High frequency

10. INFO, @Knome – Knome, Inc
- Life sciences company interpreting human genomes
- Very little self-promotion
- Very few retweeting and content is noticeably interesting/unique (less mundane compared to similar providers)
- Low frequency

II. Health IT

1. PERSP/INFO @jhalamka – John Halamka
-CIO of BIDMC
-Tweets are introductions to his very active blog (contains personal elements) and numerous insights into healthcare IT as a field and career.
- No retweets
- Moderate frequency

2. PERSP/INFO @ahier – Brian Ahier
- Maintains a well populated blog on healthcare IT
- Provides a large sum of content with brief commentary/recommendation
- Broad range of health IT topics punctuated with unrelated, but interesting information
- High frequency

3. PERSP/INFO @IyaKhalil – Iya Khalil
- Co-founder of GNS Healthcare
- Comments on a range of topics including data analytics, genomics, and the biotech innovation
- Personalized tone connotes author’s perspective
- High frequency

4. PERSP/INFO @john_chilmark – John Moore
- Maintains a thorough blog with frequent in-depth discussion
- Frequently expresses opinions in tweets with good balance of perspective in information
- High frequency

5. INFO @iHealthBeat.org – iHealthBeat.org
- Content rich and well focused on Health IT field
- Includes links to news, analysis, and editorials
- High frequency

6. INFO @HITNewsTweet – Healthcare IT News
- Content rich, relevant posts primarily to parent site
- High frequency

7. INFO/PERSP @JohnSharp – John Sharp
- Primarily focuses on patient/clinical component of Health IT
- Provides daily summary of news pertaining to electronic medical records
- Perspectives often found within links not twitter posts
- Moderate frequency

8. PERSP @Anthony_Guerra – Anthony Guerra
- Links to parent site (healthcaresystemCIO.com) that features interviews with health care CIO’s with deep commentary and analysis
- Moderate frequency

9. PERSP/INFO @DonFluckinger – Don Fluckinger
- Generally features recommendations for and analysis of health IT components
- Maintains analytical/critical approach despite large number of posts
- Views are sometimes shared in twitter conversations
- High frequency

10. PERSP/INFO @boltyboy – Matthew Holt
- Eclectic mix of health IT topics and the author’s opinions
- User personality is apparent
- High frequency

III. Investing/Finance

1. INFO @businessinsider – Business Insider
- Mix of business and financial news with topics for a general audience
- Links primarily to Business Insider website
- Posts are designed to attract attention with tint of sensationalism
- High frequency

2. PERSP/INFO @zerohedge – Zero Hedge
- Offers a particular mix of opinion and information with links to parent blog
- Zero Hedge blog authors maintains anonymity to protect site integrity
- Exhibits a clear and unique activist/sarcastic tone
- Primarily original posts
- High frequency

3. INFO @StockTwits – Stock Twits
- Provides a less pedestrian description of financial news for a more seasoned investor
- High frequency

4. PERSP @PIMCO – Pimco
- Consists entirely of comments by Pimco’s co-chief investment officers
- Bill Gross posts express opinions and news without links
- El-Erian comments via links to newly published articles
- Moderate frequency

5. PERSP @jimcramer – Jim Cramer
- Former hedge fund manager, Mad Money host, and TheStreet founder
- Offers commentary and dialogue with regular references to Mad Money program
- Style is tailored to educated but not expert audience with casual tone
- High frequency

6. PERSP @herbgreenberg – Herb Greenberg
- CNBC senior stocks commentatory
- Engages in dialogue with users
- High frequency

7. PERSP @DougKass – Douglas Kass
- Journalist and investment manager
- Opinions, dialogue for the more informed investor
- News is dispensed primarily via short descriptions rather than links
- High frequency

8. INFO @MarketWatch – MarketWatch
- Comprehensive news headlines from MarketWatch website
- High frequency

9. PERSP/INFO @BioRunUp – BioRunUP
- Specializes in biotech trading
- High frequency

10. PERSP @BiotechtraderHB – Tony Pelz
- Active dialogue discussing investment strategies and events in the biotech industry
- High frequency

IV. General News

1. INFO @WSJ – Wall Street Journal
- Wall Street Journal headlines
- High frequency

2. INFO @nytimes – The New York Times
- The New York Times headlines
- High frequency

3. INFO @nprnews – NPR News
- NPR News headlines
- High frequency

4. INFO @TheEconomist – The Economist
- The Economist headlines
- High frequency

5. INFO @washingtonpost – The Washington Post
- The Washington Post headlines
- High frequency

6. INFO @TheOnion – The Onion
- The Onion headlines
- High frequency

7. INFO @cnnbrk – CNN Breaking News
- CNN headlines
- High frequency

8. INFO @bloombergnow – BloombergNow
- Bloomberg headlines and editorials
- High frequency

9. INFO @digg – Digg
- Digg headlines
- High frequency

10. INFO @AJEnglish – Al Jazeera English
- Unique perspective on international events
- High frequency

V. Biotech News

1. PERSP/INFO @gautamkollu – Gautam Kollu
- VP Marketing at Exelixis
- Range of topics include development drug, capital markets, and cancer
- Succinct posts with commentary and relevant retweets
- Engages in dialogue regularly
- High frequency

2. PERSP/INFO @pharmalot – pharmalot
- Most original tweets link to a very active blog written by Ed Silverman
- Each morning provides collection of headlines from various sources
- Blog content highlights interesting events with author’s commentary
- Tweets offer provocative/intriguing introductions
- Moderate tweet frequency

3. PERSP/INFO @rleuty_biotech – Ron Leuty
- San Francisco Business Times Biotech reporter
- Links to blog compiling San Francisco Bay Area biotech stories running in the San Francisco Business Times and Silicon Valley/San Jose Business Journal
- Retweets from a diverse group of users
- High frequency

4. INFO @FierceBiotech – FierceBiotech
- Links to broad range of biotech science and industry news
- Concise tweets
- High frequency

5. PERSP/INFO @eyeonfda – eyeonfda
- Author, consultant/attorney Mark Senak, specializes in regulatory issues
- Perspective on impact and implications of regulatory events
- Includes many links to general biotech/pharma news
- Moderate tweet frequency

6. INFO @Genbio – GEN
- Links to Genetic Engineering & Biotechnology News website
- Features biobusiness, drug discovery, omics, bioprocessing, and translational medicine
- Frequent use of twitter hash tag syntax
- High frequency

7. INFO @FiercePharma – FiercePharma
- Broad range of pharmaceutical industry news with occasional retweets
- High frequency

8. INFO @BioMedReports – BioMedReports
- Healthcare stock and investing headlines and related news
- Retweeting is rare
- High frequency

9. INFO @BioPharmaToday – Josh Berlin
- Elsevier Business Intelligence – publishers of The Pink Sheet, IN VIVO and PharmAsia News
- Focused on business development strategy, drug development, and regulation
- High Frequency

10. PERSP/INFO @reutersBenHir – Ben Hirschler
- Pharma, health and science correspondent for Reuters in London
- European news and perspective related to pharmaceutical industry
- Includes general worldwide financial/economic commentary
- High frequency

VI. Science

1. PERSP/INFO @NatureNews – Nature News & Comment
- News and opinion (not research articles) from Nature Magazine
- Engages in dialogue
- High frequency

2. PERSP/INFO @wiredscience – Wired Science
- Wired Science blog from Wired magazine
- Themed for general public and science enthusiasts
- Moderate frequency

3. INFO @sciam – Scientific American
- Scientific American article and blog posts
- Content from additional sources provided via retweets
- High frequency

4. PERSP/INFO @newscientist – New Scientist
- New Scientist Magazine covering space, tech, environment, health, life, physics/math, and science in society
- Includes original articles, blogs, and opinions
- Content from additional sources provided via retweets
- High frequency

5. PERSP/INFO @nytimesscience – New York Times Science
- Science, environment and space news from the New York Times
- Features articles, blogs, letters and opinions
- Few retweets
- High frequency

6. PERSP/INFO @carlzimmer – Carl Zimmer
- Prolific science writer, maintains blog “Loom” at Discover Magazine
- Covers broad range of science topics and news
- Frequent retweets and dialogue with users
- High frequency

7. PERSP/INFO @guardiansciblog – Guardian Science Blogs
- Science blogs from The Guardian covering general science, physics, and nature, and science in the general news
- Moderate frequency

8. INFO @DiscoverMag – Discover Magazine
- Discover Magazine content with additional sources
- Includes content about science and scientists
- High frequency

9. PERSP/INFO @NatureBiotech – Nature Biotechnology
- Journal covering the science and business of biotechnology
- Diverse content: research articles, science news, business news, and blogs
- Contains relevant retweets
- Moderate frequency

10. PERSP/INFO @mattwridley – Matt Wridley
- Author of books on evolution, genetics, and society
- Maintains and links to a blog: “The Rational Optimist”
- Provides content at the interface of science and its social implications
- Moderate tweet frequency

VII. Healthcare/Medicine

1. INFO @nytimeshealth – NYTimes Health
- Health news from the New York Times
- High frequency

2. PERSP/INFO @HarvardHealth – Harvard Health
- Links to Harvard Health Publications, news and information about treatments and disorders
- Includes “Ask Doctor K” section
- Moderate frequency

3. INFO @AmerMedicalAssn – AMA
- American Medical Association provides news and information relating to the health professions
- High frequency

4. PERSP/INFO @WSJHealthBlog – WSJ Health Blog
- Links to blog entries providing both information and commentary on health and health business topics
- Moderate frequency

5. PERSP/INFO @MayoClinic – Mayo Clinic
- Articles from the Mayo Clinic concerning health issues and treatments and advice
- Moderate frequency

6. PERSP/INFO @Health_Affairs – Health_Affairs
- News and opinions regarding health, healthcare, and public health/policy
- Moderate frequency

7. INFO @NPRHealth – NPR Health News
- NPR Health news articles ranging from research advances to social issues
- Moderate frequency

8. INFO @NEJM – New England Journal of Medicine
- Variety of content from the New England Journal of Medicine
- Moderate frequency

9. INFO @Lancet – Lancet
- Content from the Lancet Journal
- Moderate frequency

10. PERSP @PaulFLevy – Paul Levy
- Former CEO of Beth Israel Deaconess Medical Center in Boston, MA
- Authors prolific healthcare blog which is frequently the subject of tweets
- Moderate tweet frequency

VIII. VC/Entrepreneurs

1. PERSP/INFO @venturehacks – Venture Hacks
- Advice for startups
- News, employment, funding opportunities
- Much content provided via retweets
- Moderate frequency

2. PERSP @RealEndptsEllen – Ellen Licking
- Editor and writer for Value and Innovation Blog
- Each original post features author’s opinion or commentary
- Frequent retweets with new author comments
- Moderate frequency

3. PERSP/INFO @DavidASteinberg – David Steinberg
- Partner at PureTech Ventures, co-founder of 6 startups
- Early stage investment in novel therapeutics, medical devices, diagnostics, and research technologies.
- Topics include general science, regulation, and biotech innovation/investing
- Primarily dialogue and commentary reflecting author’s view with occasional links
- High frequency

4. PERSP/INFO @bijans – Bijan Salehizadeh
- Managing Director at NaviMed Capital
- Late stage investors in medical technology, healthcare services and health IT
- Dialogue, retweets, and abundant commentary
- Moderate frequency

5. PERSP/INFO @GoogleVentures – Google Ventures
- Google’s venture capital arm
- IT/technology specific content in addition to general discussion on entrepreneurship and career resources
- Moderate frequency

6. PERSP/INFO @ScottKirsner – Scott Kirsner
- Boston Globe columnist
- Focused on start-ups, venture capital and innovation in New England
- Dialogue, retweets, and abundant commentary
- High frequency

7. INFO @BioStartUp – Ed Y Lu PhD
- Industrial researcher
- Links to news articles relating to medical innovation in research and business
- Concise tweets
- Moderate frequency

8. INFO @Sequoia_Capital – Sequoia Capital
- Venture firm in energy, finance, healthcare, energy, mobile, internet and technology sectors
- Provides promotional content and resources for entrepreneurs
- Moderate frequency

9. PERSP @msuster – Mark Suster
- Entrepreneur turned VC – blog Both Sides of the Table
- Primarily dialogue with recommended links to blog or via retweets
- Moderate frequency

10. INFO @peHUB – peHUB
- Venture capital and private equity headlines with links
- Concise tweets
- High frequency

IX. Service Providers

1. INFO @BostonBioTech – BBCR
- Boston Biotech Clinical Research – Clinical strategy and trial design specialists
- Links to content focusing on rare disease, orphan indication and clinical trials
- Moderate frequency

2. PERSP/INFO @PearlF – Pearl Freier
- Founder of Cambridge BioPartners, Inc
- Innovative networking, recruiting and strategic business development
- Primarily dialogue
- Moderate frequency

3. PERSP/INFO @Comprendia – Comprendia
- Biotechnology and life science marketing, social media and business development
- Engages in dialogue and occasionally posts links
- Moderate frequency

4. PERSP/INFO @ideapharma – IDEA Pharma
- Pharmaceutical design consulting company
- Commentary and links concerning innovation in biotech industry
- Technical and strategic approaches
- Moderate frequency

5. PERSP/INFO @biotechPatent – Brian R. Dorn, PhD
- Patent attorney working on biotech, biosimilars, nanobiotech, and phamaceuticals
- Moderate frequency

6. PERSP/INFO @ipwatchdog – Gene Quinn
- Patent attorney
- Provides news and commentary while engaging in significant dialogue
- Moderate frequency

7. PERSP/INFO @McKQuarterly – McKinsey Quarterly
- Business journal of McKinsey & Company
- Articles on aspects of managerial strategy
- Moderate frequency

8. PERSP/INFO @StevenRothberg – Steven Rothberg
- President of CollegeRecruiter.com
- Advice and commentary and employment searches and recruiting
- Moderate frequency

9. INFO @WJNPharma_Jobs – Wiley Pharma Jobs
- Pharmaceutical and biotech recruitment service
- High frequency

10. INFO/PERSP @achrismanEBD – Anna Chrisman
- EBD Group Senior Manager, Conferences and Program – facilitating strategic partnerships in the biotechnology/pharmaceutical industries
- Provides information on conferences, events, and partnerships
- Tweets are focused, concise, and clearly express opinions
- Relatively lower frequency of link tweeting; the tweet itself is often the extent of the commentary
- Low frequency

X. Benchmark Biotech Twitter Users

These are individuals in the biotech industry actively engaged in social and professional Twitter activity. While focused on the industry, they are engaged across a broad spectrum of topics and discussions.

1. Steven Dickman @cbtadvisors – Founder/CEO of CBT Advisors
2. Bruce Booth @LifeSciVC – Biotech VC
3. Cynthia Clayton @Alnylam – RNAi Biopharmaceutical Company
4. Adam Feuerstein @adamfeuerstein – Sr. Columnist TheStreet
5. John Fierce @JohnCFierce – editor FierceBiotech
6. Michael Gilman @Michael_Gilman – Founder/CEO Stromedix
7. Carlos Velez @LacertaBio – Pharma/Bio Business
Development, Licensing, & Consulting.
8. Daphne Zohar @daphnezohar – Founder & Managing Partner,
PureTech Ventures
9. John LaMattina @John_LaMattina – Sr. Partner PureTech
Ventures
10. Carol Gallagher @carol_gallagher – Past CEO of Calistoga Pharma
11. Richard Pops @popsalks – CEO Alkermes
12. Richard Heale @ThinkingPharma – CEO ThinkingPharma
13. Tim Walbert @HorizonPharmaCEO – CEO Horizon Pharma
14. David Williams @HealthBizBlog – Co-founder MedPharma
15. Bill George @Bill_George – former CEO Medtronic
16. Chris Hogg @cwhogg – CEO 100plus
17. James Tayloer @JTBiotech – CEO Precision Nanosystems
18. Tim Ravenscroft CEO @Lentigen – CEO Lentigen
19. John Halamka @jhalamka – CIO of BIDMC
20. Omar Ishrak @MedtronicCEO – CEO Medtronic

Appendix: Approach

These “Top 10” Twitter lists represent groups of Twitter users who in sum create a thorough and diverse ensemble of twitter users in a specific subject area. The lists were compiled for an audience of life science professionals and are partially based on the preferences of our “Benchmark Biotech Twitter Users” as well as the authors’ own preferences. Each tweeter’s name and handle is accompanied by a brief description as well as a classification as “PERSP” – providing primarily perspective, commentary, and opinions on topics; “INFO” – providing timely factual information and news stories; or both.

# # #

7 Comments

Filed under Uncategorized

Can the Amgen Takeout of Micromet Juice German Biotech? Can Anything?

By Steve Dickman, CEO, CBT Advisors

Now that Germany has had its first billion-dollar biotech exit, it seems it would be about time for the beleaguered German biotech sector to enjoy a welcome jolt of juice. Amgen plans to lay out $1.16 billion in cash to acquire Micromet (NASDAQ: MITI) in a deal announced on January 26.

Generally, big exits create new opportunities. As a wishful example, consider the impact of the upcoming monster $10 billion IPO of Facebook, which will likely spark financially secure engineers to start new companies and multimillionaire founders to start new venture funds.

So is it time to celebrate in Germany? Not exactly. But there may be some good news for German biotech if we dig deep enough. I believe that the Micromet acquisition and other recent successes could serve as a valuable proof-of-concept for biotech products and technologies “made in Germany.” There are plenty of seedlings growing up from German universities and spinning out of existing companies. This is a good time to focus on them.

Tough trickle-down

Amgen’s big-ticket acquisition will likely not translate directly into a rash of new startups. The techniques used in inventing Micromet’s products – bispecific antibodies for systemic treatment of cancer and other severe diseases – are not easily transferred. Amgen has said that it intends to retain virtually all two hundred employees located at the Munich site. Some itchy would-be founders may eventually leave but the short-term impact will be limited.

More difficult for the German biotech scene, Micromet has not been a purely or even mostly German company for a long time. Its January, 2006, reverse merger with the failed California biotech CancerVax gave it a NASDAQ ticker symbol and a U.S. headquarters. The company raised $328 million in total of which $264 million came in PIPEs and follow-ons following the CancerVax merger. There was also approximately $60 million cash on hand at CancerVax when the companies merged.

Despite its impressive size, the Micromet exit is surprisingly no more than “a mediocre hurrah” for local VCs, one Germany-based VC investor told me. “VCs here have mixed feelings about this deal since … very few investors [who made initial investments into the company] were able to make money.”

Dollars slipping away

Why not? Clinical trials were going to be expensive. Likely acquirers were far away. Some funds faced restrictions on cross-border or public investing. Others simply did not have the money to push a company so far towards clinical proof-of-concept. The lack of local capital threatened to leave the company unable to prove the value in its innovative products. Hence, many of the gains were made by investors in public shares such as crossover funds and hedge funds.

Before I unveil my modest proposal for how to help the next crop of projects and companies in Germany, let’s look at where we are, how we got here and then I’ll return to where we can go next.

Bye-bye bubble

The world’s biotech boom of the late 1990s and early 2000s proved to be too much of a bubble for many German companies and investors. Some early companies were not built for sustainability and after some 2000-era fairy-tale financings on Frankfurt’s Neuer Markt, public biotech investors in Germany were badly burned. They have largely not returned.

The situation is not much better for venture capital funds. Otello Stampacchia, managing partner at Omega Funds, one of the institutional investors with the longest-term stake in Micromet, said that the VC shortage afflicting Europe is “particularly bad in Germany. Compared to what has happened, say, in the UK, there has been a colossal shrinkage.”

What is left in Munich, Berlin, Stuttgart, Heidelberg and other fertile biotech regions is both promising and problematic: truly world-class science; experienced entrepreneurs and employees; over eight hundred companies; and a severe lack of both venture and growth capital. Hence, in Micromet’s case, the truly creative solution of a reverse merger in 2006 and the successive financings in 2006, 2008, 2009 and 2010.

MITIgating factors

The company’s big exit, albeit on a leukemia product not yet been approved by FDA, is a beacon of light for German startups. I asked eight venture and public investors in Germany about the acquisition’s impact and the response was one of optimism tempered with caution. “The general message is positive, namely, that German biotech is capable of turning cutting-edge basic research into a full-blown company,” said one financial VC in Munich.

The capital shortage that Micromet encountered in Germany is emblematic of issues faced everywhere by therapeutics startups: the more innovative you are, the tougher it is. It takes more time than a VC fund lifetime of ten years for such technologies to reach Phase 3 or commercial status or achieve a big exit. A typical timeline is fifteen years. (Micromet was founded in 1996.)

Micromet rings the bell

Micromet rings the bell

Now that Micromet has proven the case for innovative biotech products nurtured in Germany, the burning question for investors, one of them told me, is “whether deals like the Micromet M&A creates more international VC activity in Germany.” With IPO markets shuttered and little in the way of growth capital, I suspect that the answer is likely “not anytime soon.”

But even if traditional VC does not return in significant amounts to Germany, some of the near-ripe fruit there is worth watching. Those companies include two that had the honor of presenting at the 2012 JP Morgan Healthcare Conference: NOXXON, based in Berlin, which is carrying out multiple clinical trials in a variety of high-value indications for its exciting spiegelmer technology; and Probiodrug, based in Halle, which is pursuing a unique and highly interesting approach to treating Alzheimer’s disease by attacking the underlying disease biology in a novel way. A third company, Curetis in Stuttgart, announced in November that Roche Venture Fund had made an investment alongside a Netherlands-based financial VC fund, Forbion. Curetis’ technology can rapidly identify pathogens causing hospital-acquired or severe community-acquired infections like pneumonia by bringing highly multiplexed PCR reactions into the hospital lab.

Those are just the most advanced companies. There are many more behind them and their technologies and approaches have much to offer. (Affimed in Heidelberg and Synimmune in Tübingen are just two examples in the bispecific antibody space.) Consider the technology areas in which German companies have thrived: they are mostly intricate (like Micromet’s bispecific antibody technology or Curetis’ 50-analyte PCR); they are more likely to be enabling technologies than therapeutic products (one local expert estimated that only fifteen or twenty of those eight hundred companies are working on therapeutic products that they themselves intend to develop); these enabling technologies cost $10 million to $50 million (or more) to develop; and, once mature, they will turn out to be highly valuable to big industrial companies in pharmaceuticals and related sectors like diagnostics. Stellar examples, aside from Micromet, are easy to spot:

MorphoSys: inventor of an antibody generation technology, this venture-backed startup nearly succumbed in the early 2000s to the same shortage of capital that forced Micromet out of Germany, then “went public on a hope and a prayer,” according to one investor. “Now it’s a real company,” he said, with a recent market cap of $420 million.

Direvo: an enzyme engineering business for protein therapeutics sold in 2009 for $230 million to Bayer Schering; the original technology was spun out into the “new Direvo” and is now in innovative use for industrial enzyme development; like the original Direvo, it is based in Cologne.

Jerini: a therapeutics company in Berlin acquired by Shire in 2008 for € 328 million ($521 million).

Brahms: a molecular diagnostics company acquired by Thermo Fisher in 2009 for $479 million.

MTM Laboratories: a molecular diagnostics company in Darmstadt acquired by Roche in 2011 for up to € 190 million ($269 million).

No one doubts Germany’s ability to generate attractive up-and-coming academic projects and small companies.  As one investor put it, “the start-up scene is healthy and ‘well-seeded’ by various grant systems like GO-Bio and government-affiliated institutions such as High-Tech Gründerfonds.”* The bottleneck is capital.

Pharma to the rescue?

Last time I checked, the pharmaceutical industry was shutting down internal research and scouring the world for innovation. Some pharma CEOs are saying that pharma should not invest in internal R&D at all any more. By contrast, pharmaceutical companies are beefing up their corporate VC activities. I count no fewer than twelve VC funds affiliated with pharmaceutical companies, some of which have roots in Germany (Boehringer Ingelheim) or German-speaking Europe (Novartis) and some of these have a strong interest in clinical diagnostics (Roche).

All these funds need look no further than Germany. What a fit! On top of the fertile environment for technologies, labor is relatively cheap. As I learned as a venture capitalist in a Germany-based fund, the cost of a laboratory worker in Germany is roughly half of the cost in the United States and the quality of their work is as high if not higher.

And the managers needed to bring technology platforms to proof of concept are present in larger numbers than at any time in the country’s history. They have worked by the dozens in German companies that have had solid exits – starting with Micromet and extending to Brahms, MTM Laboratories, Direvo, Jerini and MorphoSys – and strong sales – Evotec, Miltenyi and Qiagen in addition to the local pharmaceutical industry (Bayer Schering, the former Sanofi Aventis, and Boehringer Ingelheim).

The growth capital bottleneck should present no major obstacle to corporate venture investors who are both investing more and also increasingly working side-by-side in companies such as Aileron Therapeutics and Celladon Corporation, US-based companies that have attracted four corporate VCs each.

If pharma is the investor then the exit could well be integration into one or another pharma company’s own research efforts. Investing with the aim of achieving technical proof of concept in therapeutics or early commercial validation in the case of non-therapeutic platforms would alleviate the need for fifteen years of funding. The “harvest” could come much earlier. But who knows? Once investors see that their efforts are being rewarded, they might choose to let the companies carry on independently, issuing technology dividends and financial dividends alike.

What’s missing is a catalytic action on the part of those VCs, especially corporate VCs, already active in Germany together with the German government. A government co-investment growth fund of € 200 million or € 300 million, actively managed and investing in each deal alongside a minimum of two corporate or financial VCs, could make a huge difference. The seedlings are beginning to grow. Time to water them.

# # #

Disclosure: Steve Dickman or CBT Advisors have worked recently with Curetis, Direvo and Probiodrug and previously with Evotec, Jerini, MorphoSys and NOXXON.

*GO-Bio has financed thirty-four projects in four rounds, leading to fifteen companies. High-Tech Gründerfonds, also based in Berlin, which finances high-tech startups including those in medical technology- and healthcare-related fields, has been active since 2005 and recently began investing a second fund of € 288.5 million.

1 Comment

Filed under Uncategorized

Biogen Idec Lets Stromedix Do the Hard Part

Stromedix’ Exit to Drug’s Source Shows Why We Need VC More Than Ever

by Steve Dickman, CEO, CBT Advisors

February 14, 2012

For anyone wondering about the value that can be added by entrepreneurs and venture capitalists to the drug discovery and development process, look no further than Stromedix. This venture-backed company in Cambridge, MA, was acquired today by Biogen Idec for $75 million up-front and up to $487.5 million based on the achievement of certain development and approval milestones. The driver for the acquisition is a monoclonal antibody known as STX-100, about to enter Phase 2 in the tough indication of idiopathic pulmonary fibrosis (IPF), a nearly always fatal disease characterized by lung scarring. STX-100 is one of several early entrants in the race to apply modern biologic therapies to fibrosis and its challenging biology.

Now let’s consider the value-add. First the return. As of early 2011, Stromedix had raised $29.4 million plus at least an additional $5M in debt financing in September, 2011, most of which has likely not been drawn down. (Stromedix investor Bruce Booth of Atlas Venture states in his blog post that the total cash in, including the debt facility, was $38 million). That makes the up-front price worth about 2X to the Stromedix investment syndicate, which includes NLV Partners, Bessemer Venture Partners, Red Abbey Venture Partners and Frazier Healthcare Ventures as well as Atlas Venture. Considering that most of this capital did not flow in until the 2008 Series B round, that’s not a bad internal rate of return (IRR) for the investors. If STX-100 hits any milestones at all, that return will rise, of course, possibly to an impressive 5X or even, in the unlikely event that all milestones are achieved, 19X. For the venture investors, the combination of certainty of the initial exit and possible upside later – with no more board meetings to attend! – makes this deal a sweet one.

Stromedix logoBut the deal becomes even more impressive – and instructive – when one considers that the asset STX-100, which comprises essentially the full value of Stromedix, was in-licensed from Biogen Idec back in 2007 for a price that I’ve heard was less than $5 million and perhaps even less than $2 million up front. This would fit with the company’s financing history. Before the 2008 $25 million Series B round, less than $5 million had been raised, some of which went to pay salaries, rent and development costs. So not much of this could have paid for the asset. One assumes that Biogen Idec had some milestones and royalties coming to it from the initial licensing deal and that these were negotiated away as part of the sale transaction. But the fact remains: Biogen Idec gave up the asset for a very low price and is buying it back for a much higher one. Why?

Read the rest of my post on Xconomy here or click/copy-paste the link:

http://www.xconomy.com/boston/2012/02/14/biogen-idec-lets-stromedix-do-the-hard-part/?single_page=true

Leave a comment

Filed under Uncategorized