Af­ter a bruis­ing turn as Sarep­ta CEO, Chris Garabe­di­an is back in biotech with a new role as god­fa­ther to a bunch of star­tups

Chris Garabe­di­an is back.

Two years af­ter the for­mer Sarep­ta CEO end­ed a tur­bu­lent reign marked by a roller coast­er ride for in­vestors — which is still not over, even af­ter the con­tro­ver­sial FDA OK of eteplirsen — Garabe­di­an has won $15 mil­lion from some loy­al back­ers at Per­cep­tive Ad­vi­sors to es­tab­lish a com­pa­ny that promis­es to guide biotech star­tups through that first crit­i­cal stage of de­vel­op­ment lead­ing to proof-of-con­cept da­ta.

This is brand new and its called Xon­toge­ny. Now that he has the first tranche of a $25 mil­lion com­mit­ment in hand, Garabe­di­an is putting to­geth­er a small team that will be tasked with god­fa­ther­ing new drug de­vel­op­ment for a group of would-be en­tre­pre­neurs who ei­ther can’t or re­al­ly don’t want to go the tra­di­tion­al VC route to fund a biotech start­up.

“I was get­ting a num­ber of calls from en­tre­pre­neurs who had an idea, had their hands on some­thing of val­ue, in­creas­ing­ly look­ing for some­one to part­ner with but with­out a lot of deep in­dus­try ex­pe­ri­ence,” Garabe­di­an tells me. VCs ei­ther weren’t all that in­ter­est­ed or want­ed way too much eq­ui­ty. These were “unique and good op­por­tu­ni­ties that would nev­er see a path­way for­ward un­less they found some­one to help them find a way for­ward.”

For about a half dozen to 10 new star­tups, Garabe­di­an and his team plan to play that role.

At one point, Per­cep­tive’s stake in Sarep­ta amount­ed to one of its largest in­vest­ments. And that gave Garabe­di­an time to get to know CEO Joseph Edel­man and the oth­er ex­ecs at Per­cep­tive, a fund which backs pub­lic biotechs and of­ten plays a crossover role in the lead up to an IPO. But Garabe­di­an stress­es that Xon­toge­ny isn’t a fund. They may be able to put up a few hun­dred thou­sand for seed cash to get things start­ed at a promis­ing new ven­ture, but most of Per­cep­tive’s mon­ey will go to cre­at­ing the team and fund­ing their op­er­a­tion through the start­up pe­ri­od.

The group will shep­herd new drugs through a proof-of-con­cept event, pro­vid­ing the in­fra­struc­ture on in­dus­try spe­cial­ists that each new biotech doesn’t re­al­ly need to start with from scratch. And then af­ter that point, they can con­sid­er what to do next, with all the usu­al choic­es of in­dus­try sale, a ven­ture round or IPO. And they plan to take eq­ui­ty in pay­ment, with Garabe­di­an fill­ing a role as ex­ec­u­tive chair­man or board mem­ber.

“It will be a rel­a­tive­ly small team,” says Garabe­di­an, “like a typ­i­cal se­nior biotech op­er­at­ing team, about 12 with sup­port staff” and ex­per­tise in things like pre­clin­i­cal tox and reg­u­la­to­ry work. And they can play a vir­tu­al role in man­ag­ing a range of star­tups. Garabe­di­an plans to work with aca­d­e­mics as well as some deeply pas­sion­ate dis­ease ad­vo­cates who are look­ing to launch a com­pa­ny around a new drug prospect, per­haps li­censed in. And he ex­cit­ed­ly told me — in gen­er­al terms — about sev­er­al he’s al­ready in talks with.

“What I’ve ob­served,” says Garabe­di­an, who com­plet­ed stints at Gilead and Cel­gene be­fore tak­ing the helm at Sarep­ta, “is that noth­ing has beat­en the val­ue of clin­i­cal proof-of-con­cept da­ta.”

That’s still true to­day, he adds, even with biotech val­u­a­tions run­ning high. He watched Sarep­ta shares shoot up from $45 to $55 a share on Phase II da­ta. To­day, with a drug on the mar­ket, it’s $35.

So what did he learn at Sarep­ta that would help guide him at Xon­toge­ny?

“I think Sarep­ta found it­self and I found my­self at the cen­ter of many things the in­dus­try and the FDA was grap­pling with,” he tells me. Maybe he was too trans­par­ent, he adds, though com­mu­ni­cat­ing with the pa­tient com­mu­ni­ty at every turn al­so pro­vid­ed a foun­da­tion of pas­sion­ate sup­port that was ul­ti­mate­ly crit­i­cal to the FDA ap­proval process. But per­haps the best les­son is that run­ning a pub­lic com­pa­ny is not his best role.

“I can be that pub­lic com­pa­ny CEO,” he says, “but that’s not what dri­ves me. I in­her­it­ed a30-year-old com­pa­ny that need­ed a lot of fix­ing, with min­i­mal fi­nanc­ing, no top tier board or sci­en­tif­ic founders.”

With Xon­toge­ny he can “work with peo­ple who want to work with me.” He can fo­cus on de­vel­op­ment, in­stead of the dis­trac­tions of man­ag­ing a larg­er com­pa­ny in the pub­lic eye.

“A lot of peo­ple love the spot­light,” he says. “I re­al­ly want to fo­cus on de­vel­op­ment. I feel I can beat the in­dus­try av­er­ages.”

Now he has the mon­ey to find out.

5AM Ven­tures: Fu­el­ing the Next Gen­er­a­tion of In­no­va­tors

By RBC Capital Markets
With Andy Schwab, Co-Founder and Managing Partner at 5AM Ventures

Key Points

Prescription Digital Therapeutics, cell therapy technologies, and in silico medicines will be a vital part of future treatment modalities.
Unlocking the potential of the microbiome could be the missing link to better disease diagnosis.
Growing links between academia, industry, and venture capital are spinning out more innovative biotech companies.
Biotech is now seen by investors as a growth space as well as a safe haven, fuelling the recent IPO boom.

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