When VCs hand out mega-rounds to Vir and Gos­samer, are they bet­ting on the jock­ey or the horse?

Fol­low­ing a pe­ri­od of un­prece­dent­ed re­turns for bio­phar­ma in­vestors, flush VCs are sink­ing big­ger and big­ger rounds of cash in­to com­pa­nies whose pipelines are still in their in­fan­cy. Tak­ing this trend to a new lev­el is an in­creas­ing­ly pop­u­lar move to back biotech ex­ec­u­tives who are known to be star per­form­ers with mega-rounds ris­ing north of $100 mil­lion – even if their pipelines lack a star pro­gram.

There was a time when a few mil­lion bucks would back a promis­ing as­set, and then — if the pro­gram proved worth­while — in­vestors would re­cruit a star team. But back­ing man­age­ment be­fore sci­ence is a trend that’s pick­ing up steam, ac­cord­ing to sev­er­al in­vestors I met at JP Mor­gan this year.

Ni­na Kjell­son, Canaan

Some con­sid­er these bets ex­ceed­ing­ly risky, as VCs are es­sen­tial­ly hand­ing the C-suite cash and hop­ing they dig up some­thing use­ful in re­turn. Oth­ers ar­gue the move means in­vestors are play­ing it safe with this strat­e­gy. Af­ter all, a res­olute CEO root­ing around for sev­er­al op­tions to pro­vide a re­turn may be more de­pend­able than the some­times-finicky sci­ence of a one-star pro­gram.

“It’s a clas­sic de­bate in the VC world,” said Canaan’s gen­er­al part­ner Ni­na Kjell­son. “Do we in­vest in the jock­ey or the horse?”

Com­pa­nies like ARCH Ven­ture Part­ners and Flag­ship Pi­o­neer­ing of­ten bet on the jock­eys.

The trend means one thing for cer­tain: in­vestors’ wal­lets are filled to the brim, and their strate­gies are chang­ing as a re­sult.

The plan, of course, is to get trust­ed lead­ers in po­si­tions where they can de­liv­er one (or hope­ful­ly many) re­turn. This has evolved in­to a busi­ness mod­el in which an um­brel­la com­pa­ny finds promis­ing as­sets to ad­vance, and then spins them out in­to sep­a­rate en­ti­ties to see if the sci­ence sinks or swims. That way, one fail­ure doesn’t tank the whole en­ter­prise and the vet­er­an ex­ec­u­tives can dri­ve on.

When your re­sume war­rants mega-rounds

George Scan­gos

We saw this re­cent­ly with the eye-pop­ping fi­nan­cial back­ing of Vir Biotech­nol­o­gy, which went from launch to rais­ing over a half-bil­lion in seed mon­ey in its first year. In­vestors are bank­ing on a vet­er­an ex­ec­u­tive team that in­cludes CEO George Scan­gos, the for­mer boss at Bio­gen and Ex­elix­is.

Then there was the re­cent deal with Gos­samer Bio, a start­up led by two for­mer Re­cep­tos ex­ec­u­tives that emerged ear­li­er this month with $100 mil­lion in seed mon­ey. The com­pa­ny is be­ing tight-lipped about what as­sets they al­ready have, but we do know the plan is to snatch up ear­ly- and late-stage as­sets and de­vel­op them un­der spin­out en­ti­ties.

To some de­gree, De­nali fits in this pic­ture, too. The com­pa­ny’s pipeline is chalk-full of pre­clin­i­cal as­sets, and yet the com­pa­ny raised mega-rounds to get start­ed and then scored a $287 mil­lion IPO.

In­vestors shore up risk by bet­ting on re­peat teams

Jay Lichter, Aval­on

Jay Lichter, man­ag­ing part­ner at Aval­on Ven­tures, said he sees this as a risk re­duc­tion strat­e­gy on the part of the in­vestor.

“It re­duces risk a lot when you’re back­ing a group who’s proven to ex­e­cute on pro­grams,” Lichter said. “Give them a bunch of mon­ey, toss them a few pro­grams, and the chance that all will fail is close to ze­ro. One will turn in­to a ven­ture re­turn.”

Both Lichter and seed stage in­vestor Wal­ter Moos of Shang­Phar­ma agreed that the trend is an in­di­ca­tion of in­vestors with heavy pock­ets.

Wal­ter Moos, Shang­Phar­ma

“This is prob­a­bly one of the most di­verse fi­nan­cial ecosys­tems I’ve seen in my 35 years in the in­dus­try,” Moos said. “[VCs] need to in­vest more mon­ey per as­set be­cause they have so much more cap­i­tal to de­ploy. There’s a lim­it on how many com­pa­nies the part­ners can han­dle, so the deal size gets big­ger.”

It’s al­so pos­si­ble that VC firms are di­ver­si­fy­ing, Lichter said. In­vestors might con­sid­er vet­er­an-led teams as more ma­ture ven­tures that de­serve pri­vate eq­ui­ty-sized deals in­stead of VC-sized deals.

Big bets or pub­lic­i­ty play?

Are mega-rounds for nascent pipelines smart? Kjell­son said she’s not a big fan of huge seed rounds, even if the team is ex­pe­ri­enced.

“I’m a lit­tle bit more sober these days to make a bet on a team with a $100 mil­lion check ver­sus a $10 mil­lion to $15 mil­lion check,” Kjell­son said.

Of course, many of these deals are mile­stone gat­ed, she says, and as Moos points out, “like biobucks, lots of that mon­ey nev­er shows up.” Moos thinks these mega-sized rounds can some­times be a play for pub­lic­i­ty.

“It can draw more top man­age­ment, co-in­vestors, or even grab the at­ten­tion of Big Phar­ma,” Moos said.

Lichter tends to agree with Kjell­son. He says too much mon­ey in the bank makes biotechs slug­gish as they be­gin to op­er­ate like a “small big phar­ma, with all the bu­reau­cra­cy and po­lit­i­cal struc­ture.”

“I’ve nev­er been a fan of big fi­nanc­ing,” Lichter said. “I think it draws you away from what’s great about biotech, which is be­ing nim­ble. Be­ing close to death. It’s shock­ing how hard peo­ple will work when they have six months of cash and they have to get to work to stay alive.”


Il­lus­tra­tion: Shut­ter­stock

Inside FDA HQ (File photo)

The FDA just ap­proved the third Duchenne MD drug. And reg­u­la­tors still don’t know if any of them work

Last year Sarepta hit center stage with the FDA’s controversial reversal of its CRL for the company’s second Duchenne muscular dystrophy drug — after the biotech was ambushed by agency insiders ready to reject a second pitch based on the same disease biomarker used for the first approval for eteplirsen, without actual data on the efficacy of the drug.

On Wednesday the FDA approved the third Duchenne MD drug, based on the same biomarker. And regulators were ready to act yet again despite the lack of efficacy data.

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Cell and Gene Con­tract Man­u­fac­tur­ers Must Em­brace Dig­i­ti­za­tion

The Cell and Gene Industry is growing at a staggering 30% CAGR and is estimated to reach $14B by 20251. A number of cell, gene and stem cell therapy sponsors currently have novel drug substances and products and many rely on Contract Development Manufacturing Organizations (CDMO) to produce them with adherence to stringent regulatory cGMP conditions. Cell and gene manufacturing for both autologous (one to one) and allogenic (one to many) treatments face difficult issues such as: a complex supply chain, variability on patient and cellular level, cell expansion count and a tight scheduling of lot disposition process. This complexity affects quality, compliance and accountability in the entire vein-to-vein process for critically ill patients.

Franz-Werner Haas, CureVac CEO

UP­DAT­ED: On the heels of a snap $1B raise, Cure­Vac out­lines plans to seek emer­gency OK for their Covid-19 vac­cine in a mat­ter of months

CureVac is going from being one of the quietest players in the race to develop a new vaccine to fight the worst public health crisis in a century to a challenger for the multibillion-dollar market that awaits the first vaccines to make it over the finish line. Typically low-key at a time of brash comments and incredibly ambitious development timelines from the leaders, CureVac now is jumping straight into the spotlight.

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US gov­ern­ment re­port­ed­ly be­gins prepar­ing for Covid-19 chal­lenge tri­als. Are they eth­i­cal?

Controversial human challenge trials for potential Covid-19 vaccines reportedly have a new booster — the US government.

Scientists working for the government have begun manufacturing a strain of the novel coronavirus that could be used in such studies, Reuters reported Friday morning. The trials would enroll healthy volunteers to be vaccinated and then intentionally infected with a weakened coronavirus.

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Charlie Silver (Mission Bio)

'We want to be every­where.' Mis­sion Bio rais­es $70M be­hind re­sis­tance-hunt­ing se­quenc­ing plat­form

Charlie Silver wants to look really, really closely at a lot of your cells. And he just got a lot of money to do so.

Silver’s startup, Mission Bio, raised $70 million in a Series C round Thursday led by Novo Holdings. The money, which brings Mission Bio to $120 million raised since its 2012 founding, will be used to advance the single-cell sequencing platform they built to detect early response or resistance to new cancer therapies.

Sanofi vet Kather­ine Bowdish named CEO of PIC Ther­a­peu­tics; As the world Terns: Liv­er dis­ease biotech makes ex­ec­u­tive changes

PIC Therapeutics hasn’t raised much money, yet. But the fledgling biotech has attracted a high-profile player to the helm.

The Boston-based biotech has handed the reins to Katherine Bowdish as its president and CEO. Bowdish will also join the board of directors of PIC. Bowdish joins from Sanofi where she served as VP and head of R&D strategy, as well as helping launch and lead Sanofi Sunrise, a venture investment and partnering vehicle at Sanofi. Before that, Bowdish held several exec roles at Permeon Biologics, Anaphore, Alexion Pharmaceuticals and Prolifaron (acquired by Alexion).

Trevor Martin (Mammoth)

Eye­ing in-vi­vo edit­ing, Mam­moth li­cens­es Jen­nifer Doud­na’s new CRISPR en­zyme

Last month, Jennifer Doudna revealed in Science a new, “hyper-compact” CRISPR enzyme that was half the size of traditional CRISPR enzymes and could, she suspected, offer a new, more versatile tool for gene editing.

Now, the University of California-Berkeley has licensed that enzyme, known as Casφ, exclusively to a biotech startup she and two former students set up three years ago: Mammoth Biosciences. It’s the second new CRISPR protein Mammoth has licensed from Doudna’s lab, after they licensed Cas14 in 2019.

Clockwise from left: Canaccord Genuity principal Michelle Gilson, Canaccord Genuity CSO Brian Mueller and BioMarin CSO Hank Fuchs (Canaccord Genuity webcast)

Bio­Marin CSO diss­es ri­vals for the he­mo­phil­ia A gene ther­a­py crown: Way be­hind, fac­ing big re­cruit­ment chal­lenges and at best a .6 on the gen-one scale

The leader in the race to a hemophilia A gene therapy does not like to be compared unfavorably to the competition. And when their top execs do the comparing, don’t look for any modesty — BioMarin, they say, owns the lead.

As Factor VIII expression wanes over time, quite a few analysts have raised questions about the kind of future BioMarin’s gene therapy — a supposed once-and-done treatment — faces if it stops working. But just 7 days away from their PDUFA date, with high odds of success, the top execs clearly feel that they are way out front, while promising their rivals will discover there’s a tough slog ahead trying to pursue trials where large numbers of patients are ineligible for new therapies.

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Stéphane Bancel speaks to President Donald Trump at the White House meeting on March 2 (AP Images)

UP­DAT­ED: Mod­er­na of­fers steep dis­count in US sup­ply deal — but still takes the crown with close to $2.5B in vac­cine con­tracts

The US pre-order for Moderna’s Covid-19 vaccine is in.

Operation Warp Speed is reserving $1.525 billion for 100 million doses of Moderna’s Phase III mRNA candidate, rounding out to about $15 per dose — including $300 million in incentive payments for timely delivery. Given that Moderna has a two-dose regimen, it’s good for vaccinating 50 million people. The US government also has the option to purchase another 400 million doses for a total of $6.6 billion, or $16.5 per dose.

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