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

Brian Kaspar. AveXis via Twitter

AveX­is sci­en­tif­ic founder fires back at No­var­tis CEO Vas Narasimhan, 'cat­e­gor­i­cal­ly de­nies any wrong­do­ing'

Brian Kaspar’s head was among the first to roll at Novartis after company execs became aware of the fact that manipulated data had been included in its application for Zolgensma, now the world’s most expensive therapy.

But in his first public response, the scientific founder at AveXis — acquired by Novartis for $8.7 billion — is firing back. And he says that not only was he not involved in any wrongdoing, he’s ready to defend his name as needed.

I reached out to Brian Kaspar after Novartis put out word that he and his brother Allen had been axed in mid-May, two months after the company became aware of the allegations related to manipulated data. His response came back through his attorneys.

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UP­DAT­ED: An em­bold­ened As­traZeneca splurges $95M on a pri­or­i­ty re­view vouch­er. Where do they need the FDA to hus­tle up?

AstraZeneca is in a hurry.

We learned this morning that the pharma giant — not known as a big spender, until recently — forked over $95 million to get its hands on a priority review voucher from Sobi, otherwise known as Swedish Orphan Biovitrum.

That marks another step down on price for a PRV, which allows the holder to slash 4 months off of any FDA review time.

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Martin Shkreli [via Getty]

Pris­on­er #87850-053 does not get to add drug de­vel­op­er to his list of cred­its

Just days after Retrophin shed its last ties to founder Martin Shkreli, the biotech is reporting that the lead drug he co-invented flopped in a pivotal trial. Fosmetpantotenate flunked both the primary and key secondary endpoints in a placebo-controlled trial for a rare disease called pantothenate kinase-associated neurodegeneration, or PKAN.

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We­bi­nar: Re­al World End­points — the brave new world com­ing in build­ing fran­chise ther­a­pies

Several biopharma companies have been working on expanding drug labels through the use of real world endpoints, combing through the data to find evidence of a drug’s efficacy for particular indications. But we’ve just begun. Real World Evidence is becoming an important part of every clinical development plan, in the soup-through-nuts approach used in building franchises.

I’ve recruited a panel of 3 top experts in the field — the first in a series of premium webinars — to look at the practical realities governing what can be done today, and where this is headed over the next few years, at the prodding of the FDA.

ZHEN SU — Merck Serono’s Senior Vice President and Global Head of Oncology
ELLIOTT LEVY — Amgen’s Senior Vice President of Global Development
CHRIS BOSHOFF — Pfizer Oncology’s Chief Development Officer

A premium subscription to Endpoints News is required to attend this webinar. Please upgrade to either an Insider or Enterprise plan for access. Already have Endpoints Premium? Please sign-in below. You can contact our Subscriptions team at help@endpointsnews.com with any issues.

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Am­gen, Al­ler­gan biosim­i­lar of Roche's block­buster Rit­ux­an clears an­oth­er US piv­otal study 

Novartis $NVS may have given up, but Amgen $AMGN and Allergan $AGN are plowing ahead with their knockoff of Roche’s blockbuster biologic Rituxan in the United States.

Their copycat, ABP 798, was found to have a clinically equivalent impact as Rituxan — meeting the main goal of the study involving CD20-positive B-cell non-Hodgkin’s lymphoma patients. This is the second trial supporting the profile of the biosimilar. In January, it came through with positive PK results in patients with rheumatoid arthritis.

BeiGene and Mus­tang nail down spe­cial FDA sta­tus for top drugs; Roche bags added cov­er­age for Hem­li­bra

→ BeiGene $BGNE is getting a boost in its drive to field a rival to Imbruvica. The FDA has offered an accelerated review to zanubrutinib, a BTK inhibitor that has posted positive results for mantle cell lymphoma. The PDUFA date lands on February 27, 2020. The drug scored breakthrough status at the beginning of the year.

→ BeiGene isn’t the only biopharma company to gain special regulatory status today. Mustang Bio $MBIO and St. Jude Children’s Research Hospital announced that MB-107, a lentiviral gene therapy for the treatment of X-linked severe combined immunodeficiency, also known as bubble boy disease, has been granted Regenerative Medicine Advanced Therapy status.

Trump ad­min­is­tra­tion re­vives bid to get drug list prices on TV ads

The Trump administration is not giving up just yet. On Wednesday, the HHS filed an appeal against a judge’s decision in July to overturn a ruling obligating drug manufacturers to disclose the list price of their therapies in television adverts — hours before it was stipulated to go into effect.

In May, the HHS published a final ruling requiring drugmakers to divulge the wholesale acquisition cost— of a 30-day supply of the drug — in tv ads in a bid to enhance price transparency in the United States. The pharmaceutical industry has vehemently opposed the rule, asserting that list prices are not what a typical patient in the United States pays for treatment — that number is typically determined by the type of (or lack thereof) insurance coverage, deductibles and out-of-pocket costs. Although there is truth to that claim, the move was considered symbolic in the Trump administration’s healthcare agenda to hold drugmakers accountable in a climate where skyrocketing drug prices have incensed Americans on both sides of the aisle.

Ver­sant-backed Chi­nook gets a $65M launch round for its dis­cov­ery quest in a resur­gent kid­ney field

Versant is once again stepping off the beaten track in biotech to see if they can blaze a trail of their own in a field that has looked too thorny to many investors for years.

The venture group and their partners at Apple Tree are bringing their latest creation out of stealth mode today. Born in Versant’s Inception Sciences’ Chinook Therapeutics is betting that its preclinical take on kidney disease can get an early lead among the companies starting up in the field.

Sir An­drew Dil­lon, NICE's first — and on­ly — chief ex­ec­u­tive to step down next year

Using a laptop borrowed from his former employer, South London’s St George’s Hospital, Sir Andrew Dillon set about establishing NICE — launched by the then health secretary Frank Dobson — in 1999.  On Thursday, the UK cost-effectiveness watchdog said its first and only chief executive — Dillon — is stepping down in March 2020.

Back in the day, decisions about which drugs and interventions were funded by the National Health Service (NHS) were made at the local level, but this ‘postcode prescribing’ system was fraught with skewed healthcare deployment making the structure unsustainable. A national system was deemed necessary — and NICE was formed to bridge that gap.