Six Takeaways from Boston’s Life Science Disruptors

Xconomy Boston — 

Failure isn’t just a possibility in biotech—it’s a probability. Plan accordingly, and don’t let your ego get in the way when you do. It doesn’t matter so much “how” a drug works, as long as it does. And when the inevitable fork in the road comes, don’t be afraid to take the more difficult path—as long as enough of your investors are behind you.

These were just a few of the lessons the speakers at our latest biotech event, “Boston’s Life Science Disruptors,” imparted to a packed house at the Novartis Institutes for Biomedical Research this past week. Attendees got an informal, close-up look at the stories of three Boston startups—Zafgen (NASDAQ: ZFGN), Epizyme (NASDAQ: EPZM), and Sage Therapeutics (NASDAQ: SAGE)—and how they navigated the difficult road from a concept to a successful debut on the Nasdaq.

Big thanks to our speakers: Atlas Venture partners Peter Barrett and Bruce Booth; Zafgen CEO Tom Hughes; Bay City Capital managing director Carl Goldfischer and Epizyme CEO Robert Gould; and Third Rock Ventures partner Kevin Starr and Sage Therapeutics CEO Jeffrey Jonas.

Also a special thanks to our event host, Novartis, and our sponsors: BDO, Cubist Pharmaceuticals, Health Advances, Icon, Johnson & Johnson Innovation, and Mintz Levin Cohn Ferris Glovsky and Popeo.

Thanks as well to Tyler Trahan for the photos (more of those to come via a slideshow later this week).

With that, here are a half-dozen highlights from a fun night in Boston:

1. “I remember looking at it and thinking…[it] was probably one of the worst ideas I’ve ever heard in my life.” That was Tom Hughes’s reaction when first approached by the backers of Zafgen. Then in charge of Novartis Institutes for Biomedical Research’s discovery group in cardiovascular and metabolic disease, Hughes got a call from Zafgen’s venture backers in 2006 with this pitch, based on a published paper in Nature: if stopping new blood vessels from forming (angiogenesis) with a drug could shrink tumors, the same approach might work for fat tissue.

Hughes thought it was a terrible idea, but Zafgen over the next few years was able to put together “one of the most compelling datasets I’d ever seen in mice” to back it up. That swayed Hughes to leave Novartis. He later determined the drug’s effect had nothing to do with angiogenesis— it changed the way the body metabolized fat by inhibiting the production of an enzyme called methionine aminopeptidase 2 (MetAP2).

“Whether you dressed it up as an angiogenesis mechanism or not, we were wrong to call it that, but the data were what they were,” said Atlas partner Bruce Booth.

2. A small study, as far away from the FDA as possible. Researchers in the past had tried to develop inhibitors of MetAP2 as an alternative to vascular endothelial growth factor (VEGF) blockers, like bevacizumab (Avastin), for cancer. While those drugs never showed any efficacy, the fact that they’d been tested in humans gave Zafgen a possible development shortcut. But Hughes said that some of the early steps for manufacturing Zafgen’s drug weren’t up to speed; it only had the drug in an IV formulation (rather than a pill); and the underlying paperwork for filing an investigational new drug application with the FDA wasn’t ready. So rather than spending a bunch of money reworking the formulation and getting all the FDA documents ready before getting to the clinic, Zafgen started a very small proof-of-concept study of its IV drug in Australia, which “had a process to allow that to occur,” Hughes said.

The study was a success, and Zafgen parlayed it into more venture financing, sending the startup down the path towards becoming a public company—all while saving some cash and development time.

“This is a great example of the power and impact of being nimble,” Hughes said. “Some things [here] we never would’ve done if we were a big company.”

3. Epizyme: Robert Gould’s chance for redemption. Gould, a longtime Merck executive, was working at the Broad Institute of MIT and Harvard when he got a call from former Merck colleague (and Kleiner Perkins Caulfield Byers partner) Beth Seidenberg about a new company she was helping to put together based around epigenetics—switching genes on or off without affecting the underlying DNA. The idea resonated with Gould. He’d spent decades in drug discovery, but stayed away from kinase inhibitors—which have become fertile ground for cancer drugs.

“One of the great regrets in my life is I personally sort of totally missed the entire kinase inhibitor world,” he said. “How could you ever interfere in something as fundamental as cell signaling safely and effectively? [I] just missed the boat on that totally.”

Epizyme, he said, constituted a second chance: “This had the same feel to me–a fundamental area of biology, a fundamental opportunity, particularly in the field of cancer.” He became the company’s CEO in 2010.

4. At the fork, Epizyme veered away from a sale. Epizyme faced a critical decision early in its history. Would the company try to build itself into a large, independent drugmaker with a platform for discovering therapeutics? Or set itself up for a sale? Gould said that Epizyme invested heavily in two programs from the start—the same two programs, incidentally, that are its leading drug candidates today—figuring that one of the two was going to fail. According to Gould, the question for Epizyme was, should it maximize those two assets alone and look for a buyer, “breaking every rule that you don’t build your company to sell your company,” or take the time to discover other drug candidates?

“We had many long board discussions on which of these two paths to take,” Gould said. Goldfischer, for instance, said he tends to be more aggressively on the “selling/suitor” side in such discussions. But Epizyme chose to stay independent, and struck a big partnership with Summit, NJ-based Celgene (NASDAQ: CELG) that propelled it towards an IPO in 2013.

“It was a unique situation,” Goldfischer said. “The breadth of the science, and the ability of the management team and the company to generate novel products and ideas really is what drove [it]—and the response they were getting from the people they were talking to, the strategics.”

5. “He said, this doesn’t really look like a compelling opportunity.” As with Hughes and Zafgen, Jonas had no interest in Sage when he first got a phone call from Third Rock’s Kevin Starr to talk about it. Sage was built off the concept of using drugs to either positively or negatively tweak specific receptors (GABA or NMDA) on brain cells, hopefully as a way of treating a variety of neurological disorders—among them, initially, traumatic brain injury and pain. Jonas, then at Shire, had spent years in CNS drug development, and wasn’t impressed: “Old idea, undruggable target, and I want to use a Yiddish word—farkakt [lousy] indication,” he said. Plus, Sage didn’t have any “chemical assets” at the time.

Sage’s VC backers heeded Jonas’s advice and ditched the bigger indications. With a little bit of luck, shortly thereafter, a UC Davis doctor used Sage’s first compound on a 21-year-old with a rare form of epilepsy (status epilepticus) as a last resort under compassionate use. The patient was in a propofol (Diprivan) induced coma, and had been given a number of potential remedies. Four days after getting Sage’s drug, the patient woke up. That result didn’t just convince Sage’s backers that it might have an effective drug, it enticed Jonas to come aboard. He was named the company’s CEO in August 2013.

6. How can a startup succeed in CNS? With quick, small clinical trials. One of the big problems with developing effective drugs for neurological disorders is that animal models “aren’t predictive” for how a drug prospect will work in humans, Jonas said. Costs are high, trials are long, and in a lot of cases, it’s hard to judge if a drug is really working or not. “It’s been a perennial green field with lots of boulders and a gigantic graveyard,” he said.

Sage’s solution: target acute indications that could get it quick yes or no answers supported by electrophysiological biomarkers that actually corresponded to a clinical outcome. That way, Sage could do a study on a patient in a matter of days, rather than months, and get a quick answer as to whether or not it’s on the right track. In essence, plan for failure, and make sure the company is ready to survive it. Starr noted that when Sage brought in Arch Venture Partners in a Series B round a year ago, the company calculated the amount of cash it would need to get to a value inflection point even with a few clinical failures.

“We’re in a long odds business and you have to believe you can break those odds to be successful,” Starr said. “If you don’t embrace that ability to change and rejuggle…you’re going to end up in some trouble.”