Alzheimer’s disease is a minefield for drug developers. Despite billions of dollars invested by biotechs and pharmaceutical companies, a number of programs have blown up in clinical testing over the past decade. Can a star CEO march the rechristened Forum Pharmaceuticals through that treacherous terrain?
Since July 2013, Forum has been helmed by Deborah Dunsire, who once led Millennium Pharmaceuticals as it brought its blockbuster multiple myeloma drug bortezomib (Velcade) to market. And now, even as Forum is running two massive, expensive Phase 3 trials, Dunsire is trying to make big changes.
Dunsire (pictured above) told Xconomy recently that Forum is branching out from its longtime sole backer, a unit of the money management giant Fidelity Investments, and charting a new financial course.
The exact plan is fluid—Dunsire says Forum is meeting with bankers and evaluating its options—but the Watertown, MA, startup now wants other investors to join Fidelity Biosciences, the biotech VC arm of Fidelity, and Forum’s only shareholder since 2008.
It’s also eyeing an initial public offering that could come in 2016, Dunsire says, perhaps after unveiling data from the first of two late-stage trials—one in Alzheimer’s, one in schizophrenia—for its lead drug candidate, an experimental cognitive enhancer called encenicline.
Dunsire says there are two main reasons for this major shift. First, in forming the strategic plan for Forum going forward, she crunched the costs to finish the current Phase 3 trials, and amass sales forces here and abroad. She presented them to Fidelity and urged caution: “I said I’ll do whatever you believe is best, but I want to tell you, I’m not sure you should have such a concentrated position,” she says.
Second, a generational shift is underway at Fidelity. Edward “Ned” Johnson III’s daughter, Abigail, succeeded her father as CEO of the firm in October. Abigail has a different investment strategy than her father, Dunsire says, and isn’t as keen on the idea of “owning and operating a pharmaceutical company.” Says former CEO Kees Been, who ran the company from 2005 to 2013, Ned wasn’t just incredibly passionate about “anything related to neurodegeneration,” but was known to make bold, contrarian investment bets.
“He loves the risk,” says Been, who is now CEO of Cambridge, MA-based startup Lysosomal Therapeutics. “Because with risk comes potentially high payouts.”
Fidelity declined to comment for this story beyond this quote from spokesperson Michael Aalto: “Ownership is confident with the direction of Forum and looks forward to the results from its…phase 3 trials for Alzheimer’s disease and schizophrenia.”
Many other drugs have crashed and burned in big, costly neuroscience trials. Attempts to fight the underlying cause of Alzheimer’s, a devastating memory-robbing condition affecting millions around the world, have all failed. The only successes are donepezil (Aricept) and memantine (Namenda), that, like Forum’s experimental encenicline, are cognitive boosters, meant to help people think more clearly. But even those drugs help only a fraction of patients for a short period of time, and often lead to problematic side effects.
With so much unmet need, the prize for providing even temporary symptomatic relief is significant. For all their flaws, donepezil and memantine have generated billions of dollars in sales. Should encenicline persevere in either Alzheimer’s or schizophrenia, where there aren’t any drugs approved for cognition, Forum could receive a windfall.
“And if it can work in these two disparate diseases, there are a lot of other ones where cognition is impacted,” Dunsire says.
That’s been the quest of one of the richest men in America, Ned Johnson. The story starts in 1984 when Johnson’s’s father, Fidelity founder Edward Johnson II, died from Alzheimer’s, and Ned became an advocate for funding Alzheimer’s research. Through its charitable foundations, for instance, Fidelity launched in 1996 the Alzheimer Research Forum (alzforum.org), a non-profit online resource base for Alzheimer’s research information. (The forum is owned and operated by a Fidelity subsidiary and based in Fidelity’s Cambridge headquarters.) The Fidelity Foundation has also put millions into academic research.
“This was based on a wealthy man’s passionate, dedicated investment in something that was, of course, very near and dear to his heart,” Been says.
That longstanding interest became a commercial bet in 2001 when Fidelity founded a life sciences venture unit, Fidelity Biosciences. Atlas Venture partner Jason Rhodes was Fidelity Biosciences’ first employee.
Rhodes says that the team was looking at different Alzheimer’s technologies with the idea of being a “business builder,” not a passive investor. That was a pricey proposition.
“If you’re going to do Alzheimer’s, you’ve got to be in it for the long haul,” Rhodes says. “The premise was, this was a long and important journey, it’s going to be capital intensive—probably even by biotech standards.”
In 2001, Fidelity joined other investors to launch EnVivo Pharmaceuticals. (It was renamed Forum in 2014 after Dunsire came on board.)
Rhodes describes the company as a “very specific, mission oriented business,” a different sort than the other biotechs Fidelity has since invested in through its venture units.
“All the other [Fidelity Biosciences investments] happened within a venture fund, and this sat outside of the fund,” he says. “It wasn’t viewed as a venture investment, in that sense.”
That novelty was reflected in Fidelity’s ownership position; even with the presence of a few other shareholders, Fidelity owned upwards of 95 percent of EnVivo, says Been. That’s a stark contrast to how biotechs are normally built. Even a startup creator like Third Rock Ventures, which likes to amass large Series A rounds to keep a significant stake in its startups, has ended up owning anywhere from about 30 percent to almost 60 percent of many of its portfolio companies by the time they go public.
“It was the only meaningful funding source,” Rhodes said of Fidelity.
Today, with all the advances in genomics, brain imaging, and other technologies, there is so much researchers don’t know about neurodegenerative diseases like Alzheimer’s. In 2001, it was even less. So Fidelity’s plan for EnVivo, according to Rhodes, was a diverse attack. That meant amassing several assets: discovery methods, new mechanisms of action, and drug prospects that might either alter a disease, or just provide symptomatic relief.
The founding technology, for instance, was a discovery platform out of Baylor College of Medicine based on fruit flies. Fidelity then added intellectual property around histone deacetylase (HDAC) inhibitors, and in November 2004, a drug kicked to the curb amidst a restructuring at Bayer—encenicline. The drug is what’s known as an alpha-7 nicotinic agonist, meant to boost the transmissions between synapses in the brain, and in turn, bolster cognitive functions like memory and learning.
With those pieces in place, Been, a former Biogen executive, came aboard in 2005. At the time, there was a “strong emphasis” on the fruit fly platform. Been wanted resources directed elsewhere.
“From my perspective, it was a huge distraction,” he says.
EnVivo spun out the fruit flies into a different company, Vitruvien, that eventually folded. Encenicline became the main focus, and Fidelity became the sole owner. It pumped $65 million into the startup in 2008 and bought out the remaining investors.
This left EnVivo in a unique position for a biotech startup. It didn’t have to do deals or woo outside investors to survive. That doesn’t mean EnVivo didn’t try to form alliances—it did cut one deal, for instance, with Mitsubishi Tanabe Pharma, and Been says he was in talks throughout the years for others that never panned out. But EnVivo, Been adds, aimed to stay private, retain as much value as possible, and commercialize its own drugs despite the prohibitive cost.
“That was a gift,” he says. “Being offered an opportunity to take something all the way to the market is an incredible opportunity that not many people have.”
Despite having the trust and deep pockets of Johnson and Fidelity, EnVivo found itself on the wrong side of a trend in the mid-2000s. Instead of drugs like encenicline to boost cognition, pharma was investing heavily in antibodies and other drugs purporting to alter the course of Alzheimer’s (like bapineuzumab, solaneuzumab, and tramiprosate).
What’s more, drugs from Targacept, Memory Pharmaceuticals, AbbVie, and Novartis, all using an alpha 7 mechanism like encenicline, either failed or were discontinued. But encenicline stayed afloat. With Phase 2a data released in 2009, it started showing signs that it might improve cognition in human patients with either Alzheimer’s or schizophrenia. EnVivo got more encouraging results in Phase 2b trials in 2012 and that “bolstered Ned’s courage, if that still needed to be bolstered,” Been says with a laugh.
It’s worth noting how unusual those side-by-side trials in Alzheimer’s and schizophrenia were for a biotech startup to run. As Dunsire says, even a publicly traded biotech with access to the Wall Street ATM might not do that on its own—or, if it does, only with the intent of selling itself afterwards. “But the intent here was to go on, and finish the clinical program,” she says.
That meant even larger bills. Been says as the bet got bigger and bigger, with Phase 3 trials looming, the risk astronomical, Fidelity wanted a leader in place with experience commercializing a drug. Been was let go in February 2013. Dunsire, who ran the launch of bortezomib for Millennium and the successful cancer drug imatinib (Gleevec) at Novartis before that replaced him five months later.
Despite that experience, Dunsire describes her time at Forum as a crash course. She spent much of her professional life in large organizations and with companies focused on oncology, not neuroscience. She’s never taken a company public before. After eight years at Millennium, including four after Takeda Pharmaceuticals bought the company for $8.8 billion in May 2008, Dunsire stepped down in May 2013 amidst R&D cuts. She resurfaced only two months later as the CEO of EnVivo.
Dunsire told Xconomy in July 2013 she was intrigued by the challenge of studying a new field while building a company with a drug deep into development. But she had to conquer “a whole slew of learning curves,” from the science behind the company, to the competitive landscape, to developing a clinical and commercial strategy, and a pipeline—and figure out how EnVivo was going to pay for all of it. When Dunsire came aboard, the company had already started one Phase 3 trial, in schizophrenia, and was gearing up for another in Alzheimer’s. Each are massive undertakings, with thousands of patients apiece. Yet when she started, she knew the mandate from the top: think big, and think long-term. When I interviewed her in Boston recently, for instance, she pointed to a slide the company is now showing investors, which included a slew of potential diseases encenicline might affect, if it works the way she hopes—among them ADHD, depression, and traumatic brain injury.
“I’ve only had to do 20 year planning at two places,” she says. “Takeda, because the Japanese plan for 20 years, and Forum, because the investor is thinking about how the cash flow evolves from this asset over the period to patent expiry.”
Dunsire has already put her stamp on the company, starting with the new name: EnVivo was ditched because of other companies with similar names, like publicly traded Invivo Therapeutics. (“We’d sometimes get their mail,” she says.) Though encenicline is meant for big, broad populations, Dunsire envisions a more targeted, rare disease-type approach for other drugs in the Forum pipeline. One drug, FRM-0334, is being tested in a genetic subset of patients with frontotemporal dementia. Then there’s a preclinical drug for familial Alzheimer’s disease caused by a specific genetic mutation. “We’re trying to think about populations where we can identify the mutation, [where] we know the patients to select,” she says. “A precision medicine approach.”
As more private investors join, Dunsire will look for a partner to help sell encenicline in Alzheimer’s, if it comes to market, and shoulder some of the massive commercialization costs.
There’s a tricky dynamic in play, though. Forum is backed by a titanic, experienced investor that’s already poured hundreds of millions of dollars into the company (Dunsire won’t say exactly how much; Been estimates it’s at least $200 million to $300 million). Will others value Forum similarly given the risk remaining? Will they buy that encenicline is a better, different compound than the failed alpha 7 drugs of the past; a drug poised for billions in sales?
That’s Dunsire’s challenge. It’s ironic that for the journey she chose the name Forum, the place Roman senators went to debate and discuss important matters of the day. She’s trying to put a different type of Forum together now.
“We want it to be a place where not only we discuss among ourselves at Forum, but there’s input from patients, academics, basic researchers, and regulators,” she says. “So the forum was that coming together of ideas.”
And, according to her plan, a new group of investors.