There’s an immuno-oncology frenzy going on in biotech, but with a lot of attention comes competition. Plenty of companies will be left out when all is said and done.
That’s why Cambridge, MA-based Jounce Therapeutics is trying to think a step ahead, and find some places in the field that aren’t as crowded as of yet. And today, by adding a group of “crossover” investors, it looks like that strategy is taking Jounce towards Wall Street.
Jounce is announcing today that it has raised a $56 million Series B round. It’s the second large round of cash for Jounce since the startup was formed in February 2013 by Third Rock Ventures with a $47 million Series A. It was the largest up-front investment the Boston firm has ever made in a startup.
Jounce, like several other Third Rock creations over the past few years, appears headed for an IPO. Its Series B comes from a large group of crossover investors, which invest in both public and private companies. The new backers are Wellington Management, Redmile Group, Nextech Invest, Pharmstandard International, Cormorant Asset Management, Omega Funds, Casdin Capital, Foresite Capital Management, and an unnamed “blue chip public investment fund.”
But Third Rock didn’t participate in this round, just as it didn’t join the $60 million crossover round gene therapy startup Voyager Therapeutics a few weeks ago. At the time, citing an “extremely high amount of interest” in the round, a Third Rock spokesperson told Xconomy the firm was taking the opportunity to diversify Voyager’s shareholder base and bring in backers that could help support “a future potential IPO.”
In an interview, Jounce CEO Richard Murray (pictured above) nearly echoed those thoughts. He said Third Rock remains very much involved. Partner Cary Pfeffer, Jounce’s initial CEO, is the startup’s chairman, and Third Rock co-founder Bob Tepper is on its board. But, as in Voyager’s case, the round was “significantly oversubscribed” and Jounce used that interest to draw in a “diverse base of new investors,” said Murray.
Crossover backers have become a sign that a biotech startup is either on the verge of IPO, or at least thinking about going public. Some recent examples affiliated with Third Rock include Blueprint Medicines and Sage Therapeutics (NASDAQ: SAGE). But Murray was cagey about Jounce’s timing for a possible offering.
“That’s more of a discussion for the future,” he said. “We’re not commenting on that timeline or set of expectations at the moment.”
The financing comes as Jounce’s strategy is taking shape. The company began as a broad bet on cancer immunotherapy, the idea being to amass a diverse portfolio of treatments in the fast-emerging field. Since that time, the immuno-oncology gold rush has only gotten more intense. Big Pharmas and small companies across the globe are racing to find the best combination of treatments, leading to deals, IPOs, and big investments. There are a number of approaches in play as companies attempt to harness the immune system in different ways. One method is to use so-called “checkpoint inhibitors” to release a molecular brake that tumors use to suppress our body’s defenses. Another method is known as CAR-T therapy; our own T cells are genetically modified to spot cancer, seek it out, and kill it.
When I spoke with Murray after he was hired in July, he noted that Jounce’s plan to differentiate itself was to focus on drug technologies that might either work synergistically with what are known as PD-1 inhibitors—part of the checkpoint inhibitor class—or that treat cancer types for which PD-1 drugs aren’t as effective. He mentioned three possibilities for Jounce: make checkpoint inhibitors of its own, develop co-stimulatory molecules (which as their name suggests rev up the immune response to cancer), or go after targets in the tumor micro-environment.
Jounce has now refined that plan, according to Murray. The company is zeroing in on two things: finding different ways to amp up T cells to attack tumors, and a “next step” cancer immunotherapy approach of drawing out some of the other members of the immune system to fight cancer—macrophages, for instance.
Jounce’s lead drug targets what’s known as inducible T cell co-stimulator, or ICOS, a protein found on the surface of a specific type of T cell that only gets expressed in large quantities when the immune system is activated. By activating ICOS, the drug is supposed to help drive an immune attack against tumors. What makes that strategy important, Murray said, is that most of the cells in our bloodstream aren’t expressing ICOS, but T cells that have infiltrated a tumor are. Jounce envisions testing the ICOS drug both as a monotherapy and in tandem with a PD-1 drug as a way to rev up those T cells. First trials should start next year.
The next program in the pipeline will either focus on macrophages or a different T cell-related mechanism, Murray said.
Jounce has amassed a large collection of human tumors to characterize what types of immune cells are in them. Murray likened the collection to an “atlas of information” to identify the important immune players in cancer. Since the majority of tumors don’t have many T cells that have worked their way into them, this type of information—and the patterns that emerge from the data—might help Jounce find new therapeutic strategies. Murray said the project should also help Jounce find which patients respond best to its drugs.
“We will continue to really look at this ‘next step,’ if you will,” Murray said. “It could be quite important in immuno-oncology to start addressing some of these non-T cell mechanisms of immunosuppression.”
Jounce is using the Series B cash to move the ICOS drug and its other prospects forward, expand beyond its current 37 employees, and maintain as much control of its drugs as possible. “We want to ensure that as Jounce grows and evolves there [are] substantial product rights associated with the company,” Murray said.