The monsoon that drenched Boston before Xconomy’s biotech gathering on Wednesday was apropos; there’ve been storm clouds over the industry for a few weeks now. So much so that Flagship Ventures CEO Noubar Afeyan, uncharacteristically flashing a suit and tie, quipped: “Everybody’s been predicting the death of the IPO window for awhile, so I thought this would be the wake.”
But beneath the rainclouds there was optimism. And the downpour abated just in time for the speakers to take the stage at “Boston’s Life Science Disruptors” at the Novartis Institutes for Biomedical Research in Cambridge. What plummeting stocks, drug pricing debates, and closing IPO windows? This was about the reward you get for coming up with new ideas and figuring out how to turn them into businesses in biotech. It was an inside look at how three disparate companies—Synlogic, Foundation Medicine (NASDAQ: FMI), and Seres Therapeutics (NASDAQ: MCRB)—were shaped, and are trying to make their way. (Foundation and Seres, of course, had the benefit of being able to raise a bunch of cash in IPOs while the biotech bull market raged.)
Special thanks to everyone for filling up the house on a dreary Boston day. In particular to our speakers: Michael Pellini, CEO of Foundation; Alexis Borisy, partner at Third Rock Ventures; James Collins, biological engineering professor at MIT; Jose-Carlos Gutierrez-Ramos, CEO of Synlogic; Flagship CEO Afeyan; and Roger Pomerantz, CEO of Seres.
Thanks also to our event host, Novartis, and our sponsors: BDO, Boston Children’s Hospital, Johnson & Johnson Innovation, New England Lab, and The Richmond Group. Thanks as well to our national partner, Alexandria Real Estate Equities, and charter underwriter, Biogen. (Photos from Keith Spiro Photography to come soon, as per usual.)
With that, here’s a taste of what emerged from the lively discussion.
—Tumor profiling as a business: many questions, both then and now. Even despite Foundation’s successful IPO and a big deal with Roche earlier this year, there are questions surrounding its prospects. Investors sank its stock a few months ago when sales of its tumor profiling tests slowed and the company lowered its estimates for the year. As Borisy, the chairman and co-founder of Foundation noted, how to make a business out of Foundation was always the center of intense debate among its backers.
“There were all sorts of objections,” he said. “These were questions that would turn over again and again.”
To list a few: Would Foundation have any true intellectual property to protect itself? How would Foundation’s tests be regulated? How can you establish a business in an area where the underlying technology is evolving at warp speed? And, of course, reimbursement—who is going to pay for it?
Even today, you can safely say Foundation doesn’t have all the answers to these questions. So why did Borisy and others take the risk? “There was a feeling that there was an opportunity here where the time was absolutely right—that this was the right moment from a science and medicine perspective, that these were the best founders you could possibly imagine, with a deep moral imperative that this had to happen, and that it had to be done right.”
—Cool technology. Now, what to we do with it? Atlas Venture’s Peter Barrett and Ankit Mahadevia were interested in MIT professor Jim Collins and protégé Timothy Lu’s latest work. The synthetic biology specialists had two things cooking: a tools platform to “rewire organisms,” and an idea for engineered microbes that could serve as living drugs or diagnostics. Mahadevia’s response: “We really want to do something with you guys, we just don’t know what.”
A month later, Atlas decided no to the tools, and yes to the living drugs. But how to use them? Collins’s preference—wiping out infectious diseases, like a cholera infection. Mahadevia’s response: “We still want to do something with you guys, we just don’t know what.”
It took a suggestion from Atlas entrepreneur-in-residence Dean Falb to figure out what to do. He showed Collins a list of 12 rare genetic metabolic disorders, all of which Collins had never heard of. The microbes made sense here—they could either make a metabolite that is missing, or break down a toxic one. The medical need is significant, and Synlogic could run small, inexpensive clinical trials for it.
“I thought this was brilliant,” Collins said. Synlogic is now targeting phenylketonuria and urea cycle disorders.
—How to make living drugs less risky. The idea of living drugs that can switch on and off inside your body sounds great—and risky. Engineered bacteria, Gutierrrez-Ramos said, are going to pose a challenge for regulators. So Synlogic has decided to do a few things to minimize that risk. First, it’s going to use probiotic bacteria that are already part of the human microbiome—the trillions of bacteria that colonize our bodies. Second, the components of the “genetic circuits” engineered into these bacteria are coming either from human genes, or those of other bacteria in the microbiome. And lastly, Synlogic decided to use bacteria that don’t colonize in the gut, but instead would be taken as a pill every day and survive just 18 or so hours.
“We’re going to make sure that patients, payers, and regulators feel very comfortable,” Gutierrez-Ramos says. The first trials of Synlogic’s drugs should begin next year.
—Building Seres: A long, sometimes smelly journey. When Flagship Ventures began looking into the idea of starting a company based on the microbiome in the late aughts, it did so with little if any technology available to capitalize on. What it did know, Afeyan said, was that the sequencing of the microbiome was revealing a “lot of interesting insights,” like that bacteria in our bodies were making chemicals that had a lot of influence many of our systems. So Flagship started several “proto-companies” to see if it was worth taking a stab at the field, and this led them to fecal transplants—which are exactly what they sound like, and are often used, quite effectively, to stop a bacterial infection known as Clostridium difficile. “What we found out probably earlier than anybody, is that [doctors] all did it differently, and they got the same result,” Afeyan said. “Any time you see that happen, you’re over-specifying the solution.”
So Flagship identified a group of microbes it believed to be wiping out C. diff in these fecal transplants, set up a lab, found what it was looking for, and Seres emerged. Last year, the drug to emerge from that work, SER-109, produced data that were good enough to support a roughly $140 million IPO.
“We just followed the data that was being generated opportunistically,” Afeyan said.
—Unimpressed with your CEO candidates? Just hire yourself. Pomerantz left a high-profile position at Merck a few years ago and promised his wife he wouldn’t take another role in company operations. He’d just join boards, and “have a nice life,” he said. Then Seres came along and that changed everything. He started with a board seat, was pushed by Afeyan to be chairman, and then in that role began interviewing candidates for CEO.
The problem: Pomerantz wasn’t satisfied. The candidate had to have a background in infectious diseases, drug development, and business. It’s pretty uncommon for someone to have experience doing all three, Afeyan said, and Pomerantz “kept telling me all the things that were wrong with the candidates.” That left Seres with few options. Well, actually just one: “I pulled a Dick Cheney and thought about hiring myself,” Pomerantz said.
He was named CEO in June 2014.