At first blush, the $66 million Series B round that startup FogPharma is announcing this morning seems standard fare, particularly this year, when private biotechs have raised gobs of cash hand over fist. But a closer look shows careful steps by an academic-turned-executive, Greg Verdine, to develop the type of company he wants. He’s amassed an unusual array of hand-picked investors who, he says, will largely let him maintain control of his company.
FogPharma is developing an unproven, new class of medicines called “cell-penetrating mini-proteins,” which combine attributes of small molecules and biologics, to try to get at drug targets that can’t be reached by other methods. The company is starting out with a drug aimed at beta-catenin, for instance, a so-far intractable molecular target implicated in colorectal and other cancers. The drug should begin human testing next year, and the $66 million round should get FogPharma into a Phase 2 trial, says Verdine.
But Verdine (pictured), a Harvard University chemical biologist and FogPharma’s scientific founder, has designs on something greater. He’s running both FogPharma and another Cambridge, MA, startup he co-founded, LifeMine Therapeutics, which is mining the genomes of fungi for drugs. Verdine has said he’s retiring from Harvard within the next couple of years. He is now “virtually certain that that I’ll take at least one of these two companies public, and maybe both of them.”
“I’ve always admired Elon Musk,” Verdine says of the tech mogul and CEO of both Space X and Tesla. “He’s taken two really super high-technology companies and built them from scratch, and he’s CEO of both and no one makes a big deal out of it.”
As Xconomy reported in 2017, this grand vision is all part of an evolution for Verdine. He’s been a scientific co-founder of ten startups, worked at three different healthcare-focused venture capital firms, and even run a few biotechs in their early days before handing them off to more seasoned life sciences executives. Now he’s applying those lessons to FogPharma and LifeMine.
With FogPharma, for instance, Verdine is walking a fine line. He wants to control its strategic direction and build a broad company that develops many drugs. While the beta-catenin drug is its lead program, FogPharma has a second preclinical program targeting Cbl-B, a protein that regulates immune responses and thus could be useful for cancer immunotherapy. And Verdine says the company has developed a way to quickly see if the company’s array of cell-penetrating mini-proteins (CPMPs) can bind to currently undruggable targets. (The CPMPs are next-gen versions of what are known as “stapled” peptides, which are chemically fused combinations of proteins. Stapled peptides are still unproven; Aileron Therapeutics, which Verdine co-founded, has one in Phase 2 testing.)
But to see this vision through, Verdine needs time and resources—and that typically means ceding control to venture investors.
Speaking with Xconomy last year, for instance, Verdine talked of wanting “ferocious independence.” He pointed to the example of Eleven Biotherapeutics (NASDAQ: EBIO) as a common story in biotech. In 2010, Verdine co-founded Eleven, which started out as a protein-engineering company. But as the company developed, it narrowed its focus to an experimental eye drug. That one program helped Eleven go public, but the drug failed in clinical trials and the firm ended up merging with a cancer drug developer. “If the company didn’t need to achieve [a] liquidity [event],” he said at the time, “you might have really continued to put capital into the platform itself.”
Verdine has thus been cautious about how he’s funded FogPharma, aiming to ensure that it doesn’t become another one-drug shop. The company raised a Series A from an atypical mix of high-net-worth individuals and institutions, among them WuXi Healthcare founding partner Ge Li (Verdine has been a venture partner at WuXi); Leerink Partners CEO Jeff Leerink; and former Pfizer and Biogen executive Robert Cawthorn. And it kicked around the idea of alternate financing strategies, like money from non-profit foundations. But a “patchwork of non-dilutive funding sources” wasn’t enough to both get FogPharma’s technology up and running and push multiple drugs forward, he says. So Verdine has turned to venture investors.
Still, Verdine says FogPharma “didn’t broadly shop this round around” and, at least so far, has kept the type of independence he’s hoped for. FogPharma reached out only to specific investors it thought would be “simpatico” with the idea of building a company that wanted to “generate drugs in succession well into the future,” and not “boil the company down to its first clinical program,” says Verdine.
FogPharma got a lot of that help from existing backers, but added only two board seats for venture investors, not the “four or even five” that might be more typical of a company at FogPharma’s stage, Verdine says. One of those seats went to Leon Chen, for example. Chen recently co-founded 6 Dimensions Capital, which was formed in May 2017 from the merger of WuXi Healthcare Ventures and Frontline BioVentures. The other seat went to Krishna Yeshwant of GV, who is also a LifeMine investor and board member. FogPharma’s other new backers, like Blue Pool Capital and Horizons Ventures, have invested in the company more passively, meaning they’re not taking board seats. That leaves FogPharma with a larger slate of independent directors—like new board member and Grail and Juno Therapeutics co-founder Richard Klausner—and investors who are aligned with the long-term vision of the company, Verdine says.
Will the investors remain patient as Verdine tries to steer FogPharma to the public markets and clinical trials—all while pressure mounts to generate returns? Will FogPharma have to recruit other investors, diluting stakes and bringing more voices into the boardroom? Time will tell, but Verdine jokes that he aims to lead both FogPharma and LifeMine “until I’m dragged out kicking and screaming.”