J.P. Morgan 2015: Notes, Thoughts, And Conversations From the Vortex

Xconomy National — 

The word “story” gets ill treatment at events like the J.P. Morgan Healthcare Conference. It often means an elevator pitch from a harried CEO to a distracted investor, or a few observations a journalist strings together with a headline, or Twitter snark trying to pass for insight.

But we heard a real story on Sunday night from Martha Rhodes, a former advertising executive who has written a memoir of her treatment-resistant depression and the treatment that saved her life.

Speaking at a dinner arranged by a Boston venture firm, Rhodes was a reminder that the short-attention span and shorthand skepticism that abounds at events like J.P. Morgan is, above all, a distraction.

With the help of a device that delivers transcranial magnetic stimulation, Rhodes is drug-free and, more important, feeling great. She hid her depression well during her career, she said, but she eventually attempted suicide to escape. “Imagine the Monday morning feeling of not wanting to wake up and go to work that everyone sometimes has,” she said. “Now imagine it happening every morning, and a thousand times worse.”

The dinner was an annual event meant to squeeze the press into a small space next to the firm’s portfolio companies, including the maker of Rhodes’s treatment. But it was no polished PR campaign (even though, yes, she is a former ad exec). Rhodes shook off obvious nerves to tell her story in front of several dozen strangers, and was warm and humble, if slightly frazzled, afterwards. It will be the one story that sticks with us for years to come.

There was, of course, plenty of news to report and conversations to relate. We’ve tried to gather some of them in this roundup and for those who haven’t lived it, we hope you get a flavor of what the four-day frenzy is like.

Bluebird Bio was almost Spark Therapeutics. When Nick Leschly was at Third Rock Ventures and began looking into gene therapy several years ago, Genetix Pharmaceuticals—the struggling company that Third Rock would later help turn into Bluebird Bio (NASDAQ: BLUE)—wasn’t his first target. Instead, Leschly did a “year-long dance” with a program being developed at the Children’s Hospital of Philadelphia for a rare, inherited form of blindness.

“We know that program inside out,” Leschly said. “But we said we just couldn’t build a company around that at that time. Too much infrastructure for a tiny, tiny indication.”

Yet that research educated Leschly, and Genetix, which he felt had “more legs, and broader legs,” because it was using lentivirus (a neutered HIV virus) to deliver its treatment, which less commonly used than the adeno-associated viral vector (AAV) the CHOP program was using.

“We thought if we played our cards right and learned how to manufacture it, that beta-thalassemia, sickle cell disease, and a whole bunch of other indications could be really interesting,” he says. “It had much less of an ecosystem around it than AAV at the time.”

That led to Bluebird. But the CHOP program has shown some legs, as well. It was the foundation of Spark Therapeutics, which sold rights to its hemophilia B program to Pfizer last month then filed for an IPO.

Why do so many diagnostics companies fail? They’re asking the wrong question. With the explosion of new technologies that let companies “measure things you were never able to measure before,” said Veracyte (NASDAQ: VCYT) CEO Bonnie Anderson, “the opportunities are there for diagnostics companies to emerge with new tests that change various standards of practice.”

Still, it’s hard to break in. Reimbursement is an enormous challenge, as is convincing doctors your test is good enough to change what they do. What’s the key? Three things in particular, said Anderson:

1) A clear strategy that identifies the “right” clinical question to answer.

2) Well-designed clinical studies leading to supportive evidence in peer-reviewed journals.

3) Demonstrating that a test improves care and saves money. “In today’s healthcare, if you’re not doing both, you’re going to have a tough time,” Anderson said.

Veracyte has developed a molecular test to tell doctors whether a thyroid lump is benign or cancerous. If it’s benign, patients can avoid unnecessary treatment, which in turn saves money. Some 20 to 30 percent of suspicious thyroid lumps that get biopsied are inconclusive, and many patients undergo expensive surgeries to remove their thyroid even though most of them are later shown not to have cancer.

Is the next Cubist even possible? Cubist Pharmaceuticals (NASDAQ: CBST) of Lexington, MA, is an anomaly: a startup that became an antibiotics leader capable of buying others—until, of course, it got bought by Merck. Can other antibiotics makers get that far, or are those fortunate enough to have a first product approach FDA approval destined to be acquired before long? The next case study is Watertown, MA-based Tetraphase Pharmaceuticals (NASDAQ: TTPH). It’s headed towards its first FDA approval, and was said to have begun exploring a sale in November.

“If you’ve got a great product and it’s well differentiated, I think it is becoming harder to get to the finish line on your own,” said Tetraphase CEO Guy MacDonald. “If someone comes along with an offer, we’d consider it, but if it doesn’t make sense, we won’t do it.”

He noted that a few years ago, five or six antibiotic companies had candidates in either Phase 2 or Phase 3 testing, and all said they were going to commercialize their products on their own—only to get bought.

Will Tetraphase? Like others in the past, it could soon be launching its first antibiotic in the U.S., and aims to start hiring a sales force in 2015. We’ll see if it’s still independent by then.

The Alkermes of the future: a Celgene-style dealmaker? It’s well known that Alkermes (NASDAQ: ALKS) has transformed itself from a drug delivery company to a drug maker with several neurology candidates in its pipeline, and in the process cut its corporate tax rate significantly by buying Ireland-based Elan Drug Technologies and moving its corporate headquarters to Ireland.

Investors have rewarded the shift, boosting shares from about $22 apiece in April 2013 to $68.24 as of this writing. CEO Richard Pops has always talked about Alkermes one day being a peer of Celgene (NASDAQ: CELG). With his company now worth about $10 billion, Pops is taking cues from Celgene’s creative dealmaking to plan its next stage of growth.

Celgene adapts deal structures to fit specific companies, while typically leaving those partners the breathing room to be nimble and independent. That was on full display at … Next Page »

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