Flagship CEO on Backing NY Biotech, Moderna, and Investing in a Boom

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the heads of the five medical institutions in New York City: Marc Tessier-Lavigne being one of them at Rockefeller, and Craig [Thompson, president and CEO of Memorial Sloan-Kettering] who we’ve done Agios [Pharmaceuticals] with, and several others that we knew. When they approached us, it became clear to us that there was a real science-driven, translation-driven approach here, as opposed to a financing or economic development orientation. I would say, but for that, it probably wouldn’t be all that interesting to us.

X: How would you characterize this in the context of what you normally do, and what is it that you’re trying to accomplish?

NA: It is a bit of an experiment for us. We’re so Cambridge-centric; probably out of the 85 companies we’ve done in the last 15 years, I would venture to say that over 70 of them are within walking distance from our office. We’re very comfortable with that because it gives us a bit of a network effect. But when we saw the active engagement of the heads of these institutions trying to help some of the more advanced clinical stuff become companies, we thought, you know what? Let’s look at this opportunistically. If we see enough pickup in the first couple of things we do there, then we may expand our presence. That’s the stage that [this effort] is at right now.

X: There’s been a very concerted effort to move New York biotech forward, but it obviously pales in comparison to Boston and the Bay Area. How would you characterize it?

NA: I’d say from a startup standpoint, it’s nascent. The right players—namely the top academic scientists and, to some extent, pharma—need to stay engaged. Because at the end of the day, [biotechs] are not companies that undergrads in dorm rooms are going to found. You really need deep science, relationships, and persistence in terms of overcoming some of the setbacks. And that usually happens when you have established academics who want to see their science get out there. To the extent that [all of those things] actually persist, I think [New York biotech] is very promising, and that’s kind of why we thought we would, in this limited experiment, see if we can be helpful.

X: What would it take to overcome some of the geographical challenges—lack of lab space, high rents, etc.?

NA: If big ideas are born there, they’ll find a way to exist, and if they do, [people will] find a way to create an ecosystem there. I just don’t think it’s reached a critical mass yet.

X: Is there anything in particular about New York that drew you in, to where you’d invest here, rather than maybe some other potential biotech clusters?

NA: I’d say untapped science, the capacity for relationships, local financing, and pharma presence. It’s got top notch institutions that have told us each, one by one, that they feel completely underleveraged in the startup world, and they see a lot of their science go straight into large companies but would like to see some of it go into startups. And one interesting angle that I think is underappreciated is that a lot of the philanthropy money is resident in New York.

X: What are you getting out of this deal that you couldn’t have just done yourselves?

NA: This is a bit of an early foray into a geographical region that might be ripe, and that with the right relationships we may be able to gain an advantage in. This is a mechanism to try and see whether that pans out.

X: You recently announced some partnerships with AstraZeneca, Bayer, and Nestle. What makes these relationships different than the ones other venture firms have with pharma?

NA: These [partnerships] involve teams that meet regularly to identify areas where there’s white space and use VentureLabs [the name for Flagship’s in-house startup unit] to deploy against [it]. That level of collaboration is really, I think, something quite novel and important— it’s not about assets, there’s really no strings attached. There’s no option [to acquire], there’s no [special] rights, that’s not the nature of these deals. There are plenty of venture deals with corporations where it’s either about the money, or it’s about options and access to deals. This is not really about either.

X: Any examples?

NA: When Moderna was conceived, we had access to some of the therapeutic area heads at Merck, and we could leverage their know-how [and ask]: If you could do this, what would you do with it? What data would you need to see to believe that it was safe to put in [humans]? And on and on. These are things that in the startup world we struggle to get access to, and find ways to do by hiring former pharma people and those types of things. But the fact that we have this available, we think, is a very important strategic advantage. Though of course if it comes at a cost, which is that you’ll either limit the upside or you’ll kind of narrow the scope of what the companies can do because of the corporate involvement.

X: Speaking of Moderna, that’s a company that’s evolved into an unusual model—part biotech, part incubator. Why take that kind of approach?

NA: The precedent models in the biotech industry for technologies like this—[small interfering RNA], or monoclonal antibodies or many other things—is that biotech companies licensed the technology to pharma companies, creating a collaborator who was in fact a competitor. Those companies then take the technology, learn how to do it better, and develop their own drugs eventually.

We wanted to create a different dynamic. We said all along we’ve got to … Next Page »

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