Riding Investment Waves

In Pennsylvania, we currently have the modern day equivalent of a gold rush going on in our state (the Marcellus Shale) after the discovery of the country’s largest natural gas deposit.  To get in on the rush, gas exploration companies are offering vast amounts of cash to landowners in exchange for future development rights.  I say future because the economics of natural gas drilling is not yet on par with gasoline, leaving the widespread adoption of the fuel very much in question.  Yet, even with that risk, large exploration companies are willing to spend considerable amounts of money up-front in the hopes that they will receive a handsome payday in the future. 

The economics of natural gas exploration in Pennsylvania is somewhat analogous to that of life sciences product development, wherein investors are willing to spend large amounts of money up-front on the development of life science products, hoping that those products can tap into future markets that are expected to be in the billions of dollars. 

Taking on such risk, whether in natural gas exploration or life science product development, can be daunting for all but the most intrepid entrepreneurs and investors. 

How does one participate in sexy investment trends, such as natural gas exploration, but not take on the risk associated with it? 

The answer is to identify products and services that support those companies working at the bleeding edge of an investment trend.  In the case of natural gas, that means identifying those companies that provide the infrastructure (raw materials) and logistics (housing, food, transportation) that are required by the exploration companies to prospect for gas.  

Like the natural gas industry, there are those life science companies that swing for the fences, identifying new trends and investing big in them, and those companies that provide infrastructure and services to support the homerun approach of their peers (sometimes even these companies can be home runs).  Below is my analysis of two such companies and the products they created to support the development and adoption of bleeding edge technologies.

Avid Radiopharmaceuticals

With an aging US population, the prevalence of Alzheimer’s is growing at an astonishing rate.  Every major drug developer has tried to develop medicines to treat the disease, but with little success.  A key development challenge for drug developers is that Alzheimer’s, especially in its early stages, can be challenging to diagnose.  Poor diagnosis has meant that drug developers have typically sought later stage patients.  These patients are harder to treat as much of the damage done by amyloid aggregates (I am not mentioning tau or prion in this blog post) likely cannot be reversed by therapy alone.  Early diagnosis is therefore a priority of patients, clinicians, and drug developers. 

Avid Radiopharmaceuticals (an Osage portfolio company) has created a radiolabeled ligand that binds to amyloid-beta, a protein that often aggregates in Alzheimers’ patients brains and is considered by many to be a hallmark for the disease.  Unlike drug developers focusing on homerun therapeutics, Avid chose to develop a diagnostic that could aid clinicians in their ability to track disease progression.  While the diagnostic has yet to be approved, Eli Lilly bought Avid for $300 million upfront and is making the company it the cornerstone of its Alzheimer’s drug discovery effort. 

Embrella Cardiovascular

As percutaneous procedures mature and increase in complexity, device companies and clinicians are attempting to insert ever-larger catheters through the arties of patient’s.  Large catheters have a high likelihood of rubbing against artery walls, knocking off plaque and debris that has accumulated on the epithelium.  Once freed, that flotsam may embolize on its passage through the arteries and into the brain where it eventually could cause a stroke.  Early clinical trials for Transcatheter Arotic Valve Implantation (TAVI) procedures in Europe have confirmed the risk of stroke as several patients did, in fact, have strokes.

Embrella Cardiovascular created a simple solution to the floating debris problem; it developed a small net that catches embolisms when inserted into the patient’s heart.  The product is simple to use, relatively cheap, and provides a nifty solution for decreasing TAVI-associated stroke, which could been a stumbling block for the adoption of TAVI procedures.  Being a relatively simple device, Embrella required only $7 million of capital before it was acquired by Edwards Life Sciences for $43 million.

Summary

There will always be those companies that are willing to invest significant up-front resources in risky projects in hopes of generating a substantial future windfall.  What is often less talked about is the role that numerous other companies play in supporting the efforts of those “wildcatters”. 

Adjunctive technologies, when applied to bleeding edge markets, can often generate significant interest from strategic acquirers as those companies seek to build out their product offerings and expertise around a specific development area, such as Alzheimer’s or TAVI.  Identifying trends and products that companies need to better facilitate the development and adoption of core products around a growing trend is a surefire way to start a company that will have significant strategic value to potential acquirers.

Personalized Cancer Therapy

Personalized therapy is the wave of the future for drug development.  Unfortunately, personalized therapy has been considered as such for the last 20 years. Individualizing therapeutic regimes is a tantalizing thought, but one that has yielded few tangible results due to the overall complexity of the human body.  

Personalized therapy has garnered the most attention in the oncology world.  Tumors are thought to be patient-specific – that is, each patient accumulates various mutations that lead to disease presentation.  By identifying and mapping mutations across a wide swath of tumors via next-gen DNA sequencing, cancer geneticists believed that they can identify certain tumor profiles that would make tumors most susceptible to certain types of therapy.  In practice, geneticists learned that tumors had a greater diversity of mutations and gene expression profiles that were far more complex than anticipated, making it significantly more challenging to identify putative cancer causing mutations that could lead to aberrant gene expression. 

Tumor profiling has not been a complete disaster as it has yielded some very important diagnostic tests such as the BRCA and HER2 tests.  However, those tests are relatively simple as they only measure the expression level of one gene.

Why hasn’t there been more progress over the last 20 years? 

Unlike normal cells, tumors are typically a mix-mosh of several different types of abnormal cells and some normal cells.  Screening tumor cells for mutations requires quite a bit more skill and time compared to normal cells.  Normal cells require roughly 40x sequencing coverage to ensure the fidelity of the sequence read.  Because cancer cells are so heterogeneous, they require more like 500-1,000x coverage to figure out the various sequences for the different types of cells.  While the price of DNA sequencing has dropped dramatically, it is still super expensive when you have to do 10-25 times the amount of sequencing runs for cancer cells as opposed to normal cells.  Also, it takes some serious software and computing power to align all of those sequences!

As scientists have accumulated more and more sequencing data, their appreciation for the complexity of mutations in tumors has grown.  In the past, people assumed that 4-6 mutations drove a cancer.  Now, geneticists estimate that 10-15+ mutations are needed for tumorignesis.  If 15 mutations are involved in a tumor, it is super hard to figure out which one or two are the really important ones. 

As an aside, that also makes you wonder about the rationale for monoclonal antibodies in cancer.  Maybe it is time people gear up for polyclonals…

Lastly, sequencing requires a really nice biopsy needs to be taken.  No two biopsies are the same, so one could argue that there is a need to take several to fully capture the cellular diversity of a tumor.  That is not so easy when the tumor has latched onto the lung or pancreas, or is too small to see. 

I am a big fan of the power of personalized therapy, but leery of investing the space.  This whole blog entry basically only covered analysis of mutations that drive cancer in genes that are being expressed as quantified by sequencing.  What about epigenetic modifications, non-coding RNAs, or other regulatory elements that are overlooked when doing sequencing analysis?  In time, I believe that someone will figure out a more holistic way of analyzing tumors so that patient-specific therapy decisions can be made.  

University Startups Focused on Personalized Therapy

Foundation Medical: Developing a comprehensive solution that enables physicians to personalize cancer treatment for their patients. By harnessing emerging technologies to develop unparalleled tests that identify and interpret an ever-growing set of actionable genomic and other molecular alterations, Foundation is enabling personalized cancer medicine. Technology licensed from MIT.

Precision Therapeutics: Precision’s first commercial test, ChemoFx®, is a proprietary drug response marker which measures an individual’s malignant tumor response to a range of standard therapeutic alternatives under consideration by a physician with the goal of optimizing patient outcomes. Technology licensed from the University of Pittsburgh.

Therasis: The Company’s proprietary technology, the Therasis Filter™, represents a paradigm shift in the ability to discover therapeutic targets, their chemical inhibitors, and associated biomarkers. This platform integrates world-class expertise in high throughput screening, systems biology, cancer genetics and clinical research. Technology licensed from Columbia University.

Predictive Biosciences: A Multiple Biomarker Approach to Bladder Cancer Detection.  The test utilizes both protein biomarkers and molecular DNA analysis optimized to provide both sensitivity and specificity. Technology licensed from Children’s Hospital Boston.

Imuneering Corp.: Immuneering helps pharmaceutical companies develop immunology-based therapies for cancer, neurodegeneration, and autoimmunity. The company utilizes proprietary engineering techniques to quantitatively model the physical processes occurring at the cellular and molecular level in a given disease, and determine how particular medicines will impact those processes.  Technology licensed from MIT.

On-Q-Ity: On-Q-ity’s proprietary technologies provide more frequent and effective monitoring of cancer progression by proactively measuring tumor biology and intelligently adjusting therapy as necessary throughout a patient’s treatment lifecycle. By combining DNA repair biomarkers with the company’s ability to capture and analyze circulating tumor cells (CTCs), On-Q-Ity can provide a complete view of an individual patient’s pending treatment options and allows for more patient-friendly monitoring of the treatment’s progress. Technology licensed from Massachusetts General Hospital and MIT.