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Funding the Development of Antibody Innovations: Part 4: Exit Strategies for Investors in Antibodies

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By Tom Burt (Partner, Sofinnova Partners) & Nick Hutchinson (BSG Lead, Mammalian Cell Culture, FUJIFILM Diosynth Biotechnologies)

Start-up antibody companies need substantial amounts of capital to fund the late-stage clinical development of lead candidates and grow their clinical pipelines. In our 3rd post, we described the role of Venture Capitalists (VCs) in funding the early-phase development of antibody therapeutics and introduced the concept of crossover investors (1). In this, our final post in the series, we look at the final stage of the financing cycle and describe how early investors may seek to exit with a return on their investment.

According to Tom Burt of Sofinnova Partners, the emergence of crossover investors in the past 5 years has accelerated the path to the public markets for many ‘early-stage’ biotech companies. “Crossover investors’ have flexible criteria around the clinical stage of the company’s lead program that has led to their participation in earlier private rounds such as Series A/ B funding. Furthermore, it has resulted to the counter-intuitive situation where, on average, preclinical companies can command higher pre-IPO valuations than their later-stage peers (2; Figure). In these cases, it is because the crossover candidates encompass highly differentiated or novel modalities, including antibody-drug conjugates,  bispecific and multi-specific antibodies,” he says.

According to Tom, a start-up can continue to raise capital from the private markets in later-stage financings such as Series C and onwards despite the absence of a crossover financing round. “It may choose to do this for the following reasons: 1) crossover investors don’t believe the company can command the minimally accepted IPO valuation required to go public in the US of over c.$300m; 2) existing investors may believe they can command a higher IPO valuation if they wait, pursue an additional financing round and reach a milestone event such as a clinical trial readout, or 3) existing investors feel there is a high chance the company may strike a value-driving partnership or be acquired in the near-term,” he says.

EpimAb’s three rounds of funding

EpimAb is one such company that progressed to Series C funding. It is a start-up antibody company that initially raised $25 million in a Series A round and put it to use to develop its proprietary Fabs-In-Tandem Immunoglobulin technology platform. The platform generates antibody-like bispecific molecules designed to be more potent, less immunogenic and easier to manufacture than those produced by other bispecific antibody technologies. It was able to build a pipeline of candidates and progress the first into clinical trials with the cash (3). In 2019, the company raised $74 million in Series B to build out the pipeline further, but also to progress its lead candidate, EMB-01 (targeting EGFR- and cMET) into Phase 2 clinical trials for oncology indications (4).

This year the company announced it had raised $120 million in Series C funding to further progress the clinical development of EMB-01, but also to fund the clinical trials for two other candidates. EMB-02 targets checkpoint proteins PD-1 and LAG-3, while EMB-06 is a T-cell-engaging bispecific that targets CD3 and BCMA. The company sees the three programs as pilot projects in three major areas of bispecific antibody development, namely, targeted oncology, dual checkpoint inhibition and T-cell engagement. It has licensed its technology to other companies which has provided income and helped validate the company ahead of a final round of private investment and subsequent IPO (5).

Tom says, “Generally, for investors in companies that pursue later private financings, an acquisition is always a preferable exit route over IPO. By this point, Series A investors may have been shareholders in the company for over five years and an acquisition represents a complete exit. If they attempt to exit through an IPO, they are restricted on selling down their shares immediately as these are locked up for at least 6 months following IPO, and even then can only be sold in a co-ordinated way that will not impact the share price.”

He continues “Assuming that EpimAb is not acquired before its current capital is exhausted, it may decide to pursue an IPO. The main attractions of an IPO are that: 1) public capital markets are much larger than private markets and can provide greater quantums of capital needed to pursue late-stage clinical development; and 2) it provides an exit route of sorts for earlier investors.“

Over the past few years NASDAQ has become the venue of choice for global biotech companies seeking to IPO. This is not to disparage European exchanges such as AiM or LSE, but generally the US market has much deeper pools of capital, comprising many more specialist public buyside investors who focus on public biotech stocks. Arguably, it makes little difference to the company where its shares are listed, since R&D operations can largely continue as before. Beyond this continuity though, the move to public status represents a step-change in how the company is owned, managed and regulated that is significantly different to its prior existence as a private company.

Conclusions

Innovations derived from the discovery and development of antibodies, especially therapeutic antibodies, come from scientists with creative minds, but large amounts of capital are needed to bring ideas to fruition. Many scientists will forge careers in companies that are not yet generating revenues, but are being funded by investors. Some scientists may opt to move out of research and work in the sector supplying inventors with the advice and funding required to progress their innovations. These opportunities include those in technology transfer, consultancies, analysts, and, of course, VCs themselves.

Ultimately, discoveries in antibody research and development will not benefit society, including patients suffering from serious diseases, unless scientists with passion take the bold step to commercialize their ideas by launching their own business and raising money to continue their development. The Antibody Society comprises a community with members that have done just that. Furthermore, our community has a huge amount of expertise that can help budding entrepreneurs with support ranging from mentoring, intellectual property advice through to recruiting management teams. We hope that this series of posts will kick-start introductions and discussions among Society members that will help establish the next generation of antibody companies.

(1)    Burt T. & Hutchinson N. (2021). Funding the Development of Antibody Innovations. Part 3: Crossover Investors. 
(2)    Cowen Healthcare (2021) Life Science Market Update March 2021.
(3)    GEN (2017) EpimAb Raises $25M in Series A to Progress Bispecific Antibodies into Phase 1. Genetic Engineering News. April 25, 2017.
(4)    Al Idrus, A. EpimAb bags $74M to push EGFR/cMET bispecific, build out pipeline. Fierce Biotech. June 5, 2019.
(5)    Al Idrus, A. (2021) EpimAb reels in $120M to propel 3 clinical-stage bispecifics, including dual checkpoint inhibitor. Fierce Biotech. March 22, 2021.

Learn about ImmunoPrecise Antibodies’ efforts to stay ahead of the virus on June 17!

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Join us on Thursday June 17, 8am PT/ 11am ET / 5pm CET for

 

 

Staying ahead of the virus: From a multispecies discovery strategy to highly efficacious, clinically suitable multi-antibody cocktails targeting SARS-CoV-2.

featuring:

Ilse Roodink, PhD, Scientific Director, ImmunoPrecise Antibodies Europe and
Debby Kruijsen, PhD, General Manager, ImmunoPrecise Antibodies Europe

Whereas vaccines significantly contribute to halting transmission of SARS-CoV-2, they are not universally effective. Therapeutic antibodies can fill this gap to efficiently combat SARS-CoV-2. Obviously, long-lasting efficacy of anti-viral approaches heavily depends on the ability to protect against virus variants. As a multi-targeting strategy reduces the risk of mutagenic escape, we have isolated a diversified pool of anti-spike protein antibodies by leveraging our expertise to generate antibody libraries across multiple discovery platforms in different species, to eventually formulate a sensible therapeutic cocktail. A broad range of in vitro characterizations was applied to gain early insight into the epitope landscape and functional characteristics as well as developability profiles. This comprehensive, high-throughput characterization of the obtained lead candidate pool guided the rational combination of high value antibodies into multi-membered cocktails that unlock synergistic effects, significantly boosting neutralization potency in vitro.

To accelerate further clinical development of our prioritized antibody cocktails, 2 individual components were subjected to in silico modeling-guided light molecular optimization to minimize liabilities, while in parallel, in vivo efficacy evaluation in a hamster challenge model validated efficient prevention and treatment of SARS-CoV-2 infection following administration of our prioritized antibody cocktails. Although we anticipate that a multi-targeting strategy is the best solution to reduce mutagenic risk escape, we continuously analyze binding of the antibodies of our lead pool for reactivity towards emerging SARS-CoV-2 variants empirically. To date, we screened our prioritized antibody cocktails towards spike protein of the S. African (B.1.351 lineage), Brazilian (P.1 lineage), UK (B.1.1.7 lineage), New York (B.1.526 lineage) and Californian (B.1.429 lineage) strains and confirmed retained binding. Our pandemic preparedness is further strengthened by the readily accessible, diverse pool of antibodies that we generated, which provides enormous possibilities for plug-and-play cocktails to address future SARS-CoV-2 variants.

Click here to register for this free event!

Funding the Development of Antibody Innovations: Part 3: Crossover Investors

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By Tom Burt (Partner, Sofinnova Partners) & Nick Hutchinson (BSG Lead, Mammalian Cell Culture, FUJIFILM Diosynth Biotechnologies)

The development of antibody therapeutics requires large amounts of cash to sustain nascent companies while they demonstrate the safety and efficacy of their products in clinical trials. It is estimated that it takes over a billion dollars to bring an antibody therapeutic to market. In our last post (1) we described how biotech firms use pre-seed and seed funding to get their ideas off the ground, but following these, they typically rely on VCs for their next rounds of finance. The first round of VC funding or Series A funding can run into tens of millions of dollars.

Ori Biotech, a company developing a manufacturing platform for cell and gene therapies, raised $30 million of additional funds from a group of VCs, having initially raised $10 million in seed funding. The team believe the Series A funding is sufficient to develop a minimum viable product, the earliest version of the technology that can be released to the first customers for them to provide feedback and allow subsequent improvement cycles.

In an interview published in March 2021, Ori Biotech CEO, Jason Foster, advised start-up companies seeking Series A investment to start by developing a comprehensive understanding of the market for the technology and how to pitch effectively to potential investors. Secondly, he recommended firms target the right investors, as different investors specialize in different sectors and investment stages. Finally, he emphasized that fundraising is a full-time job, so companies should ensure they have sufficient support and time allocated to this critical activity (2).

Series B Venture Capital funding

AgomAb, is a Belgium start-up that is working on regenerative pathway modulators in inflammatory, metabolic and fibrotic diseases. It has raised two rounds of VC funding. Scientists at the company have drawn upon research from the 1990s that suggested hepatocyte growth factor (HGF) and the HGF-MET pathway might have regenerative potential. Founded in 2017, the company raised $25 million in 2019 in a Series A funding round, which it used to perform research on a set of full and partial MET agonists.  These had been discovered through a partnership with argenx, which gave AgomAb access to the SIMPLE antibodyTM technology platform that raises antibodies with variable regions derived from the immune systems of ‘outbred’ llamas.

AgomAb’s Series A funding allowed it to progress its lead antibody candidate, AGMB-101, into Investigational New Drug-enabling toxicology studies, but the company needed additional funding to enter the clinic and so raised a further $74 million in Series B funding. Significantly, AgomAb considers that AGMB-101 could be efficacious in a range of disorders and represent a pipeline-in-a-product; however, it is also seeking to expand its pipeline beyond this lead candidate (3).

So, what’s the difference between Series A and Series B funding? Tom Burt of Sofinnova Partners points out, “The AgomAb example highlights that the amount of capital raised in Series B is larger, which in this case this is helpful because of the high costs of clinical development activities, and that the scope of what the business must achieve has evolved. In many instances, the two rounds of funding might seem similar and represent a continuum, with the Series B round being led by the same Series A investors. Redmile and Cormorant, two well-known US-based crossover funds, led this funding round.”

“Crossover investors can be considered as VCs that invest in promising companies that have the near-term potential to list their shares on a stock exchange in a financing round known as an Initial Public Offering [IPO]. They are a relatively new addition to the venture capital continuum. While a crossover investor will still need to be convinced of the potential in the company’s pipeline, they also have a focus on the public markets,” he says.

Cross-over investors can be more flexible around the clinical stage of development and can finance preclinical to Phase 3 clinical-stage companies if they believe that sufficient appetite exists amongst public market investors for the IPO candidate. Typically, the crossover investor[s] will seek to raise a significant amount of funds in a Series B [and sometimes Series A round] with the committed intention of supporting any IPO round alongside traditional institutional investors.

In our final post of this 4-part series, we will look at the final stages of the financing cycle, including how crossover investing has altered valuations of early-stage biotech companies. We’ll examine the case of EpiMab and discuss how investors in  a company like this might look to exit and generate a return on their investments.

We hope you’ll join us next week for the final post in this series, Exit Strategies for Investors in Antibodies.

(1)    Burt T. & Hutchinson N. (2021). Funding the Development of Antibody Innovations. Part 2: Business Angels and Venture Capitalists.

(2)    Finerva (2021). Ori Biotech – Fundraising & Growth. March 12, 2021.

(3)    Taylor, P. T. (2021) AgromAb raises $74M to develop regenerative pathway modulators. Fierce Biotech. March 10, 2021.

Funding the Development of Antibody Innovations, Part 2: Business Angels and Venture Capitalists

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By Tom Burt (Partner, Sofinnova Partners) & Nick Hutchinson (BSG Lead, Mammalian Cell Culture, FUJIFILM Diosynth Biotechnologies)

Antibody scientists with exciting technologies typically require substantial amounts of capital to develop their ideas and turn them into products that can be marketed. In the case of therapeutic antibodies, this can take many years and cost millions if not billions of dollars. In our first post on raising finance to support antibody innovations, we described why scientists are excited about raising finance at the current time (1). In this second post, we explore possible sources of funding for newly formed antibody companies at the very beginning of the funding cycle.

Venture capitalist (VCs) firms have traditionally been significant sources of funding for start-up biotech companies because they are undeterred by the risk that an individual company may not generate a return due to the challenges of product development in this sector. In order to generate a return on their investments, VCs back numerous start-ups in the hope that a minority will win big. However, for most scientists attempting to commercialize the fruits of their research labors, VCs are probably not the first port of call when attempting to raise funds. Biotech start-ups commonly rely on pre-seed funding in the form of government grants, bank loans, technology transfer funding from universities and even family or friends.

Business Angels are also sources of early finance. These are often individual, or syndicates of wealthy, private individuals that invest their own money in sectors that they know and understand. They typically make smaller investments than VC, usually up to $2 million, but small companies can often obtain the funds sooner. Angel investors are often interested in being involved in the project and are able to provide mentoring and access to useful networks in addition to the funding they bring.

Start-up biotechs use this seed funding to protect their intellectual property and progress their idea sufficiently such that VCs or other partners will become interested in the technology. Fortunately, in the past few years the cost of research infrastructure has gone down, allowing start-up companies to make greater progress with their ideas prior to reaching out to the VC community. Low rent lab-space is now more commonly available, suppliers provide more convenient ways to access equipment, and entrepreneurial scientists can outsource more routine studies and testing to contract research organizations.

Antiverse, a UK-based biotech start-up, recently announced it had raised £1.4 million [US$2m] to fund the development of its Artificial Intelligence-powered antibody discovery technology for accelerating antibody drug development by accurately predicting antibody-antigen binding. The company believes their platform will enable the development of antibody drugs for difficult targets associated with cancer, and heart and lung diseases. It will use the money to further develop the platform, to build a new laboratory in Cardiff, Wales, and to recruit specialist machine-learning engineers, laboratory scientists and structural biologists. The funding was raised from The Development Bank of Wales and a syndicate of Angel Investors.

While the levels of pre-seeding funding might not match that provided by VCs, some founding scientists see a benefit in taking maximum advantage of investments that allow them to retain greater control.

Tom Burt of Sofinnova Partners says, “To truly scale a start-up requires quantums of growth capital that can really only feasibly be provided by VCs. Beyond the necessary capital, VCs are also helpful to emerging companies in more qualitative ways, given their accumulated experience of financing other similar enterprises. VCs can contribute by attracting talent to Board and Management-level positions who increase the probability of success through sage advice on all areas of development.”

“In addition, the VC’s network can be invaluable in forging connections with potential pharma and biotech partners as well as investors and bankers for assistance with further financings. While the founder can expect some loss of control, VCs are typically minority investors looking to work collegially with other stakeholders to improve outcomes,” he continues.

In our next post, we’ll look at the first two rounds of financing that VCs provide to antibody start-up companies and we’ll introduce the concept of the cross-over fund, a relatively new concept by which VCs invest in promising companies that have the near-term potential to list their shares on a stock exchange.

Look for the third post in the series next week.

(1)    Burt T. & Hutchinson N. Funding the Development of Antibody Innovations. Part 1: Entrepreneurial Antibody Scientists.

 

Funding the Development of Antibody Innovations, Part 1: Entrepreneurial Antibody Scientists

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By Tom Burt (Partner, Sofinnova Partners) & Nick Hutchinson (BSG Lead, Mammalian Cell Culture, FUJIFILM Diosynth Biotechnologies)

The Antibody Society has partnered with Tom Burt, Partner at Sofinnova Partners, a leading European venture capital firm in life sciences, specializing in healthcare and sustainability to produce a 4-part series of articles explaining the basics of financing a start-up biotech company. Our aim is to support and inspire researchers working in labs with a passion for their science and the drive to push their ideas as far as they will go. In Part 1, we discuss the characteristics of the entrepreneurial antibody scientist.

As of 2021, the pipeline of therapeutic antibodies is strong and the biopharmaceutical industry is enjoying unprecedented success in bringing new products to market (1). The launch of new antibody drugs can have a tremendous impact on the lives of patients suffering from diseases for which there are either no existing treatments or current treatments are lacking. Technological developments, such as Fc engineering, bi- and multi-specific antibody formats and antibody-drug conjugates will lead to improved antibody treatments in the future. Not all advances in antibody science are new drugs, however, and many are leading to new enabling research tools and novel diagnostics. The amount of innovation in the sector, driven by creative scientists working in labs around the world, is startling.

Scientists developing antibody therapeutics must progress the idea through discovery and development phases, including preclinical and clinical testing, with various regulatory hurdles that must be navigated before commercial launch can take place. Large pharma and biotech companies are well versed in managing the complexity and costs of antibody development and commercialization, but there is always room in the market for smaller, more agile players who can compete on an equal footing with these giants.

Entrepreneurial scientists are eschewing the traditional career pathways of staying in academia or joining large pharma companies (2) in favor of establishing their own companies. They are raising money to finance discovery and development, while managing their biotech businesses in order to turn their ideas into a reality. By adopting this approach, founders can retain much greater control of their inventions, can align the development of their technology with their own values, and furthermore, stand to benefit financially if their candidate is shown to be successful.

“It’s an excellent time to be considering raising finance for biotech start-ups. Investors have lots of capital that is waiting to be deployed and society is re-considering how it values medtech innovations in light of the pandemic,” explained Tom.

Investors’ attitudes to these different types of start-up will vary depending on the size of the investment that the company will need, the level of risk associated with the investment, the size of the likely return and the time it will take to see a return. Raising finance for different types of antibody start-up companies will depend on the business model and the nature of the innovation being commercialized. A technology for antibody discovery embedded in a piece of equipment will differ from an amino acid sequence that can be licensed, which will differ from an antibody therapeutic requiring ten years and hundreds of millions if not billions of dollars before any revenues are generated.

“Investors in therapeutics are very wary of “one-trick ponies” with only a single drug candidate,” says Tom. “We look for companies with innovative technologies that might be applied to a number of candidates for multiple disease targets. This reduces risks by ensuring the start-up can have multiple shots on goal.”

One such example is the start-up antibody company Gigagen, which was recently acquired by Grifols, a specialist in plasma-derived medicine. Gigagen’s Magnify Platform enables the identification of rare novel targets within the tumor microenvironment, which in turn can be fed into its Surge Platform, allowing the production of recombinant polyclonal antibodies derived from mammalian repertoires. The company has an oncology pipeline containing monoclonal and bispecific antibodies and a recombinant polyclonal immunoglobulin pipeline, which includes treatments for COVID-19 and other infectious diseases.

Like other start-up biotechs, Gigagen had licensed these platforms technologies to other antibody discovery and development companies in order to generate early revenues, before using them as a springboard to launch their own candidate development programmes.

In the next three posts in this series, we’ll explain the start-up financing cycle and how it relates to antibody companies, especially those developing antibody products for therapeutic use. We’ll use industry examples to describe different types of investors in antibody innovations, what they look for in a company or idea, and their expectations as to how the funding is utilized. We will also explain how the funding cycle is changing, which will help inventors fund the clinical journey more easily.

Watch for our second post next week!

1.       Kaplon H & Reichert JM (2021) Antibodies to watch in 2021. mAbs.

2.       Friedman J. How Biotech Startup Funding Will Changing in the Next 10 Years.