Anatomy Of A Biopharma VC Deal

By Matthew Pillar, Editor, Bioprocess Online

This article originally appeared in Life Science Leader magazine

From my perch in the Business of Biotech podcast studio, I’ve interviewed quite a few biopharma leaders whose careers were inspired by very personal experiences with disease.

Ray Therapeutics CEO Paul Bresge is one such leader. Until 2010, leading a biotech wasn’t on his radar. He’d built a long and successful career as a leader in unrelated industries - industrial tools and a courier service, for example. Then, his 15-year-old daughter was diagnosed with retinitis pigmentosa (RP), a rare genetic disease that causes degradation of retinal cells over time. She was going blind. Ophthalmologists told him there was nothing that could be done to save his daughter’s vision.

That’s when Bresge threw himself, and his money, behind the work of Drs. Henry Klassen and Jing Yang, helping to form jCyte, a cell therapy company with a late-stage candidate for RP. He served as the company’s advisory board chair for five years before becoming its CEO in 2016. In July 2021, on the heels of jCyte’s licensing and commercialization deal with Santen Pharmaceutical, Bresge made another move in his effort to explore and advance the therapeutic options for RP. He cofounded Ray Therapeutics, a preclinical company pursuing RP with a promising new genotype-agnostic approach called optogenetics that shows promise of restoring vision in RP patients, not just halting the degradation of retinal cells.

FUNDING FOLLOWS SCIENCE, NOT MISSION STATEMENTS

Obviously, a first priority in Bresge’s new role as CEO of a biopharma startup was raising money. Less obvious is that mission-driven leaders like Bresge, pushed forward by the personal experiences they’ve had with the diseases they choose to attack, are subject to a bit more scrutiny from the VC world than scientific founders typically are. That’s a reality Dmitri “Dima” Kuzmin, Ph.D., managing partner at 4BIO Capital, readily admits on episode 119 of the Business of Biotech podcast.

“To me, a CEO with a personal story is always a risk, 100 percent,” says Kuzmin. “We are not a charity; we are a venture capital firm. That means we have to make a return on investment for partners, and that’s what moves these therapies forward.” As such, he says vetting the person at the helm is as important as vetting the startup’s scientific data. “We have to be certain he will make the right business decisions to ensure that we get there.”

Kuzmin has seen the inspiration-driven stories before. Many of them end poorly for all parties. “There are other companies in the biopharma space that have been built by the parents of children carrying the disease. Unfortunately, as we know, not all of them have been successful.”

Still, heading into 2021, 4BIO led a $6 million seed round to get Ray Therapeutics on its feet. Kuzmin says his firm pondered two key questions in the due diligence process leading up to that decision.

The first, says Kuzmin, centers on generational improvement in the specific therapeutic modality. “How far has the field moved on from the first generation, and what can we count on?” he asks.

The second consideration 4BIO dwells on is the company’s management team, and that starts with the CEO. “We spend a lot of time making sure the leader of the company and the people they’re putting around them are the best people to take the science forward,” says Kuzmin.

On the former consideration, Kuzmin leaned into his own academic background, and his experience in the retinal disease space. He earned his Ph.D. in neurochemistry, his MSc in experimental therapeutics, did his doctoral fellowship at Max Planck and his postdoc at UCL, and holds an experimental therapeutics assistant professorship at Yale, among other accolades. He’s adept at discerning winning science, and he says the current generation of optogenetics is capable of solving all the major limitations seen in the first.

On the second, his analysis of Bresge’s tenure at jCyte and its successful journey to Phase 3 and ensuing deal with Santen played into the decision. “Paul’s exposure to the patient organizations, his personal story, and the people he attracts to the effort all supported our decision,” says Kuzmin.

VC DEALS ARE A TWO-WAY STREET

Of course, there’s a lot more due diligence on the VC’s part that goes into funding a new company — considerations like the feasibility of clinical trials, the work — or lack thereof — that’s gone into the protection of intellectual property, and the vision for an endgame, whether that’s acquisition, commercialization, or some creative path to one or the other. Kuzmin thoroughly covers those bases in a refreshingly transparent way on episode 119. Equally important, but far less often discussed, is the new venture’s perspective on what makes a good VC partner.

In this case, 4BIO checked several early boxes for Ray Therapeutics. For starters, the firm is explicitly focused on advanced therapy medicinal products. It doesn’t fund small molecules. It doesn’t fund antibodies. It only funds novel advanced therapeutic endeavors, most of them cell and gene therapies. Bresge says 4BIO’s experience in the advanced retinal therapeutics space, and specifically, Kuzmin’s depth of optogenetics knowledge, solidified the match. “It was very important to me upon leaving jCyte that I continue my mission for patients with blinding diseases,” says Bresge. “I did my own due diligence prior to the launch of Ray Therapeutics, and the questions 4BIO asked of the science and the market mirrored those I asked at the time.” For Bresge, that was the first indication that 4BIO had more than financing to offer. “Once I had an introduction to Dima, I knew 4BIO was absolutely the right investor for us,” he says. “The chemistry and alignment were there, and in terms of board composition, Dima’s unique expertise in optogenetics made his choice a no-brainer.”

As for Bresge’s daughter, her name is Tamar. She’s an artist, writer, and MFA candidate at the School of the Museum of Fine Arts at Tufts University, where she’ll be teaching next year. She recently gave an incredibly introspective and beautiful TED talk. Look it up on YouTube. Her vision is slowly waning, or “precarious,” as she puts it in her talk. But her dad, supported by Kuzmin and a dedicated team at Ray Therapeutics, is working on that.

Tune in to episode 119 of the Business of Biotech podcast for a much deeper look into the relationship between a brand-new biopharma and its primary investor.