Magazine Article | July 7, 2010

What It Takes To Be A Biotech Entrepreneur

Source: Life Science Leader

By Cliff Mintz, - Contributing Editor

By Cliff Mintz Ph.D.

Unlike a majority of academicians, Dartmouth’s Tillman Gerngross’ approach to biological research has always been extremely focused and, most importantly, practical. This, along with a relentless drive to push the “scientific envelope” and an uncanny willingness to embrace change, has enabled him to transform himself from a tenured professor at an Ivy League college in New Hampshire’s White Mountains into a financially successful biotechnology entrepreneur.

Gerngross, who grew up in Austria and graduated from a science high school, started his undergraduate college career as a French major at the Sorbonne in Paris. But, he soon realized how much he missed science and subsequently transferred to the Technical University in Vienna, Austria, where he earned undergraduate and master’s degrees in chemical engineering. Never satisfied with the status quo, Gerngross decided to pursue a Ph.D. in molecular biology so he could combine his passion for engineering with his love of biology.

After earning his Ph.D. in 1991 and honing his molecular biology skills in Arnold Demain’s laboratory at MIT, Gerngross joined the faculty at Dartmouth’s Thayer School of Engineering in 1998. His early research focused on making plastics from corn rather than fossil fuels. While Gerngross’ work was successful and lauded by granting agencies and experts in this field, he concluded that the process wouldn’t be cost-effective, and also it produced unusually large amounts of greenhouse gasses.

At a crossroads in 2000, Gerngross decided to shift his focus from bioengineering plastics to developing a new platform to manufacture glycosylated therapeutic proteins in yeasts. Because he was neither a yeast geneticist nor a glycobiologist, he was unable to convince funding agencies that he had the “right stuff” to advance the technology. This forced Gerngross to consider alternate ways to fund the idea and develop the platform, which many experts at the time considered impossible.

With nothing to lose, Gerngross approached Charles Hutchinson, an experienced entrepreneur and former Dean of Engineering at Dartmouth who originally hired him. Together, they formed Glycofi in 2000, which was sold in 2006 to Merck for $400 million in cash, the third-highest price ever paid by a pharmaceutical company for a privately held biotechnology venture! Merck is currently using the Glycofi yeast glycosylation and manufacturing platform as the basis for its foray into the biosimilar protein space.

By 2007, Gerngross (who is still a professor of engineering at Dartmouth) got bored and began considering what he could do for his second act as a serial biotechnology entrepreneur. Relying on legal, regulatory, and business skills that he learned while helping to run Glycofi, Gerngross quickly determined that therapeutic monoclonal antibodies (MAbs) represented the next major advances in the biotechnology industry.

To that end, in 2007, he and Dane Wittrup — an MIT professor and one of the world’s leading experts on surface expression of antibody fragments on yeast — formed a New Hampshire-based biotechnology company called Adimab (Antibody Discovery, Maturation and Biomanufacturing). While details of the underlying principles and biological mechanisms of Adimab’s humanized MAb technology haven’t been widely publicized, no fewer than four pharmaceutical companies including Merck, Pfizer, Roche, and an undisclosed one, believe in its potential and have inked deals with the company since it launched the platform in June 2009.

Late last year, Adimab closed on a Series D round of funding for an estimated $15 million that was led by Google Ventures with support from return financial backers that included Polaris Ventures, SV Life Sciences, OrbiMed Advisors, and Borealis Ventures. Gerngross and Wittrup started Adimab in 2007 with $6.2 million in equity financing from Polaris Ventures and SV Life Sciences. Gerngross describes Adimab as an antibody engineering company that offers its R&D, optimization, and biomanufacturing services to the life sciences industry.

I had an opportunity to chat with Gerngross several weeks ago when he was in transit (in his silver Porsche) from his laboratory at Dartmouth to the Adimab facility. Our discussion focused on forming Adimab, the future of therapeutic MAbs as biotechnology products, and the entrepreneurial qualities an individual must possess to create and run a successful biopharmaceutical company.

Not surprisingly both companies were built on technology platforms rather than around specific therapeutic areas or diseases. My engineering background is probably responsible for this. However, while the technology platforms for both companies were built using yeast-based systems, Glycofi and Adimab are quite different from one another both scientifically and from a business model perspective.

Glycofi’s humanized yeast glycosylation platform was created to help companies optimize and improve biomanufacturing of biologically active recombinant proteins. However, in contrast, Adimab’s platform, which is based on a MAb yeast display system, was designed to aid and expedite the identification and optimization of prospective new antibody drug candidates.

While the biggest challenge we faced with the Glycofi platform was a technical one (most people thought it was impossible), the greatest challenge with Adimab’s technology was a legal one. That is, we had to determine whether or not we had the freedom to operate in the MAb discovery space before we could attempt to create a new platform. Once we determined that our intellectual property didn’t infringe on any existing patents, it took us about two years to develop and refine the Adimab MAb platform.

The fact that we have done several major deals within the last year and were able to deliver libraries of validated, fully humanized antibodies to our partners (usually within two to three months after we received the target antigen) suggests that we are probably on the right track. The business models of the two companies are also very different. In contrast with Glycofi, where the focus was on biomanufacturing with the possibility of establishing an internal product pipeline, Adimab is an antibody engineering enabling company that has no plan to develop its own products. Rather, we want to enter into fee-for-services, or possibly milestone-driven, royalty-bearing relationships with companies involved in MAb R&D activities.

After spending almost seven years raising $28 million to start and run Glycofi (and then selling it to Merck), I realized that therapeutically active proteins like EPO (Erythropoietin), the interferons, and others had limited therapeutic applications and finite commercial life spans.

Unlike these proteins, MAbs are highly specific molecules that possess an almost limitless amount of molecular diversity — making them ideal candidates for new drug discovery and development. Also, the huge prior commercial successes of MAb-based products like Remicade, Enbrel, Herceptin, Avastin, and others suggested to me that MAbs would likely be the next class of products championed by the biotechnology industry. Finally, one of the things that I believe is critical to the success of forming a new life sciences company is asking industry executives incisive and carefully crafted questions and carefully listening to what they have to say.

After exiting Glycofi in 2006, almost every pharmaceutical company executive that I listened to insisted that biologics, whether in oncology, infectious diseases, neuroscience, or ophthalmology, will constitute 10% to 30% of their future commercial pipelines. I quickly realized that MAbs, not the EPOs of the world, represented the next frontier in the biotechnology industry.

For the next year or so, we evaluated a number of existing antibody engineering platforms and found most of them were lacking. More importantly, we exhaustively reviewed the patent literature (literally reading thousands of patents) trying to determine whether or not we had the freedom to operate in an already crowded antibody engineering space.

During the course of our due diligence, we repeatedly came across the name Dane Wittrup, an MIT biologist who held a number of patents related to displaying antibody fragments on yeast cell surfaces. I called Dane, and we both quickly realized that we had independently reached the same conclusion: The life sciences industry sorely needed a better antibody discovery and optimization platform to reach the 10% to 30% (of the drug pipeline allocated for biologics) goal set by almost every pharmaceutical executive that we listened to.

Adimab was literally formed just a couple of months after the initial conversation between Dane and me. I think we made the right choice for the Adimab technology platform. Right now, there are more than 300 new MAb drug candidates in various stages of preclinical and clinical development, and the number of potential new targets is growing daily.

There are three critical elements that all life science entrepreneurs must consider before taking the plunge and attempting to start a new company. First, and perhaps foremost, make sure the idea or technology you are going to base the company on is actually going to help solve a problem that people care about. The “build it and they will come” strategy — which worked in the past — is no longer a viable business model to start and sustain a successful biotechnology company. Too often, entrepreneurial scientists become enamored with new ideas and discoveries and then desperately look for ways to commercialize or build businesses around them. Companies built using this model invariably fail. Solving scientific problems that don’t exist or are not medically relevant just doesn’t make sense to me. In my experience, the best way to build a successful company is to read the scientific literature; ask industry experts, analysts, and thought leaders what they think is missing in the industry; and then listen carefully — an approach I used to start both Glycofi and Adimab.

Second, no matter how novel or innovative an idea may be, unless you have freedom to operate you will never be able to successfully commercialize it. Before hiring scientists or buying office furniture and pipettes, would-be CEOs should divine a clear technical and legal strategy that is not encumbered by third-party patents or intellectual property rights. If there is an inkling that issued or pending patents may infringe on your freedom to operate, it will greatly impinge on your value proposition and interfere with the ability to raise money and do deals with potential corporate partners.

Finally, to really be successful, a company must create a product or technology that clearly outperforms or is better than any preexisting products on the market. As the old adage goes, “talk is cheap.” Also, to ensure success, a company must enunciate and clearly articulate product or technology metrics that are meaningful to potential customers. If customers don’t see any obvious, meaningful, or measurable performance benefits from a product or technology, then it is unlikely that it will achieve commercial success in today’s market. Interestingly, many of the business plans I have reviewed as a technology advisor to a New England-based venture firm fail to meet one or more of these critically important commercial requirements.

I think a successful entrepreneur must to be willing to take risks, analyze everything before acting, be a good problem solver, and never be willing to take no for an answer. For example, when I started Glycofi, nobody believed we could develop the platform — mainly because others with more impressive scientific credentials than mine had previously failed. In fact, several people told me I was crazy to even consider attempting to create the Glycofi platform. The main reason people doubted whether we could develop the platform was that they weren’t able to see or understand the mistakes made by our predecessors. However, we did, and that is why we were successful with the Glycofi platform. While it took us about six years to develop, refine, and validate the Glycofi platform, Adimab’s technology only took two years to develop and optimize (starting in 2007). We were able to expedite development of Adimab’s technology because we tirelessly researched the platform and related intellectual property portfolio before we launched the company.

On a practical level, entrepreneurs who want to succeed must establish clear and measurable milestones and metrics at the outset. Other keys to success include hiring very smart people, clearly articulating company values, and being certain about what you do and don’t know. In my experience managing both an academic and corporate laboratory, people who are treated respectfully and fairly and are recognized for their contributions can make the difference between success and failure of an enterprise. Also, it is vital to keep open lines of communication between management and employees; as long as people feel they are “in the loop,” things will be okay, even in difficult times.

If you are unable or unwilling to do all of these things, then I recommend you do something other than being an entrepreneur.

Let me say at the outset that companies that don’t have an MAb strategy currently in place for particular indications are likely to miss out on many future commercial opportunities. I recently heard that the sale of therapeutic MAbs is predicted to surpass $30 billion next year.

A therapeutic area that is ripe for innovation is oncology. This is because the notion that many cancers can be cured by developing drugs against a single target is ridiculous. Most emerging evidence suggests there are multiple, shared targets in many cancer pathways and MAbs represent a unique opportunity to treat them in a highly specific and safe way. I believe this will happen by using combinations of different MAbs or suites of MAb technology platforms (bi-specific antibodies, FAB [fragment antigen-binding] fragments, nanobodies, and MAb-drug conjugates). If this strategy is embraced, I think we may see major advances and improvements in cancer treatments in the near future.

While I believe MAbs represent an area for future innovation, I don’t want to rule out the importance of small molecule drugs. Big pharma has substantial expertise in small molecule drug discovery and development, and I believe innovations will continue in this space. To that end, it may be possible to meld MAb engineering with small molecule discovery to come up with novel new treatments. For example, it may be possible to conjugate pharmacologically active small molecule drugs to MAbs or FAB fragments to direct delivery to appropriate targets. This may help improve drug specificity and reduce potential side effects that have historically hampered the effectiveness of small molecule drugs.

Absolutely not. America will remain a powerhouse of innovation for quite some time. This is based on the significant resources that we pump into basic discovery-driven research, and it is still a country where many people prefer to live. Moreover, unlike most other places in the world, the United States is a country where the integration between innovation, academia, and venture money has been extremely successful.

However, the flip side of this is the dismantling in recent years of U.S. pharmaceutical and biotechnology R&D operations and outsourcing many of these functions to China, India, South America, and elsewhere. Because of this, we run the real risk of losing the ability to develop and manufacture our own drugs.

Eventually, the governments of the countries that are the beneficiaries of the outsourced work will realize they can develop their own drugs and cut American companies out of the equation entirely. But, I don’t think we have to worry about this scenario for quite some time, mainly because I believe the best and the brightest scientists will always find a way to remain in the United States.