The vision of Life Science Leader is to help facilitate connections and foster collaborations in pharma and med device development to get more life-saving and life-improving therapies to market in an efficient manner. Connect, Collaborate, Contribute
Issue link: https://lifescienceleadermag.epubxp.com/i/233442
Exclusive Life Science Feature I interviewed the CEOs of micro-innovators Sarepta Therapeutics, Melinta Therapeutics (formerly Rib-X), and Advanced Cell Technology (ACT). Sarepta has been in the news often for its Duchenne muscular dystrophy (DMD) drug, mainly concerning whether it will beat the competition, a GSK drug, to market. Melinta has striven bravely into the almost abandoned field of antibiotics with a product based on Nobel-winning research into ribosomes. ACT has pioneered a unique line of human embryonic stem cells for treating AMD and other conditions. From the three companies' collective and individual experiences, a set of tenets emerges, which I have framed as imperative responses to the conditions such companies typically encounter. In Part One, we looked at how the companies began with groundbreaking science, built a business foundation for applying the science, and learned to aim their unique technologies at defined therapeutic targets. In Part Two, we see how they funded, planned, and are executing their clinical trials. MANY WAYS TO PAY THE PIPER "Funding the company was probably our biggest struggle," says Gary Rabin, ACT's president and CEO. Of course, many if not all micro-innovators would say the same, as do Sarepta and Melinta. But in ACT's case, some added twists developed that illustrate the lengths to which some companies will go to pay the high costs of drug development. It may also suggest another way small companies that discover and develop their own products stand out from the crowd in this industry — none of our three companies has followed the stereotypical venture-capital to IPO path. ACT was not VC-financed; it went public through a reverse merger into a shell company, giving it access to capital market financing from the beginning — a tough accomplishment in its founding year 2005. At that point, however, it was still preclinical, with not even a gleam of a therapeutic product in its eye. "Companies at that stage, without big venture capital behind them, struggle to raise capital, and this company did some really bad financing in that period, so it worked hand to mouth," Rabin says. "The coffee maker and the copy machine were actually repossessed at one point. We've come a long way since then." ACT had the additional challenge of working in the controversial area of human embryonic stem cells (hESC). To this day, it is still pushing to persuade the NIH that its cell line meets the agency's hESC definition and qualifies for NIH funding. Now a low-priced favorite on the bulletin board exchange, ACT contemplates moving up. "Being a penny stock on the bulletin board has offered some advantages to us in the past, but the volatility that excites penny stock investors is not always a desirable feature, particularly as a company matures," says Rabin. "We have been able to build an incredibly loyal base of investors – with more than 45,000 retail shareholders – and reached a market cap of almost $200 million. Now we want to take the next step, and we are actively working toward uplisting to NASDAQ or the like. This will give us access to an additional pool of institutional investors." Sarepta also went public for its development funding, 15 years ago. But lately, it has felt the hot glow of stockholders' expectations over its shoulder. CEO Chris Garabedian sees the positive side: "It was critical that I could tap into the public market more easily than trolling for dollars in the VC community, which can be challenging without a track record of the technology's success." He points to the exceptional cases of early IPOism, such as Human Genome Sciences, Dendreon, and Alexion. But Sarepta also went through an identity change before it began to make headway. With the move to focus on DMD came a corporate transformation, symbolized by rechristening the company from its former name, AVI Biopharma. "Every paragon of success today had been written off at one point because it had the wrong application," notes Garabedian. "Gilead is a perfect example; it moved to in-licensing nucleotide products and now is the largest market cap company in the industry, recently surpassing Amgen. So you work with what you have. We renamed the company. We changed the staff and executive team, and people describe us not as a start-up but a start-over." Similarly, Melinta's name change, just as I finished this article, reflects a "strategic realignment," according to the company. Under its new management, Melinta will shift into full commercialization mode, pushing toward and preparing for product launch. Sarepta, like Ariad and Garabedian's former company Celgene, has also skipped the partnership avenue. A year ago, Garabedian says, he would not have thought the company could make it to market without a major pharma partner. Now he no longer agrees with that premise. "There are many examples of sophisticated small companies successfully commercializing new therapies on their own, and that's what we aim to do here at Sarepta." Garabedian agrees that structured deals with terms that favor pharma partners and stretch out the timeline with milestone payments make partnering less attractive. "We haven't taken it completely off the table, but it has to be the right circumstances to make sense for staying on the drug development path, doing the right thing by our shareholders, and ultimately getting our drugs to patients as soon as possible once we prove they're safe and effective. And large pharma has different priorities, without necessarily having the same sense of urgency we do." Stock volatility has been an issue for Sarepta, at least as a topic of speculation among trade press and analysts. But the company's real test will only come when the FDA makes a key decision about the Phase 2b eteplirsen data — whether to approve eteplirsen early based on dystrophin levels as a surrogate marker of effectiveness or on the stabilization of function observed in clinical studies to date. Melinta went the opposite direction with its funding — remaining private to this day. Venture capital and dedicated private investors have sustained the company for years and, according to CEO Mary Szela, will do so into the indefinite future. "The company is wellfunded at this point to pursue the development and commercialization of delafloxacin and the additional anti-infective compounds in our pipeline. Our investors are focused on the long term and committed to realizing the potential of our pipeline," she says. Melinta recently ended a partnership with Sanofi and reclaimed January 2014 LifeScienceLeader.com 31