Part 1: Ribonucleases (RNase) what are they and why are they relevant to cancer?

Part 2: Ribonucleases (RNase) clinical applications for cancer therapy

I wondered whether quarterly performance is a good predictor of annual performance. In other words, is venture capital (VC) investment a slow and steady process throughout the year or are there historically breakout quarters? The following graphs are based on the NVCA/PwC data. I looked at VC as a whole as well as a breakout for biotech investments. The first graph in each category is all historical data. The next two graphs (side by side) are 2002 to Q1 2012 vs. 2007 to Q1 2012. For the fiver year overview, I included the annual totals on the graph for reference. At first glance, the funds raised vs. invested issue suggests we’ll see a decrease in VC invested in 2012 but the magnitude of the change seems unlikely to be predicted by the first quarter numbers.

After looking at the national data, I went back to the Wisconsin data since business here have issues with access to VC. When the first quarter numbers were released, two VC investments (Alice.com and Murfie.com) for $5 million were noted. Using the same approach as above, I compiled the Wisconsin data. I’ve suggested previously there are perils in looking at annual VC data when the numbers are small and I think the WI quarterly data emphasizes that point. Since the start of 2002, VC investment in Wisconsin in any given quarter is almost equally likely to be <$5M as over $20M (13 quarters <$5M, 11 quarters >$20M).

I actually saw Michael Greeley’s blog post after I compiled the data above and I wanted to also adress one additional point he made:

Lastly, and this one always amuses me, 11 states in the country had zero – nada – VC deals, while 19 had less than 3 deals in 1Q12. Are 60% of the states not even in the innovation economy?!?

Shortly after, I saw that Bijan Salehizadeh, managing partner at NaviMed Capital, tweeted:

Via @greels1 – 11 states had zero VC deals in Q1. 19 had less than 3! 60% of states not in innovation economy.

While the comment may be true for some states, I don’t believe Wisconsin has been left out of the innovation economy. Rather, this perception highlights that a better job needs to be done to tell the stories of how innovation gets done in an environment where venture capital is not – and has never been – a viable option for most companies. 

While we communicate with our shareholders on a regular basis, most of the contact is by (e)mail. Since the annual meeting is in person, we have more opportunity for questions and discussions. Our goal at the meeting is to review operations and financial progress over the previous year and provide our plans for the coming year. Because we get immediate feedback, I have the opportunity to learn more from these meetings than when we provide written reports. Here are a couple of things that stuck with me after our meeting.

• Communicate beyond the headlines. Personalized medicine and targeted therapy get quite a bit of attention in the popular press, but our drug is a broadly effective agent (not dependent on a specific genetic mutation). We wanted to provide market data supporting the need for drugs like ours. While we shared our internal market data as well, we discussed examples from the American Society of Clinical Oncology 2011 Report on Progress Against Cancer where such drugs are making a difference for patients. In the section on hard to treat cancers, two of the four advances highlighted are based on broadly acting drugs. In ovarian cancer, Avastin is being used in combination with chemotherapy to delay progression of ovarian cancer in women. For children with neuroblastomas, a new chemotherapy combination has shown improved survival. While we believe our product fills a gap, the various market research we provided supports a true need. 
• Sometimes the pot needs stirring. Historically, we’ve had good representation on our board of people with experience in building businesses and private equity investments. Based on our goals over the next year, we’ve been interested in adding a viewpoint with experience working with institutional investors. After a search, our shareholders elected a new board member who has already added valuable new perspective just as we head into the company’s next stage.
• Don’t forget the takeaway. We spent a lot of time discussing data from our Phase I trial and how that fits into the greater picture of cancer therapy. At the end of the meeting, one of our shareholders asked a great question about what our message was. With my focus on providing information, I had failed to provide a straightforward takeaway for shareholders: We’ve reached key milestones in our Phase I trial, generating excitement internally and externally about the next steps for our new broadly active drug.

 Picture by Milo Winter

Inspired by Aesop’s fable of the Crow and the Pitcher. 

For the scientists wondering about the truth behind the fable, here’s a study of rooks, a type of crow, and their response to a similar problem.

Context for the Update

At Quintessence, we are in the midst of an oncology Phase I clinical trial, which primarily involves increasing the dose of our drug from low levels to higher levels while monitoring and managing side effects. As a result, potential partners, shareholders and colleagues often ask what dose level we’re currently using to treat patients. The answer is straightforward but, particularly as the trial has progressed, not very fulfilling for me to give. The reason is that dose is just the first step in answering the question: Can you give enough drug to patients to see benefit?

There are two sets of information that take the next steps in addressing this question in a first in human trial.

• What are the pharmacokinetics (PK, often referred to as exposure) of the drug in this trial?
• Are drug levels in humans similar to the levels needed to see efficacy/benefit in model systems?

I had to pull our data, but below is a straightforward look at the significance of understanding exposure.

On Dose and Exposure

Dose is a straightforward way to refer to how much drug is given to a patient. However, the dose is not the only factor that contributes to how much drug a patient is actually exposed to.  The same dose of drug may result in different exposure levels in the same person on different days and/or in different patients. There are a variety of common examples and two are provided.

For many calcium channel blockers (used to treat high blood pressure), the addition of grapefruit juice to a patient’s diet can increase the amount of the drug in the patient’s bloodstream. Grapefruit juice can have the opposite effect for other drugs, such as the cancer drug etoposide. In this case, a cancer patient might take a dose of drug shown to have benefit but the amount of drug in their body may be too low.

Some differences between patients can be traced to their genes. Some individuals have subtle changes in their genetic codes that alter the way their body breaks down drugs. The most common of these differences is in a family of proteins called the cytochrome P450 enzymes (CYP450). The dose of certain drugs, such as the cancer drug tamoxifen, may be modified based on genetic testing to determine how a patient metabolizes (breaks down) such drugs.

For these reasons, understanding the relationship between a dose of a drug and the exposure of the patient to that drug is a key part of a successful drug development program.

Success = Mo’ Money? The spark for these thoughts was a conversation with fellow small business owners where someone asked who was the more successful of between myself and another person. The other person responded immediately that they were more successful. Internally, I thought they very well could be right. My friend has built a growing, profitable business from scratch with no external financing that now employs 100 people. These people are highly skilled employees who earn a good living with solid benefits.

Before I could say anything, someone asked why they believed they were more successful. Their answer was based solely on cash and didn’t account for business metrics, such as growth or profitability.

In drug development, achieving long term milestones, such as going public or getting acquired, generally marks financial success. The success of the drug being developed isn’t demonstrated until the drug is on the market after FDA approval, which takes many years and many millions of dollars. I’ve said at times that the drug development business model precludes traditional ideas like profitability. But seriously, most drug development companies, such as Quintessence, spend their majority of their existence as failures by traditional business metrics.

Success = FDA Approval? Another reason success is on my mind is that the company is approaching a pivotal time. We’ll finish our Phase I trial this year and will need to partner and/or fundraise. This transition has led to a question, generally from folks outside biotech, about how long it will take until we get FDA approval. That milestone is still at least years and many millions of dollars away and chances are very good that we won’t be the team that gets the drug there. My role here isn’t to take the drug to FDA approval but to generate sufficient support for the drug that another company, another shepherd, will.

Success = IPO? – Daphne Zohar (@daphnezohar) from PureTech Ventures recently tweeted about a 2008 Harvard Business school paper, Performance Persistence in Entrepreneurship.

The paper talks about the factors involved in the success of entrepreneurs. While we haven’t raised institutional money, the topic is still of interest so I wanted to read the paper. Almost immediately I got to a sticking point, which I have underlined in the excerpt below.

“In this paper, we address two basic questions: Is there performance persistence in entrepreneurship?  And, if so, why?  Our answer to the first question is yes: all else equal, a venture-capital-backed entrepreneur who succeeds in a venture (by our definition, starts a company that goes public) has a 30% chance of succeeding in his next venture. By contrast, first-time entrepreneurs have only an 18% chance of succeeding and entrepreneurs who previously failed have a 20% chance of succeeding.”

The definition stuck out because my sense has been (at least in biotech) that going public happens for a minority of companies and that for many of those an initial public offering is a way to access a wider pool of capital, not necessarily an exit for existing shareholders.

I tweeted that I was stuck on success as IPO and got some quick responses, including

• @drhamptn (Dave Hampton) “A disablingly narrow outcome measure: revenue is key”
• @rofrechette (Roger Frochette) “kinda limits the pool of potential study participants”
• @dbsable (David Sable) “agreed-way 2 narrow an outcome measure”

So how narrow of a sample are we talking about? The National Venture Capital Association (NVCA) has compiled the data on the exits of venture-backed companies and you can see that even in years with decent market conditions, merger and acquisition is a significantly more likely outcome than IPO.

**Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile. 

Looking at the question of an IPO as a fundraising opportunity or an exit for shareholders, Bruce Booth from Atlas Ventures has blogged about the issue (underline added):

IPOs aren’t liquidity events in Biotech, they’re just financings and insiders typically do at least a third.  This insider participation isn’t the case some of the higher flying Tech IPOs, but venture investors still often hold their shares for a long time after the offering.  We held shares of Isilon for years after the IPO until its exit last fall via acquisition by EMC.  I don’t have the data to be quantitative on this, but the IRRs differences in the past decade would suggest time-to-liquidity can’t be much better for Tech.

After I got past the definition of success, I noticed that the study uses the term ‘entrepreneur’ to refer to the founders of the company. As I mentioned in the section above, the team that starts a company isn’t necessarily the same as the team that would take it “all the way” (a drug to FDA approval or in this case to IPO). In looking for some data on this point, I came across a small study from the Angel Resource Institute on 50 VC backed companies. At the time of IPO, a founder was CEO of only 49% of the VC-backed firms in the study (page 4).

Success = …. – Here is my working definition:

If we

• develop a cancer drug that is enticing enough to be advanced to FDA approval
• and convert that implicit value into a solid return for shareholders

then we will have succeeded for all of our stakeholders.

And that is what I’m off to work on now because I assure you it isn’t anywhere near as straightforward as it sounds.

*Addendum: A friend and mentor who has built lasting profitable businesses and provided return for shareholders gently reminded me that this post is a look at success through a very narrow lens. The reminder? A link to Bessie Stanley’s answer to the question What is Success. (A similar version is often credited to Emerson.)

He has achieved success who has lived well, laughed often, and loved much;
Who has enjoyed the trust of pure women, the respect of intelligent men and the love of little children;
Who has filled his niche and accomplished his task;
Who has never lacked appreciation of Earth’s beauty or failed to express it;
Who has left the world better than he found it, Whether an improved poppy, a perfect poem, or a rescued soul;
Who has always looked for the best in others and given them the best he had;
Whose life was an inspiration;
Whose memory a benediction.

There has been a lot of noise over the last few days as PricewaterhouseCoopers and the National Venture Capital Association released the venture capital (VC) investment numbers for 2011. Overall, the numbers are positive: $28.4 billion was invested across 3,673 deals, which is an increase of 22 percent in dollars and a 4 percent rise in deals over 2010. If you were reading this news in Wisconsin, you were much more likely to read about a decrease in VC dollars flowing to the state, from $112 in 2010 to $72M last year (here and here).

My first thought wasn’t that the sky is falling in Wisconsin – it was that the VC investment in Wisconsin in 2010 was probably an outlier. The 2010 story was stuck in my mind because I wrote a post about the need to distinguish between private equity and VC.

Two of the 2010 investments account for $87M of the $112M and involved a lot of individual and corporate partner dollars. Backing out these two investments leaves $25M of VC invested in WI in 2010. Looking back to 2009, only $23.9M of VC flowed to the state, a near all time low. Based on the graph below, the $72M in VC in 2011 is probably a victory – putting Wisconsin back to pre-2007 territory.

(The VC investment data comes from Thomson Reuters and is provided on the PWC website going back to 1995. The graphs here are all based on those spreadsheets.)

Now you might wonder (as I did), that last statement is true – is the uptick from $23.9M in 2009 to $72M in 2011 representative of the national VC investment environment?  A large caution in looking at the next graph is that there is a massive difference in scale between the primary y axis (VC investments) and secondary y axis (Wisconsin VC investments). With that out of the way, the national trend appears to generally be mirrored in the Wisconsin experience.

Since my day job is in biotechnology, I felt compelled to break out the data for that sector. (Biotechnology and medical devices are separate categories.) Again, note the difference in scales of the two y axes. Other than potentially being on an upswing after the low of 2009, I don’t think the numbers lend themselves to much further analysis.

Wisconsin doesn’t get a significant share of VC dollars and that is often the source of angst for folks wanting to build and scale businesses here. While we need to continue to pursue a variety of approaches to gain greater access to capital to grow our businesses in Wisconsin, we shouldn’t sell the state short on what appears to be a victory, although somewhat bittersweet.

Why would a biotech COO/President tweet so much at an investment bank healthcare conference?

I would argue it wasn’t to fulfill my main JPM goal: business development. A struggle with key conferences is timing your data to have fresh additions to your story to demonstrate clear progress. My target for JPM was exposure data from our ongoing Phase I oncology trial, but by early December it was clear that the data would be delayed. Pharma companies and investors set up days of back-to-back 30 minute to hour long meetings. Rather than push for these slots, most of my scheduled meetings were quick, informal contacts or more leisurely catch up meetings at the end of the day. This year I ended up with almost as many chance meetings in the halls and cocktail events, perhaps because I was open to them rather than rushing along with my head down. Overall, folks know we’re still advancing our drug and that I’ll have more of the package ready soon.

A secondary goal for me at JPM is a reality check on where our drug is in relationship to other drugs in development. Although there is a lot of talk about regional biotech hubs, our drug (and our company) are (and should be) benchmarked against the companies presenting at conferences like this one. As we approach the end of our Phase I trial, our product development plan, sometimes referred to as a target product profile, is increasingly top of mind. Seeing the clinical trial designs, plans for biomarkers (predicting responders), etc. keeps us focused on what we need to accomplish. I attended and took notes at a variety of cancer company presentations, including Exelexis, Aveo, Ariad, Agios, ImmuoGen and Seattle Genetics. As I often do when reading interesting news, I tweeted about what I was hearing – what was interesting or relevant to me.

One of the main benefits was discussing (online and IRL) the information with folks who have been in the industry longer than I have or have different perspectives. While not news themselves, some of the interesting topics I walked away thinking about are:

• Investors and partners have different pressure points.
  • For example, a public company that pushes back a deadline suffers more from the market than from potential pharmaceutical partners.
• Setting expectations is critical.
  • The CEO at Dendreon told the crowd in the breakout session that they would no longer give monthly sales because they are not predictive of quarterly results.
  • When asked about early stage drug candidates, Seattle Genetics’ CEO said they weren’t discussing them because the results of their experiments over the next year will tell them which ones will be most exciting.
• There are significant differences in covering public and private companies.
  • Forced transparency of public companies can make it easier to keep track of progress, financial and otherwise.
• Understanding the relationship of dose and efficacy is important throughout all stages of development.
  • In cancer, drugs are often given at or near their Maximum Tolerated Dose to have the greatest chance of efficacy. However, dose reductions due to side effects can make it difficult to see the drug’s benefit.
  • Exelexis is developing their cMet inhibitor cabozantinib in multiple cancer indications and have found efficacy at doses much lower than those used in some of their late phase trials.
• There are challenges to moving from one stage of drug development to another due to the need for different skill sets.
  • The transition from clinical trials to commercial (selling products) was the most prevalent area of difficulty for companies at JPM.

Why would a biotech COO/President tweet so much at an investment bank healthcare conference? Because it resulted in interesting discussions with people who are just as fascinated with cancer drug development as I am. And I learned from each one.

Drug development goes through a process that (focusing on FDA approval) looks like this:

A couple of notes on this oversimplified drug approval process graphic:

• Key milestones are often catalysts for equity investment, acquisition, etc. and as such are the topic of much discussion at JPM.
• Another key milestone is “proof of concept”, whose position can be the topic of much debate but lies somewhere between the end of Phase I and Phase III. (Perhaps POC will be a topic of a future post.)

Why do so many drug development companies gravitate to San Francisco in early January?

Biotech Companies Presenting at JPM

These companies are generally public biotechnology companies that are selected to present at JPM and therefore get good exposure to investors and analysts. You can read much more about some of the companies selected to present at JPM in this article by Adam Feuerstein at The Street. JP Morgan has a site to find additional information about the presenting companies.  Some of these biotech companies are also want to partner with pharmaceutical companies, who set up shop in hotels near the Westin St. Francis (where JPM is held)

Biotech Companies Not Presenting at JPM

In addition to the pharmaceutical companies, venture capitalists, even early stage investors, come to San Francisco for meetings in or around JPM. Biotech companies not presenting at JPM can use a single trip for introductory or follow up meetings with potential partners and funders. If companies are so inclined, there are other conferences that have grown up to showcase biotech companies at earlier stages or in somewhat different spaces. Websites have grown to allow people to find one another in San Francisco.

Any More Reasons to Come to San Francisco?

• The program at JPM also includes great keynote speakers from places like the FDA and the CMS as well as presentations by payors to calibrate the reality of who is willing to pay for these new drugs.
• There are always new people to meet or old friends to greet by the clock in the lobby of the Westin St. Francis.
• Networking doesn’t stop at the end of the day, just moves to nearby bars and restaurants for a reception or two before dinner.
• Communications people are everywhere. Seriously, PR people and journalists are in San Francisco in force to tell the stories and report the news.

For an informal glimpse into JPM, search for the #JPM12 hashtag in twitter. And if you have an interest in talking about a Phase I oncology asset, let me know.

First, Sonosite has had some relatively bold TV spots. While I was watching football this fall, I saw The Rehabilitator, which is an ad for ultrasound equipment that is supposed to provide enhanced images. How often do you see doctors with the overlay of superhero imagery (the floating cape now a white coat) in medical advertisements? 

The ad and the transaction are also notable to me because a local (Madison, WI) biotech company is in the ultrasound space. Echometrix is working to provide quantitative ultrasound imaging and to tie the imaging not only to initial diagnosis of musculoskeletal injury but also to track repair over time. Sam Adams, who runs the company, recently invited me to an open house where I had the chance to see a demo of the EchoSoft system, which uses acoustoelasticity in conjunction with ultrasound. A key differentiator to other approaches is that the technology allows for evaluation of dynamic, as opposed to static muscle. The technology came out of Ray Vanderby’s labs at UW Madison. If you are interested in seeing how it works, a beta version of their EchoSoft Portal available for research use. Since they are working on their 510(k) approval, the product is limited to investigational use. If you read about lean biotechs, Echmoetrix is a good example of doing a lot with relatively small investment. Angel investors and SBIR grants have funded the company’s product development and the team has been able to form a number of exciting partnerships that will help them collect the clinical data to support their development of the product. Their collaboration with the US Marines to evaluate possible tendon damage during training hikes was announced earlier this year. Echometrix also has a clinical trial ongoing with the PanAm clinic in Winnipeg, which is funded by Manitoba’s Science and Technology International Collaboration (STIC) fund.

One of the differences between the coasts and Wisconsin is the size of our biotech communities. While I can’t necessarily get a room packed full of cancer drug development folks, I can always find a group of passionate entrepreneurs working to bring medical innovation to patients.