Investing in Brain Cancer – Part 5
Models Designed to Bridge to Institutional & Strategic Investors
Executive Summary
Given the disappointing historical record of increasing mOS for many brain cancers, the need for new therapeutic options is high. Such therapies require patient and sustainable investment over the development cycle from basic discovery to regulatory approval, which may continue for a decade or more. Human clinical development is very expensive and risky, and is best performed by skilled and experienced people with ample resources including large amounts of capital. Significant funding at a manageable cost of capital is only possible via institutional and strategic investors and ultimately the public markets.
Thus, the primary objective of earlier stage brain cancer investing must be the creation of evidence-based investable profiles that are designed to attract institutional and strategic investors.
In the remainder of this post, we will explore some potential models for generating such investable profiles as a bridge to institutional and strategic investors with a focus on Venture Philanthropy primarily driven by family offices and foundations.
What Constitutes an Investable Profile for Brain Cancer?
In a word, #Data. In God we trust, everyone else must bring data. What kind of data? Below are some of the key data categories.
Description of Biological Mechanism. Institutional investors are generally OK with taking molecular or device risk, but they despise biology risk. If you have not worked out the mechanism responsible for the desired therapeutic action, then STOP and redouble your efforts to elucidate the effector mechanism of action before moving forward.
Validated and Translatable Models. Even in monogenic rare diseases, one of the biggest impediments to advancing therapeutic candidates is the lack of a validated and translatable disease model. The founders and leaders of successful Venture Philanthropy organizations such as the Cystic Fibrosis Foundation and the Spinal Muscular Atrophy Foundation have spoken at length about the catalyzing effect of investment in model development. By and large, there are no accepted brain cancer models that are validated and translatable. Hmmm, seems like an area ripe for early stage investment, particularly in the academic and foundation-sponsored research setting.
IND/IDE Quality Pre-Clinical Data Packages. Alongside Tier 1 investors, we have reviewed multiple opportunities over the past year that have Clinical Hold orders or IND/IDE Sponsor response letters from the FDA or other worldwide regulatory agencies in the data room. The letters are generally issued to Academic, Non-Profit or startup entities that have filed for an IND/IDE that the agencies consider to be materially deficient usually as a result of missing data about safety, pharmacology, mechanism of action, testing & validation and other required elements of a regulatory dossier. A fair number of the Sponsor letters came about as a result of the agencies insisting that the Sponsors open an IND/IDE after a period of treating patients under a permitted Expanded Access (aka “Compassionate Use”) program. Generating the required data package for an IND/IDE application is not rocket science, but it does require knowledge of the process and rigorous attention to detail. Best to engage the services of an experienced Regulatory advisor early in the process of planning an experimental campaign to support an IND/IDE submission.
First-in-Human Clinical Data (Ideal, but not a “Must Have”). Because translatable pre-clinical models for brain cancer are effectively non-existent, the value and impact of a data package with some human clinical data is huge. Often the data comes from an Expanded Access program at an academic medical center. Just make sure that the full clinical record is disclosed to the potential investors. Attempting to paper over aggressive corticosteroid and bevacizumab use concomitant with the experimental agent under development does not enhance your credibility.
Patient Selection Criteria (Ideal, but not a “Must Have”). Among the most critical elements of a clinical trial design are the Patient Eligibility Criteria (including Inclusion/Exclusion criteria). Being able to objectively select patients, who have a high probability of response to the therapeutic agent, is every clinical trial designer’s goal. Molecular and genetic biomarkers are the most valuable criteria, but typically do not exist for HGGs (with the exception of H3K27M mutations in DIPG/DMG and IDH mutations in non-GBM HGGs), and certain driver oncogenes in LGGs. Beware of pseudo-marker ecDNA-resident oncogenes in HGGs. Under treatment pressure, they disappear faster than social media “friends”.
Market & Business Data. The number of brain cancer patients is thankfully small, even when brain metastases are included. Nonetheless, rare diseases can and do represent compelling business opportunities. Our advice in this area is to gather the patient and market data, and make realistic (conservative?), risk-adjusted projections regarding market size, rate of market uptake, revenue and profitability. This type of data is rarely a deal breaker.
Models for Bridging to Institutional & Strategic Investors
In this section we will propose and examine models for earlier stage investments in brain cancer designed to attract institutional and strategic investors.
Organizational Basics
Any organization is only as effective as the people and skills that it has available to it. Thus, it makes sense to staff the organization with people who have knowledge of and a track record of achieving tangible results in the data categories described above for an investable profile, and executives who are facile with the decision-making process of institutional and strategic investors. Ignore this at your peril.
Model 1 – Venture Philanthropy
It is no secret that we love the Venture Philanthropy model whether it is practiced by a foundation, family office or perhaps, even a hybrid “venture capital-like” organization. Why? When led by a capable and committed staff with appropriate skills, it just works…in multiple disease categories…over decades…with approved therapeutic agents to show for it. So why isn’t everybody doing it? Short Answer: The model requires a convergence of capital, skills and strategic focus that many organizations struggle to assemble and sustain. Either the organization (i) dilutes its mission and modest funding with non-therapeutics development endeavors (e.g. patient support, messaging, lobbying); (ii) staffs its operations with academic or other executives/scientists/clinicians, who have never been associated with a translational research program and its companion financing; or (iii) falls victim to the ego and arrogance of a Founder, who confuses success in an non-healthcare field with capability in the highly regulated, data-driven and risky field of therapeutics development. Look no further than the categories of Neuro-Degenerative disease and most Cancers for multiple examples of how not to harness the power of Venture Philanthropy.
So how can we punch through the noise in brain cancer to effectively deploy the Venture Philanthropy model? We would begin by proposing that foundations and family offices take a hard look at exactly what they want their strategic focus to be, and exercise discipline about maintaining the focus. Some will choose patient support, messaging and lobbying…and that is important…but it will not be effective in terms of producing Venture Philanthropy results. Others will emphasize therapeutics development via the Venture Philanthropy model. For these organizations, the strategic analysis needs to be extended to consider the necessary staff skills, management talent and capital base to be truly effective.
If considered thoughtfully, most groups should conclude that the required capital allocation will need to be at least $40 million per year deployed in a handful of projects carefully selected by a panel of evidence-based decision makers with strong backgrounds in translational science and therapeutics development. Throw in a couple of executives with business relationships and knowledge of decision-making in the world of institutional and strategic investors, and things start to look promising.
How does one assemble a capital base that permits investment of at least $40 million per year? That kind of money likely only comes from family offices and UHNW individuals with a particular devotion to brain cancer, at least initially. The trick will be to convince multiple organizations and individuals in this arena to work together, which necessitates that each organization (and its Founder) relax its insistence on absolute control. No trivial challenge.
In summary, the organization making the investments should (i) be organized as a for-profit entity with an investment structure and mandate; (ii) have a clear strategic focus accepted and maintained by all of its staff; and (iii) recruit skilled and experienced staff with a proven track record in executing and financing translational R&D, and expect to pay them market rates.
Venture Philanthropy Examples in Brain Cancer. There are only a few examples. We recently highlighted one between MimiVax, Inc. (Buffalo, NY) and a syndicate of foundations, family offices and quasi-venture capital organizations for the mid-stage development of SurVaxM for GBM. If successful, the investment has the potential to create the investable profile that will attract institutional and strategic investors with much bigger checkbooks.
Model 2 – Public/Private Partnerships (and Hybrids thereof)
We mention this model because it has some potential to produce effective translational science and therapeutics development candidates even though it is generally less well capitalized than the Venture Philanthropy model. A partnership is struck between an academic or non-profit center and an external investor interested in funding only a defined program with the understanding that the program will be exported from the center at the achievement of a pre-defined milestone. The challenge with the PPP model is clearly defining and adhering to the transition point at which further development activities are moved out of the PPP incubator and into a purpose-built for-profit entity of professionals solely focused on getting the therapeutic agent approved in the most capital and time efficient manner.
We have met with several PPP centers in multiple therapeutic areas over the past decades. Some are quite disciplined and embrace the transition of programs to an external for-profit entity at a pre-defined milestone. Others say that they have such discipline, but then produce a proposal that is padded with tangential projects and capital equipment/facility build out activities for which they are ill-suited to execute, and which will burn money. We see this type of muddy proposal most often in academic medicine centers focused on immunotherapies. Immunotherapies require the aseptic manufacturing of macromolecules or cell/gene therapies which are complex, capital-intensive and often personalized to each individual patient. It is hard enough to do immunotherapy production well in a dedicated and well-funded industrial plant much less in an academic center. Nonetheless, there are a few large brain tumor centers in the US that take this approach with respect to immunotherapies. While we wish them well, we prefer to work with PPPs that do a better job of recognizing their expertise and their limits.
PPP Examples in Brain Cancer. There are two that we wish to highlight:
Stanford Innovative Medicines Accelerator/Invus Group. We posted about this partnership when it was announced in January 2023. We know and work with people from the organizations on both sides of this partnership. They are skilled, dedicated and relentless scientists and investors. We believe that this PPP has a good chance to succeed and transition a strong clinical candidate outside of the Stanford IMA for further development and registration.
Seattle Children’s/BrainChild Bio. This PPP is a spin out of work done at Seattle Children’s (SC) for pediatric brain cancers into an independently managed corporation with an initial equity investment from SC. The initial program and clinical trial in DIPG/DMG/refractory CNS tumors employs a quadrivalent CAR-T agent (see here and here). We find this PPP intriguing for three main reasons: (i) BrainChild Bio is initially being led by a CEO with a proven track record of attracting institutional and strategic capital in Biotech, and a CSO who is a recognized world leader in the development of immunotherapies; (ii) SC has invested over many years to build its capability for the production of personalized CAR-T immunotherapies under cGMP conditions; and (iii) multi-valent CAR-T agents in the brain are a high-degree-of-difficulty dive with respect to manufacturing, and control of treatment-emergent neurotoxicity (S)AEs (e.g. ICANS). Godspeed, all!
A Concluding Word
We hope that you have found our Investing in Brain Cancer series to be informative and thought provoking. We have heard from many readers and investors around the world, and some important new conversations have started. It is our intent to continue working to help bridge the investment gap between early stage discoveries and the construction of profiles that are attractive to institutional and strategic investors. In our opinion, this is the most likely way to drive significant investment into brain cancer over time. We can think of nothing more satisfying to do with our time, capital and worldwide networks.