Starting Your Own Biotech: Challenges and Pitfalls

UNC/UCSF

February 14, 2012 ADDF Drug Discovery Conference

Frank M. Longo, MD, PhD

• membrane disruption • Ca2+ influx • oxidative stress

GSK3

p-tau

cdk5

A

calpainPI3K

AKT

p75NTR

• Synaptic dysfunction • Spine loss • Neuritic dystrophy• Neuronal death

p-CREB

PKA

Survival adaptors

p75NTR – A Valid AD Target?

JNK

MLK

Death adaptors

RhoGDI

Rho A

Rational for company formation

Technology/IP

UniversityTech Transfer

Pharma/Biotech• Prioritized?• Your involvement?

Company Formation• Prioritization• Appropriate nurturing• Involvement • ($ not a useful rational)

Requirements:• Inclination• Time• Mentors/networking

Market? Timing?IP: Univ commitment; use vs matter; timing of filing; filing vs granted claims

Identify founders

Hire attorney (equity/discounts)• Create a C Corporation• Capitalization tables (dilution)

Create business plan• Get examples/circulate to critics • Exec summary / ‘elevator message’

Company Evolution

Funding (dilutive vs non-dilutive)• SBIR• Venture-Philanthropy• Angel• VC

Virtual company• CROs• CEO? Employees? • Academic collaborators• Prepare for partnering

License tech from Univ• Need $

End points (exit strategy):• License/Partner• Sell• Ongoing

Virtual company function

Technology maturation (“baking the risk out”)• $$$• IP: novel derivatives; composition of matter• Efficacy models – independent verification• Biomarker validation• ADMET: PK (BA and BBB); hERG/CYP/AMES; MTD• Pre-IND• Phase I, II

Effective leveraging of non-dilutive capital• Optimal selection of CROs• Academic collaborations that benefit PI (compounds or $)

Your Role

Possible:• Founder• Board Chair (COB)• Board member• Scientific Advisory Board (SAB)• Consultant

Likely against university policy:• CEO• Chief Scientific Officer (CSO)/VP R&D• Any employee status

Funding

VC [also: corporate/pharma VC]• ROI time constraints/ limited exit strategies• Each investment high risk, therefore take massive equity• Dilution of founder / Term sheet• Cadre of ‘consultants’

Angel•Less equity? High maintenance?

Self, friends, family

Venture philanthropy• Less equity, stamp of approval, guidance

SBIR / STTR (non-equity)• Phase I ($ 150K)• Phase II ($1M)

Licensing / Partnership

Licensing / Partnering

What pharma is looking for:• IP• Target/mechanism validation and specificity• In vivo target engagement?• Translatable biomarker (dose finding / efficacy)• Tox outlook• Multiple disease models/endpoints• Independent verification (50% non-reproducible)

Licensing structure:• Upfront payment vs back-loaded• Milestone payments (preclinical, IND, Phase I, II, III)• Royalties %• Due diligence • Ownership of data

University incubator models – workable?

New pharma-university models: bypassingstart-ups and small biotech?

VC model relevance?

The future

Favorable trends:• NIH translational grants• University translational platforms• Advanced / translatable biomarkers• Streamlined ADMET principles