So many biotech start-ups, and so many different ways to navigate from point A to point B.
I attended two talks recently which provided a contrast in styles for designing and getting a startup off the ground. Both paths were successful, but success came in different forms.
The first presentation was Jennifer Doudna, well-known for her CRISPR work at UC Berkeley. Caribou Biosciences grew out of this lab work and became a company in late 2014. Interestingly, Dr. Doudna placed her graduate student Rachel Haurwitz at the helm. Caribous utilized SBIR grants and the QB3 program when it began life as a startup. Closely following these inputs, Caribou engaged in multiple corporate partnerships, such as with Novartis and Dupont, as additional sources of revenue. Caribou remains a private company.
An interesting off-shoot of Caribou is Intellia Therapeutics. Intellia takes on the therapeutic angles of the CRISPR technology, whereas Caribou was founded more to generate platform technology. Unspoken as an issue at the seminar, the two companies appear to be fighting over this alleged dividing line. In the Intellia model, venture capital funded the company growth and Intellia became a publicly traded company in mid-2016.
The second presentation was given by Sophie Qiao. She advocates for the “virtual company” approach. Her first such company, Lead Therapeutics, began in 2006. The company focused on small molecule drug development for validated targets; in other words, developing a “next generation” drug for an already identified drugable target. However, Lead did not employ a chemistry team. Instead, molecule development and testing resided with contract research organizations (CROs) based in China. The company identified a lead molecule (pun intended) and sold it off at the preclinical stage to BioMarin in 2010. Through a series of acquisitions, the drug is now approved as talazoparib, marketed as TALZENNA by Pfizer Inc.
Dr. Qiao now has a new company, Vivace Therapeutics, launched around 2015. Unlike her first company, this one is headed towards a first in class drug approach. The small molecule discovery is directed towards new targets in the YAP pathway. Similar to the first company, Vivace relies upon chemistry and biology CROs for its discovery and testing pipeline. Vivace’s aim is to have a first IND filed by 2020.
Dr. Qiao’s company track-record has a few common themes. First, she views CROs as a key ingredient to developing a robust discovery function while conserving resources. Additionally, she relies heavily on VC money and in fact, skipped the seed stage altogether, going straight to series A for both Lead and Vivace. Her reasoning is the high level of investment required for drug discovery and the desire to have money to attract the very best people. This may be particularly true given that the CRO model requires a fairly intense level of long-distance project management.
The multiple companies that grew from Dr. Doudna’s and Dr. Qiao’s inputs illustrate some of the questions that come up early in startup life:
- Who will lead the company? This may not always be the one with the original scientific ideas.
- How will the company be funded – non-dilutive grants, VC investors, strategic partnerships?
- How much resource development will take place in house versus use of CROs?
Each of these questions impacts multiple fronts, including one close to my heart – a startup’s intellectual property strategy. Here are some thoughts for consideration.
- When using CROs or other collaborations for R&D, think about inventorship and whether a scientist or manager from the company will be conceiving the inventions, with the CRO carrying out directed work, or whether that conception may be shared between the startup and the collaborating organization. Depending on the country of residence of the CRO, there may be restrictions on where, when and how patent applications may be filed.
- Also regarding CROs, arrangements should be made early on to delineate IP ownership, protection of confidential information and trade secrets, as well as responsibility for filing for patent protection.
- Non-dilutive funding can be advantageous for the cap table, but some grants come with restrictions on IP ownership and licensing. For example, SBIR grants where money is shared between start-up and universities can lead to complications with joint ownership of IP and licensing arrangements.
- Funding mechanisms can also impact the shape of your IP portfolio. Some of this shape is simply impacted by funding available.
- Non-dilutive funding can be limiting in the amount you can spend on IP filings, including limiting the number of applications that can be filed, as well as the breadth of country filings.
- VC funding may offer more resources for IP development but can also be a chicken and egg scenario. VCs often want to see some establishment of an IP strategy before plunking down a significant investment.
- Strategic partners may offer options to foot the bill for IP. However, the partners may want a hand in the direction of the IP, as well as joint ownership or exclusive licensing arrangements.
- Relationships with founders can also interject some interesting IP issues, particularly where at least one founder does not join the company. This circumstance often calls into question the balance between sharing information between start-up and founder, as well as the tensions between publication and protecting the company’s trade secrets and competitive IP position.
The content of this blog is for informational purposes only and does not offer legal advice. Circumstances are fact-specific and you should consult an attorney for legal advice concerning your individual issues.