By Tom Burt (Partner, Sofinnova Partners) & Nick Hutchinson (BSG Lead, Mammalian Cell Culture, FUJIFILM Diosynth Biotechnologies)
Start-up antibody companies need substantial amounts of capital to fund the late-stage clinical development of lead candidates and grow their clinical pipelines. In our 3rd post, we described the role of Venture Capitalists (VCs) in funding the early-phase development of antibody therapeutics and introduced the concept of crossover investors (1). In this, our final post in the series, we look at the final stage of the financing cycle and describe how early investors may seek to exit with a return on their investment.
According to Tom Burt of Sofinnova Partners, the emergence of crossover investors in the past 5 years has accelerated the path to the public markets for many ‘early-stage’ biotech companies. “Crossover investors’ have flexible criteria around the clinical stage of the company’s lead program that has led to their participation in earlier private rounds such as Series A/ B funding. Furthermore, it has resulted to the counter-intuitive situation where, on average, preclinical companies can command higher pre-IPO valuations than their later-stage peers (2; Figure). In these cases, it is because the crossover candidates encompass highly differentiated or novel modalities, including antibody-drug conjugates, bispecific and multi-specific antibodies,” he says.
According to Tom, a start-up can continue to raise capital from the private markets in later-stage financings such as Series C and onwards despite the absence of a crossover financing round. “It may choose to do this for the following reasons: 1) crossover investors don’t believe the company can command the minimally accepted IPO valuation required to go public in the US of over c.$300m; 2) existing investors may believe they can command a higher IPO valuation if they wait, pursue an additional financing round and reach a milestone event such as a clinical trial readout, or 3) existing investors feel there is a high chance the company may strike a value-driving partnership or be acquired in the near-term,” he says.
EpimAb’s three rounds of funding
EpimAb is one such company that progressed to Series C funding. It is a start-up antibody company that initially raised $25 million in a Series A round and put it to use to develop its proprietary Fabs-In-Tandem Immunoglobulin technology platform. The platform generates antibody-like bispecific molecules designed to be more potent, less immunogenic and easier to manufacture than those produced by other bispecific antibody technologies. It was able to build a pipeline of candidates and progress the first into clinical trials with the cash (3). In 2019, the company raised $74 million in Series B to build out the pipeline further, but also to progress its lead candidate, EMB-01 (targeting EGFR- and cMET) into Phase 2 clinical trials for oncology indications (4).
This year the company announced it had raised $120 million in Series C funding to further progress the clinical development of EMB-01, but also to fund the clinical trials for two other candidates. EMB-02 targets checkpoint proteins PD-1 and LAG-3, while EMB-06 is a T-cell-engaging bispecific that targets CD3 and BCMA. The company sees the three programs as pilot projects in three major areas of bispecific antibody development, namely, targeted oncology, dual checkpoint inhibition and T-cell engagement. It has licensed its technology to other companies which has provided income and helped validate the company ahead of a final round of private investment and subsequent IPO (5).
Tom says, “Generally, for investors in companies that pursue later private financings, an acquisition is always a preferable exit route over IPO. By this point, Series A investors may have been shareholders in the company for over five years and an acquisition represents a complete exit. If they attempt to exit through an IPO, they are restricted on selling down their shares immediately as these are locked up for at least 6 months following IPO, and even then can only be sold in a co-ordinated way that will not impact the share price.”
He continues “Assuming that EpimAb is not acquired before its current capital is exhausted, it may decide to pursue an IPO. The main attractions of an IPO are that: 1) public capital markets are much larger than private markets and can provide greater quantums of capital needed to pursue late-stage clinical development; and 2) it provides an exit route of sorts for earlier investors.“
Over the past few years NASDAQ has become the venue of choice for global biotech companies seeking to IPO. This is not to disparage European exchanges such as AiM or LSE, but generally the US market has much deeper pools of capital, comprising many more specialist public buyside investors who focus on public biotech stocks. Arguably, it makes little difference to the company where its shares are listed, since R&D operations can largely continue as before. Beyond this continuity though, the move to public status represents a step-change in how the company is owned, managed and regulated that is significantly different to its prior existence as a private company.
Conclusions
Innovations derived from the discovery and development of antibodies, especially therapeutic antibodies, come from scientists with creative minds, but large amounts of capital are needed to bring ideas to fruition. Many scientists will forge careers in companies that are not yet generating revenues, but are being funded by investors. Some scientists may opt to move out of research and work in the sector supplying inventors with the advice and funding required to progress their innovations. These opportunities include those in technology transfer, consultancies, analysts, and, of course, VCs themselves.
Ultimately, discoveries in antibody research and development will not benefit society, including patients suffering from serious diseases, unless scientists with passion take the bold step to commercialize their ideas by launching their own business and raising money to continue their development. The Antibody Society comprises a community with members that have done just that. Furthermore, our community has a huge amount of expertise that can help budding entrepreneurs with support ranging from mentoring, intellectual property advice through to recruiting management teams. We hope that this series of posts will kick-start introductions and discussions among Society members that will help establish the next generation of antibody companies.
(1) Burt T. & Hutchinson N. (2021). Funding the Development of Antibody Innovations. Part 3: Crossover Investors.
(2) Cowen Healthcare (2021) Life Science Market Update March 2021.
(3) GEN (2017) EpimAb Raises $25M in Series A to Progress Bispecific Antibodies into Phase 1. Genetic Engineering News. April 25, 2017.
(4) Al Idrus, A. EpimAb bags $74M to push EGFR/cMET bispecific, build out pipeline. Fierce Biotech. June 5, 2019.
(5) Al Idrus, A. (2021) EpimAb reels in $120M to propel 3 clinical-stage bispecifics, including dual checkpoint inhibitor. Fierce Biotech. March 22, 2021.
