Since we announced the closing of our new Fund last fall, I have been asked by many people in the community if we still have an appetite for investing in therapeutic companies. After all, investments in the sector have been on the decline in Canada and the U.S. over the past few years and most people noted our rising interest in the healthcare IT industry. Well, our latest investment should prove that we still believe that the investment thesis in this vertical still holds great promise.
The Clementia Pharmaceuticals’ case is a great example of how we are approaching investments in this sector.
1- Early-stage. BDC initially seeded the company as the sole investor along with the founders of the company. The capital provided financial resources to enable the completion of licensing negotiations, hire key advisors and perform market validation studies that helped shape the current development strategy. All this early stage effort supported the company in landing a very good licensing agreement with solid economics and secured a world-class syndicate while allowing the founders and BDC to maintain significant ownership and continued involvement. One important point of clarification: by “early” we do not always mean “early-stage technology”. Clementia’s investment thesis was to in-license a Phase II asset with an established safety profile. But when we got involved, it was a two-founder company with a great idea and no assets to table on. Technology is somewhat irrelevant in our investment thesis. We like to invest at the initiation of the idea, be the first VC involved and build great companies.
2- Improved Patient Outcome. Fibrodysplasia Ossificans Progressiva (FOP) is a severely disabling ultra-orphan disease characterized by painful flare-ups and abnormal bone formation in muscles, tendons and ligaments that progressively causes loss of mobility to affected joints, including inability to fully open the mouth limiting speech and eating. Extra bone formation around the rib cage restricts the expansion of lungs and diaphragm causing breathing complications. Lesions begin in early childhood and there is no treatment available for this terrible disease. Clementia’s lead product is a potent RARγ agonist that has recently been shown to block ossification in animal models, as well as in a transgenic model of FOP. Even a small improvement in patient mobility will have a significant impact on the quality of life of those affected and save a substantial amount of money to families and payers.
3-Defined Market. Unlike most orphan diseases, FOP is a well-characterized condition. Virtually all known patients with FOP have the same point mutation and all present a congenital malformation of the big toe at birth. There are seven hundred cases confirmed globally with 285 known cases in the United States alone. The advocacy groups are well organized around the world, especially in the U.S. and are involved at every level with all stakeholders, facilitating communication of program progress and simplifying market launch. Most of the early work done was to further validate the addressable market and better understand the patient pool.
4- Early Partner Interest. Our approach is to invest early in new ventures and sometimes being the sole investor can be a risky endeavor. This is the reason why we need to rapidly test that the business model of an individual investment can attract partners that will help mitigate some of the early stage risk, provide external validation and continue to build value. In this case, the company attracted top-tier collaborators at every steps of the food chain, thanks to academic collaborations with UPMC, a pharma partnership with Roche Holding (ROG:VX) and a very solid syndicate with the closing of the financing led by Orbimed Advisors.
5- Great Management Team and Advisors. This is a prerequisite to all of our investments. The founders in this case, had rich business and academic experience with stellar successes in prior ventures. We are continuing to attract great talent at both the management and board levels as the company continues to rely on experienced advisors with a proven track record of success developing and commercializing drugs in the orphan disease space.
Having said all this, we still have a long road ahead before seeing this drug in the hands of the patients and we expect many challenges ahead during development, we remain however excited to be part of this story and we look forward to making a difference in the battle against FOP.
Enough writing for now, I need to pack my suitcase for San Francisco. See you all at #JPM14!