End­points News’ Ven­ture Invest­ing in Biotech Webi­nar Got Us Fired Up 🔥

End­points News recent­ly host­ed a fan­tas­tic webi­nar about ven­ture invest­ing in biotech, which piqued our inter­est as last sum­mer we com­plet­ed a $12M pre-seed round led by DCVC. It was our first time going through the process of engag­ing with VCs to intro­duce our tech­nol­o­gy, share our mis­sion, and iden­ti­fy a cul­ture fit – and we learned a lot. 

In this webi­nar, three invest­ment experts joined End­points’ John Car­roll and Deal­For­ma​’s Chris Doko­ma­ji­lar to dis­cuss today’s invest­ment chal­lenges and oppor­tu­ni­ties, and what it means for both pri­vate and pub­lic biotech com­pa­nies. As a grow­ing start­up, nat­u­ral­ly, we were very inter­est­ed in their per­spec­tives! Here are our key takeaways:

Cap­i­tal hasn’t stopped flowing.

• Ven­ture dol­lars con­tin­ued to trend low­er in all health­care and life sci­ences sub­sec­tors, how­ev­er the share of bio­phar­ma Seed and Series A rounds stacked high­er. This is great news for a start­up at our stage of growth, as it demon­strates VCs’ con­tin­ued appetite for invest­ing in ear­ly inno­va­tions. In fact, our own investor DCVC recent­ly announced $1B in fresh funds to invest across a gamut of indus­tries, includ­ing biotech, which has been at the firm’s core since its inception.

• Oncol­o­gy remains the top ther­a­peu­tic area of invest­ment for Seed and Series A, fol­lowed by neu­rol­o­gy. We’re thrilled to see con­tin­ued strong invest­ment in inno­v­a­tive can­cer treat­ments. At Kan­vas, we’ve part­nered with The Uni­ver­si­ty of Texas MD Ander­son Can­cer Cen­ter and the institution’s Plat­form for Inno­v­a­tive Micro­bio­me and Trans­la­tion­al Research (PRIME-TR) to begin man­u­fac­tur­ing our lead drug can­di­date in our Immuno-oncol­o­gy Pro­gram.

• The top bio­phar­ma modal­i­ty area of invest­ment for Seed and Series A is Bio­log­ics, Anti­body, DNA, RNA, Pro­tein, etc., fol­lowed by Small Molecule. 

• Lat­er-stage bio­phar­ma com­pa­nies are still bring­ing in larg­er rounds. Andrew Lam, Prin­ci­pal at Ally Bridge Group, point­ed out that this reflects what pub­lic mar­ket investors want to see: clin­i­cal stage and post-proof of con­cept, or even lat­er clin­i­cal stage. Inci­den­tal­ly, this stage of com­pa­ny is also what Phar­ma is look­ing to buy right now.

Val­ue inflec­tions have changed.

• Com­pa­nies may have been able to raise off of an Inves­ti­ga­tion­al New Drug (IND) fil­ing in the past, but now it’s all about con­serv­ing run­way and hav­ing clin­i­cal, human data. Tess Cameron, Prin­ci­pal at RA Cap­i­tal Man­age­ment, shared that this forced focus is already gen­er­at­ing excit­ing results, and set­ting up com­pa­nies well as cap­i­tal mar­kets begin to open up a bit more. 

• Nes­san Berming­ham, Oper­at­ing Part­ner at Khosla Ven­tures, shared that for pri­vate com­pa­nies, the nec­es­sary reset in val­u­a­tions has yet to occur. What’s hap­pen­ing in the pub­lic mar­kets right now will con­tin­ue to fil­ter down to the pri­vate mar­kets. How­ev­er, he stressed that the sci­en­tif­ic progress we’ve made as an indus­try – includ­ing our bio­log­i­cal under­stand­ing and tech­ni­cal tool­box, and our abil­i­ty to seg­ment patients and treat­ment par­a­digms – has nev­er been bet­ter. So it’s hard­ly all doom and gloom!

• There’s a tremen­dous amount of cap­i­tal still sit­ting on the side­lines. This pil­ing up of funds over the past few years needs to be put back into the sys­tem, and it will, albeit in small­er incre­ments (accord­ing to Nes­san, we may see Series A rounds more in the $10 – 12M range vs. $150M, for example).

• The ​“high inter­est rates and ven­ture con­ver­sa­tion” can some­times be a red her­ring. Nes­san shared that ulti­mate­ly, sci­ence is what’s most impor­tant to biotech investors. 

Pharma’s watch­ing these trends:

• Anti­body-Drug Con­ju­gates (ADCs)

• Obe­si­ty drugs

• Inflam­ma­tion and Immunol­o­gy (I&I) therapeutics

• Radio­phar­ma­ceu­ti­cals

• Any­thing with good data! 

  • We were excit­ed to see this, as the lead drug can­di­date in our Immuno-oncol­o­gy Pro­gram, KAN-001, is gen­er­at­ing promis­ing data that demon­strates sig­nif­i­cant poten­tial to improve out­comes for patients with ICI-refrac­to­ry can­cers. Cur­rent­ly, we’re con­duct­ing addi­tion­al pre­clin­i­cal stud­ies for KAN-001, refin­ing the drug’s deliv­ery sys­tem, and prepar­ing for an IND filing.

• Fur­ther engi­neer­ing improve­ment around first-gen­er­a­tion technologies 

  • Kan­vas is improv­ing on first-gen­er­a­tion live bio­ther­a­peu­tic prod­ucts (LBPs): Recent­ly approved LPB prod­ucts for the treat­ment of C. dif­fi­cile col­i­tis are com­posed of com­plex fecal prepa­ra­tions, which can­not be con­trolled effec­tive­ly to treat a broad­er range of indi­ca­tions such as an immune check­point inhibitors (ICI) response. Also, sin­gle-strain LBPs can be man­u­fac­tured effec­tive­ly, but lack the meta­bol­ic com­plex­i­ty to dri­ve a potent host response. Kan­vas Bio’s nov­el man­u­fac­tur­ing tech­nol­o­gy can repro­ducibly man­u­fac­ture large ecosys­tems that mir­ror the meta­bol­ic com­plex­i­ty of a fecal micro­bio­ta trans­plant (FMT), while avoid­ing the safe­ty and scal­a­bil­i­ty issues that impact FMTs in clin­i­cal tri­als and their abil­i­ty to meet com­mer­cial demand.

While the pan­elists agreed these were the hot trends right now, they not­ed that for a long time, they weren’t! So biotech com­pa­nies shouldn’t feel like they have to fit into one of these now-obvi­ous box­es. Biotech investors are always look­ing for seeds of an idea 10 – 15 years before any­one else can see it, so com­pa­nies should focus their ener­gy less on trends and more on the oppor­tu­ni­ties their prod­uct or ser­vice can unlock. 

2024 and beyond will bring new treat­ment par­a­digms and AI-based drug discovery.

• Oncol­o­gy fund­ing will con­tin­ue to dom­i­nate oth­er ther­a­peu­tic areas. This bodes well for con­tin­u­ing to advance Kan­vas Bio’s drug can­di­date designed to improve out­comes for patients with ICI-refrac­to­ry can­cers and our newest drug can­di­date that seeks to improve out­comes for patients with ICI-naïve cancers. 

• In the com­ing years, more cap­i­tal will also go toward ther­a­peu­tics focused on the cen­tral ner­vous sys­tem, pain man­age­ment and car­diometa­bol­ic dis­eases. Also, dig­i­tal health and health­care democ­ra­ti­za­tion will remain top pri­or­i­ties for investors.

• Psy­che­delics are gain­ing momen­tum as a men­tal health ther­a­peu­tic. Tess shared that the clin­i­cal data is promis­ing, but the ser­vice deliv­ery chal­lenge remains.

• Fer­til­i­ty and birth con­trol drugs for both sex­es also stand to gain momen­tum. Tess shared that while there’s no one tech­nol­o­gy we can point to yet, there are an increas­ing num­ber of bold entre­pre­neurs who rec­og­nize this mas­sive, unmet need.

• AI will be crit­i­cal, par­tic­u­lar­ly for drug dis­cov­ery. Chris shared that $400M has already been invest­ed in AI-focused drug dis­cov­ery com­pa­nies this year, but the pan­elists stressed that we’re still not equipped to dili­gence these AI algo­rithms and get­ting qual­i­ty out­puts will take time. At Kan­vas, we’re already using AI exten­sive­ly in image pro­cess­ing and spec­tral analy­sis. We have the largest spa­tial and func­tion­al host-micro­bio­me dataset in the world, so we’re eager to con­tin­ue learn­ing from this data and lever­age a unique AI drug dis­cov­ery mod­el to inform the design and devel­op­ment of nov­el micro­bio­me therapeutics.

Unlike many oth­er areas of tech, biotech is a team sport.

We espe­cial­ly appre­ci­at­ed the pan­elists’ response to an audi­ence ques­tion about how first-time CEOs can nav­i­gate today’s envi­ron­ment, giv­en we have a first-time CEO of our own! Nes­san stressed that every CEO was once a first-time leader, and there are clear ben­e­fits to hav­ing less man­age­ment expe­ri­ence right now. For one, often moti­va­tion and hunger become dilut­ed as peo­ple accrue more expe­ri­ence and suc­cess. Tess added that there are a lot of con­ven­tions in biotech that need to be chal­lenged, so fresh per­spec­tives can be valu­able. Nes­san also reit­er­at­ed that unlike the rest of tech, where founders can scale an idea alone in their garage, biotech is tru­ly a team sport. To suc­ceed, biotech lead­ers need to check their ego at the door and main­tain gen­uine, trans­par­ent dia­logues with their board, investors, employ­ees, part­ners, and customers.

Thanks so much to End­points News for host­ing this infor­ma­tive event, and to the pan­elists for shar­ing their time and insights. If you’re inter­est­ed in learn­ing more about Kan­vas Bio, and how we’re using AI to accel­er­ate the dis­cov­ery and devel­op­ment of micro­bio­me-based ther­a­peu­tics, reach out to us direct­ly!