A proven team gets $145M to take a familiar path
Patrick Mahaffy thinks he has a pretty good business plan for his start-up biotech company.
Gather an experienced biotech team, raise $145 million in venture funds, in-license about five promising early and mid-stage cancer therapies and push them on to an approval.
Of course, Mahaffy and his crew of seasoned executives at Clovis Oncology have good reason to believe this approach can work. They've done it before with Pharmion, a company they sold for $2.9 billion.
"Our thesis is that discovery technologies have become so productive that the number of compounds available relative to companies or--at the macro level--the industry's ability to develop all of these compounds, has been pretty far exceeded," says the CEO. "We believe there's a real opportunity to step into that niche."
Some developers these days also may just not have the money to advance all the programs in their pipeline, and they could be ideal development and regulatory partners.
"A lot of this is predicated on what we did well and learned from at Pharmion," notes Mahaffy. "We're pretty agnostic as to tumor type. We had products to treat hematological malignancies but also development efforts in solid tumors."
Clovis is in early partnership talks with developers operating on the same broad scale. But one area that Clovis won't dive into deep is discovery work.
"We want to focus on clinical development and managing the regulatory interface so critical and often delayed too long," Mahaffy explains. "We will not do any discovery work ourselves."
More than likely, most of the partnerships they ink will involve therapies in Phase I or early Phase II.
"At this moment in our young life, for first products we would like to see some human data," says the CEO. "If we find an attractive Phase III candidate, that would be delightful."
Mahaffy never speaks in the first person. He sees himself as a team player, and he's quick to acknowledge that the team members around him all have an impressive track record. That team includes Chief Medical Officer Andrew Allen, M.D., PhD; EVP of Regulatory Affairs and Technical Operations Gillian Ivers-Reade; and Erle Mast, chief financial officer. They're all back in the same positions they held at Pharmion. Clovis is based in Boulder, CO and plans to open offices in San Francisco and London.
"We grew Pharmion to 600 employees distributed between Europe and the U.S. and between commercial and development activities," says Mahaffy. "That feels like a realistic goal in the area we are in. We don't have to become enormous in terms of employees. We don't require a large sales force or an army of people in clinical staff. We can work through CROs. And we don't have to build discovery resources."
That ambition helped attract Domain Associates, New Enterprise Associates, Versant Ventures, Aberdare Ventures, Abingworth, Frazier Healthcare Ventures and ProQuest Investments to join the management team in a $145 million first round, a huge sum for a start-up biotech. And there's more of that kind of money to be had.
"I think they would say they believe in the concept and they believe in the team," Mahaffy says about his backers. "There's more money available from the investor group to support good programs. We've already heard from other investors that they would be very interested in investing in us. I think if we do our job right--and we have a history of doing our job right--we would be able to attract additional resources and I imagine become a public company."
Mahaffy is acutely aware that IPOs have ground to a halt. But he's betting that's a temporary condition.
Says Mahaffy: "I've been in this industry for a long time and the prediction of its demise and the end of the IPO market have occurred frequently and always been wrong.
"One of the things I like about our business model is that we know this space exceptionally well," he adds. "We're well financed to achieve our goals and not dependent on large pharma for anything. If we were in a different therapeutic category, say arthritis, it would be hard to imagine managing trials and commercializing the product." At some point the business model would have to include major partners. But the Clovis team believes it can go it alone.
"We're casting a pretty wide net," Mahaffy says. "We want to talk to a number of companies. And those companies have to be attracted to us. We aren't planning any releases in the immediate future. But by this time next year, we could have one or two relationships.
"I don't know what will be the ideal number of clinical programs. We have to let time and the nature of the compounds we acquire drive that. We will never be a one product company. There is some number of products we can't support. We can't build too large an organization. That's as unhealthy as a single-product company. At Pharmion, we had five development/commercial compounds at the time we were acquired, plus two small ones. After five or six years, five or so compounds as we move to commercialization feels about right."
Targeting those programs at specific subsets of cancer populations, and coming up with the data and diagnostic tools to convince regulators and payers that Clovis is rolling out valuable new therapeutics, is a central theme at the start-up.
"There is going to be a great focus on subset populations who can benefit to a far greater extent from a given therapy," says Mahaffy. "Increasingly patients and physicians will be told, you need to know you have breast cancer that is this subtype and this subtype, benefits from this but not this."
Drug developers will need to understand what biomarkers can help define the treatment and have the diagnostic tools on hand to do that. And that's the one area of lab-based research that Clovis plans to undertake.
If they're successful, Mahaffy believes that Clovis will have a long, bright future in the cancer arena.
"What I've always told employees is that our goal is to matter and if we matter we will create value and create a sustainable enterprise," he says. "I don't imagine I can design a company for sale. I can design a company that matters."
There's just one proviso: "If someone makes an offer you can't refuse, you can't refuse it. You're obligated to let the shareholders decide that."