Stromedix grooms itself for an M&A deal
As the CEO of Cambridge, MA-based Stromedix, a developer headed into a mid-stage trial of its one and only therapy, Mike Gilman has a lot of priorities. But recruiting new workers isn't one of them.
Early in 2008, when Gilman sat down with Xconomy to talk about his development strategy, the biotech company was crewed by an elite team of eight. Today's head count: Eight. And Gilman is more than happy with the way a virtual company like his can stay focused and outsource big chunks of the work involved in drug development.
"Once you get there and decide you're not building labs," says Gilman, "it's almost a no-brainer to do it virtually, particularly if you're going to be a single-product company. You go through pretty amazing peaks and valleys; times when everybody's going flat out and other times when you're waiting for someone to do something."
And when Stromedix is in the middle of flat out, Gilman can bring in contract workers to handle the added load, which seems to suit the rest of the team as well. "Our team has been very stable," he says. "The only change, we had a fulltime regulatory guy for awhile, and we just couldn't keep him busy.
"It really helps to be in a place like Cambridge, which is thick with people who do this on a consulting basis. We have a consulting CFO who works with a dozen biotech companies in the area. In general, this is a lot easier to pull off here than in, say, St. Louis."
After leaving his post as the executive vice president of research at Biogen Idec, Atlas Venture put Gilman in charge of a project aimed at finding a development program for a new treatment of fibrosis, a cellular process that triggers a cascade of scarring events that leads to organ failure. Starting out with a $4 million Series A from Atlas and Frazier Healthcare Ventures, he sifted through a series of potential therapeutics before winding up back at Biogen's doorstep after the big biotech outfit shelved a promising antibody program in the field.
"Once I heard about that, I started calling friends over there," recalls Gilman. "I said, ‘Why not give us to us?' And eight to 10 months of negotiating later, we had it."
In April of 2008, New Leaf Venture Partners, Bessemer Venture Partners and Red Abbey Venture Partners joined Atlas and Frazier in a $25 million Series B. Working with a CRO, Stromedix sailed through a Phase I safety trial of STX-100 in 40 healthy volunteers. And now the developer is working on launching a Phase II trial in 2010.
One of the big challenges for any biotech company working in fibrosis is that it's typically very slow to develop, and that makes it hard to design a trial that can run over a relatively brief period of time. The "killer app" here is for idiopathic pulmonary fibrosis lung disease (IPF), says Gilman, which is where Biogen was originally headed. But that is too difficult a challenge for a young biotech company. So Stromedix settled on kidney transplant patients, who commonly suffer from fibrosis and can provide the tissue researchers need to study without the long wait that would be needed for other conditions.
As a virtual company, Stromedix's business strategy has to remain simple as well.
"We talk about licensing all the time," says Gilman. And the investors have also thought about splitting the indications and licensing out different targets.
"We looked at that carefully," adds the CEO. "We had some partners really interested in transplant, not so much in IPF, and others really interested in IPF and not transplant. But it's very difficult to have two parties developing the same drug. We are a single product company, and because of that, licensing our one and only product doesn't make a lot of sense, at the end of the day. The preferred outcome is sort of a clean transfer of the asset, a trade sale basically."
Being virtual helps that.
"We don't have a lot of overhead," he adds. "If somebody wants to swallow us whole, we're a tiny little morsel. Keeping lean really makes it simpler for someone to just acquire the whole thing."
And as pharma companies do more strategic reviews, fibrosis--and Stromedix--may be moving up the list of targets.
"There are things we've learned that can be applied to other molecules," says Gilman. "We've got eyes on additional molecules we would love to work on if we had the opportunity to work on it. If someone was really interested in kick-starting it, we could gather these other molecules, and put together a program."