Venture capital firms have poured tens of billions of dollars into new drug startups over the past several years, greatly expanding the ranks of biotechnology companies both private and public.
But some argue there’s still room for more. Specifically, there’s room for more young biotechs led and run by the scientists and researchers that founded them. While the idea of the scientific entrepreneur isn’t a foreign one, increasingly the highest-profile and best-funded biotech startups are launched from inside the walls of major venture funders like Flagship Pioneering, Third Rock Ventures and Atlas Venture.
These firms often form and incubate young drugmakers around ideas developed in-house and equip them with the tools, funding and executives they need to advance their research. It’s a controlled approach that’s led to high-profile successes like Moderna as well as a host of other well-resourced companies advancing new drugmaking technologies. But it’s birthed similar companies, too, which can struggle to stand out, some argue.
Jake Becraft, the CEO and cofounder of Strand Therapeutics, is one of those advocating for more founder-led biotech companies, as well as for an ecosystem that’s more conducive to funding and supporting their development.
“There’s still good science that goes unfunded, and there’s bad science that gets funded,” he said in an interview.
Becraft founded Strand in 2017 to build medicines from messenger RNA, years before the strips of genetic code would power the COVID-19 vaccines from Moderna and Pfizer partner BioNTech. It’s raised $58 million to date in seed and venture funding, but its investors are from outside the familiar circle of East Coast biotech backers. The company, which now employs about 75 staff, aims to bring its first therapy into clinical testing next year.
BioPharma Dive spoke with Becraft about the founder-led biotech movement, the ongoing public market downturn for drugmakers and the appeal of “platform” companies. The following interview has been lightly edited and condensed for clarity.
BIOPHARMA DIVE: There's this idea of founder-led biotech, which is sometimes mentioned in contrast to some of the venture capital models that are out there. As a founder and CEO, what does that idea mean to you? What does it mean for how biotech companies are created?
JAKE BECRAFT: To me, it's not really an ‘either/or’ thing. Venture-created companies will continue to be a thing. I think the biotech ecosystem would be healthier and we'd probably get more revolutionary companies if we had more founder-supported ecosystems.
The playbook for venture creation — for classic drug development, [where you] take an asset out of an academic group, discover some novel biology, then take that out into a company and run traditional drug development — became sort of formulaic. Not to besmirch the challenge, but essentially that formula was more reproducible and so a lot of funds started to run these companies.
What we're seeing from people throughout the industry is those sorts of companies ended up being ... there is just less identity when a fund makes it and the leadership is also sometimes rapidly changing. You'll see CEOs and management teams cycle in every two years. I think that generally leads to a very different sort of experience for your employees.
Founder-led biotech, to me, just means the founders and the creators of the technology are given a voice and a position at steering the company. I does not necessarily means that the scientist who does the work has to be the CEO of a company. Certainly, that won't be the case for everyone. Not every scientist is going to have the ability or even the want to take up a CEO role.
You mentioned you thought the biotech ecosystem would be healthier if we had more founder-led biotechs. What are some of the challenges preventing that from happening?
BECRAFT: It was a bias that emerged because of the way that people were doing things. When I started Strand, before there was a founder-led biotech movement, there simply weren't any biotech founders that I knew here in Boston. There were more in San Francisco, but the idea that you would both found a company and run that company was pretty foreign. I remember having a lot of investor meetings where people would completely dismiss the idea, almost rudely. The general nature of that not being the case, leads to people saying, ‘Well, the ends justify the means.’
I don't believe that I'm such an intelligent person that I'm a standout for the ability to start and lead a company. The fact that I did it is more luck and being given the opportunity. What's stopping more people is that opportunity. It certainly isn't the ability to do it.
With more capital being put behind founders now in the biotech space, especially as capital from the West Coast came in and had more openness to this idea, we're seeing people be very successful.
So much of what big biotech venture firms are creating are companies that they've incubated in their own labs, that they've funded and maybe put in their own executives. Is biotech venture capital open to ideas coming from outside their walls?
BECRAFT: Again, it becomes like a playbook that you know. The problem, let's say five years ago in the Boston biotech ecosystem, was that people mistook what was happening with what was the best. They said, ‘This is working and this is how it's happening, so this is the only way that it should be done.’
I'm trying to advocate for something that's less common, because that's what needs the advocacy. I don't think that venture funds starting their own companies need the advocacy. They seem to be doing just fine doing that themselves.
We're hopefully seeing a trend of people continuing to [found and run companies] and, obviously, more wins on the board help everyone get more comfortable with it as well.
There’s been a downturn in biotech markets recently. Yet there's still been an enormous infusion of capital into the sector over the past few years. What effect has that had in terms of which ideas get funded?
BECRAFT: Prior to this downturn, there was a lack of discipline. There's still a lack of discipline. Things still to this day seem to be getting funded that — I'm all for go out and fund your innovation, right? I mean, it's capitalism at its best. However, I think a lot of those were not great ideas.
There's still good science that goes on unfunded, and there's bad science that goes funded. Do we really need another AAV [gene therapy] for Duchenne muscular dystrophy? No. We should focus on Duchenne, but there's like 20 companies trying to do the same approach and it just seems unnecessary.
You see it with new fancy platforms that sometimes come out of the venture creation arena. Then you look at their development plan and they say ‘We're going to start with liver disease, prove it out there and then we'll be able to solve all these other things.’ I just bang my head against the wall. The liver delivery problem is the problem. It's wonderful that another liver disease is going to be targeted. But the hard part is going to be not going to the liver and getting to the other tissues. This doesn't open up the platform directly. You're just a liver disease company unless you have a real idea for how to not get there.
The idea of a platform has become a buzzword that's often used to describe why a company might have a lower risk of failure. Over the past year, though, I've heard that maybe people are less inclined to invest in that premise. Has there been a shift in how people view platforms?
BECRAFT: People have abused [the idea of] platforms to raise money. Because how many companies actually intelligently develop a platform that will make a difference? How many of them have then, over time, translated that into actual drug approvals? You've got like six companies, probably, that have gotten multiple drug approvals in different diseases — Alnylam, Regeneron, etc.
You have companies that have platforms, and you have companies that have a single asset and a dream. If a company has a Phase 2 clinical trial and then there is a bunch of discovery work, that was never really a platform company. It's more the story that they're using.
Unfortunately, investors have been burned by that and so now, what they would like to do is pull back from the idea of platforms. But more so, it's not that investors are even pulling back from platforms right now, it's just that they don't care about the story as much. They want to talk to you less about the platform and more about the drug.
What impact has this biotech downturn had on Strand? Has the retrenchment in public markets gone through to the private side, or shut any paths that were previously open to you?
BECRAFT: It doesn't directly affect us. You really only feel the effect if you go out and try to raise funds. We're always talking to investors. I have CEO friends who are in similar stages and there's been a big pullback, especially in Series B rounds as well. The problem in the biotech ecosystem is, over time, the private market investors have swum upstream all the way to start their own companies. The later-stage guys have just become crossovers, rather than actual growth-stage private capital.
What's happening now is the early-stage, private market guys are just continuing to start new companies and trying to go real early. If they're far enough from the public market, then they feel safe that the market will rebound in the next two or three years and they won't have to worry about it.
We've seen from other companies private valuations drop with the public markets, and just a lack of capital to invest into this area because people are scared. It’s a weird time.