Kevin Parker is an expert in genomics, immuno-oncology and computational biology. A Ph.D. scientist from Stanford University, he has helped author research in prestigious journals like Science, Nature Medicine and Cell.

But two years ago, when Parker was working with colleagues on an idea for a new biotechnology company, he found himself in unfamiliar territory. Skilled at navigating thorny scientific challenges, Parker was stumped by the process of building a startup.

“The logistics of getting a company started — incorporating it, getting all the legal affairs in place, getting a bank account set up, getting health insurance, like the very nitty gritty of it … there’s no book on how to do that,” said Parker.

Launching a biotech wasn’t always on his radar. The head of his laboratory, physician-scientist Howard Chang, encouraged students to explore many career paths — even ones in industry, spurring Parker to take an internship at drug startup Maze Therapeutics. There, he got a glimpse of academia’s constraints.

“It’s really focused on analyzing data, publishing it and moving onto the next one, while the industry is focused on translating those ideas into how it impacts a person,” said Parker, who in 2020 founded cancer drugmaker Cartography Biosciences.

Making the jump between fields wasn’t easy, however, and he considers himself fortunate to have done it successfully. A new generation of biotech leaders, Parker among them, hopes to make that transition easier, filling in for future entrepreneurs the gaps where they felt lost. Frustrated with how drug startups are usually formed, they are not only creating their own, but building a new kind of community, too.

“There is a wellspring of grassroots energy. They’re taking all the knowledge accumulated and spreading it,” said Tony Kulesa, a principal at venture firm Pillar VC who has become a prominent voice in this loose collection of executives, scientists and students.

To Kulesa, Parker and others like them, the moneyed venture capital firms that incubate most new biotechs aren't forming startups quickly enough to harness that energy, leaving many aspiring entrepreneurs without a path forward.

Some also say traditional investors are too focused on their own formulas and objectives to give room to unorthodox ideas. Often, venture investors will install an executive or seasoned entrepreneur in new drug companies they’ve started around already-vetted research. “For an investment firm, the product is the company,” said Roivant Sciences CEO Matt Gline in a recent interview with BioPharma Dive.

To be sure, the VC model has produced many successful biotechs as well as new medicines. "How these companies are created has been turned cookie cutter at least in some shops," said Maha Katabi, a general partner at Sofinnova Investments, "but it's certainly not the reality of the vast majority of how this industry has developed."

Some entrepreneurs argue, though, that researchers with great ideas who want to retain control can be shut out. Using terms like “founder-led biotech” and “techbio,” this new generation sees themselves growing a movement to encourage and support more academics launching drug companies. In the process, they hope to broaden the industry’s borders beyond its well-trodden hubs of Boston, San Francisco and San Diego.

An open-source approach

The growth of this community was on display last fall, when hundreds of scientists and entrepreneurs attended a virtual event dubbed the “Founder-led Biotech Summit.” Among the sessions were panels such as “New Funding and Organizational Models” and “Pathways to Entrepreneurship.”

It was the second time the event had been held, said Kulesa, who started the summit through Pillar VC, a firm that provides startups with seed capital. More than 3,500 people registered for the summit, which also included sessions on areas that receive relatively less venture investment like reproductive health.

Attendees described how they stumbled onto the idea of launching their own companies partway through their forays in academia. “You just came to class and were like, ‘I just started a company,’” Kulesa joked with former Massachusetts Institute of Technology classmate and Amber Bio founder Jacob Borrajo, during one of the summit’s sessions. “And I was like, ‘You can do that? That’s wild.’”

For many, the draw of this community appears to be its boundlessness. Rather than growing out of prestigious universities and labs in Boston and San Francisco, the founder-led biotech network has been built on Zooms, virtual events and Twitter. The aim is to help people from all over connect with like-minded entrepreneurs and investors.

“There’s a lot of great science and a lot of latent demand from people that previously weren’t a part of the networks and culture of startups, and are now trying to enter that,” Kulesa said.

Take San Antonio, Texas-based biotech entrepreneur Guillermo Vela. A former Johns Hopkins University cancer and stem cell researcher, Vela returned to his home state to pursue a startup career. Building his cancer drug discovery company, NeuScience, involved many cold calls and emails. The executives and investors who answered often connected Vela with others in the industry.

Having received a helping hand, Vela is now active on social media and other forums, trying to pass along knowledge and “demystify” the company creation process.

“There’s no denying this is a sector where you do have to have some experience, and there’s a lot of know-how you can only gain through the years,” he said. “But there’s a lot of secret sauce, secret knowledge that isn’t published because there’s no real, good mechanism.”

Groups like Alix Ventures’ BIOS community and Nucleate, a mentorship community for researchers, college students and entrepreneurs, are trying to share some of that know-how.

Nucleate has even gained the attention of established drugmakers, including Genentech and Alnylam Pharmaceuticals, the latter of which in July announced a partnership with the graduate student-led group. And Nucleate, which is in part run by one of Kulesa’s colleagues, Michael Retchin, has also created a venture fellowship with support from Pillar VC. 

From Retchin’s perspective, Nucleate’s objective isn’t to “staple a term sheet to every Ph.D. and say ‘go.’” Nor is it to criticize biotech investors for how they operate because, in his view, a wider range of ideas has been getting funded recently.

Instead, he wants to see founders who have previously launched successful companies or taken a drug to market play a more active role in mentoring up-and-coming leaders. “Bringing in more people and giving them excellent advice, rigorous thinking and processes from these veterans can solve a lot of problems,” Retchin said.

A ‘tricky business’

Yet trusting a biotech newcomer with a startup can add risk to an already fraught endeavor. Though some of the industry's most successful companies, such as Genentech and Regeneron, blossomed under young founders, more often investors call on trusted executives or surround an industry outsider with veteran help.

“It's really important to keep in mind that drug development is a tricky business and it's a long path that requires both an experienced management team and experienced investors,” said Sofinnova’s Katabi.

Successful biotech companies typically spend many years and hundreds of millions of dollars to bring a new medicine to market. Each step of the journey involves different types of expertise, from discovering a medicine to designing clinical trials and working with regulators.

Founders who have previously built startups or worked as biotech executives can be better prepared to raise funds, execute on a business plan and pilot a company through ups and downs. Even business-savvy scientific founders might need experienced people on their management teams to help navigate drug development.

“There’s very little that happens in a vacuum in biotech,” Katabi said. “It’s really putting these two minds together and experienced investors around the table that create these ultimate biotech successes.”

Those successes include many drugmakers that emerged from the established venture capital ecosystem. Alnylam, now the industry’s largest developer of so-called RNA interference medicines, was once a startup formed by Atlas Venture, Arch Venture Partners and a few other firms. COVID-19 vaccine developer Moderna was built by Flagship Pioneering and privately funded for years before it became a household name.

Other companies that have brought medicines to market in recent years or soon could, like Bluebird bio, CRISPR Therapeutics and Sage Therapeutics, were also either incubated within or closely ushered along by blue-chip biotech investors.

There are also biotech veterans who argue for patience. The next generation of leaders has to learn the ropes first — whether that means spending years working at a pharmaceutical giant or at other startups — before expecting an idea to land with investors.

“This is not a business where impatience serves you, because it’s so heavily regulated,” said Jeff Jonas, the CEO of biotech incubator Abio-X and a veteran drug developer who previously ran Sage. “There’s so many rules and regulations about how to do stuff. You can’t be impatient. You can be urgent, but you have to always be willing to learn.”

Still, young founders see other ways to accumulate industry know-how, such as via an experienced board of directors, and are eager to forge their own path.

A decade ago, Armon Sharei was completing his Ph.D. at MIT when he began searching for a way to apply his research to drug discovery. He connected with one investor who was interested but skeptical Sharei’s idea could be the foundation of a full-fledged company. Others told him not to bother, while venture capital firms were hesitant about his lack of experience.

Sharei continued building his startup, later named SQZ Biotech. The company entered MassChallenge in 2014 and took home the $100,000 grand prize. More importantly in Sharei’s view, it was where he met Amy Schulman, an investor at Polaris Partners.

Schulman mentored Sharei as he completed his postdoctoral fellowship, advising SQZ and later becoming its executive chair. Having her name attached to the company seemed to ease investor concerns about having a young scientist running it.

“She helped get Polaris on board to lead the initial financing,” Sharei said. “Through her time on the board, it was like, ‘OK, we have the faith you won’t screw it up.’”

Still, things don’t always work out. Though SQZ went public in 2020, peaking at $32 per share that fall, its stock has lost nearly all its value since. Citing “differences in company strategy,” Sharei parted ways with SQZ in November 2022, when it announced a restructuring.

Room for both?

The growth of the founder-led movement suggests an appetite for new biotech career paths and a more open approach to company creation.

Yet Julia Moore, a co-founder and managing partner at Breakout Ventures, which invests in early-stage biotech and medical technology companies, believes there’s a place for both traditional venture-backed as well as founder-led startups.

“When you’re doing something that doesn’t follow an existing playbook and it takes the passion of someone whose baby this is, that can be a really strong recipe for success and focus,” Moore said.

Greater collaboration with a new generation of entrepreneurs could lead to biotech companies that look a bit different. And it could mean more drugs get developed for diseases that have been historically neglected.

Amylyx Pharmaceuticals, for instance, was founded by a pair of Brown University undergraduates, Justin Klee and Josh Cohen, who remained at the helm of the company through Food and Drug Administration approval of its ALS drug Relyvrio.

Stories like Amylyx’s are still the exception rather than the norm, though. It’s rare that a pair of students with no company creation expertise develop a drug and bring it to market. Amylyx’s success isn’t necessarily a model that can be readily replicated, either.

Still, industry veterans can do more to help, some founders say. “There’s a supply and demand issue,” Sharei said, with far more would-be entrepreneurs than industry mentors to guide them.

A few initiatives from larger venture firms do exist to bring more academics into the world of biotech company creation. Sofinnova has a program to introduce graduate students to biotech investing, where the firm’s higher-ups give lessons on business development and clinical trials. Foresite Capital offers a fellowship in tandem with its incubator, Foresite Labs, teaching academics about venture investing and company creation.

Other programs start even earlier, such as Project Onramp, a Boston biotech internship program funded in part by Third Rock Ventures that recruits college students from low-income backgrounds.

Having a greater number of entrepreneurs compete for investor dollars, Kulesa argues, should bring forward more diverse ideas to complement those backed by traditional venture investors.

Ultimately, though, the measure of success in biotech is the development of new medicines that help patients. Starting and funding new drugmakers is just the first step in a yearslong journey, and how much of an impact the founder-led movement can have is very much an open question.

“Time will have to tell, right?” Kulesa said.

Ben Fidler contributed reporting.

Initial stock offerings by drugmakers, for years a reliable staple, largely disappeared in 2022. Fewer than two dozen biotechnology companies priced IPOs last year, a decline of 79% from the previous year’s total and a sign of financial pain for the sector.

With public markets closed, biotechs even earlier in their corporate existence opted for extension or bridge financing from their venture backers. Some, however, simply ran out of cash. By the end of the year, the number of biotechs that had laid off staff surpassed 100 companies.

Dealmaking, such as Takeda’s $4 billion acquisition of a Nimbus Therapeutics immune disease drug, spurred some optimism. But private companies still face a challenging 2023. With economists warning of a recession, it’s possible the next 12 months will look like more of a repeat of last year than a bull market return.

Here are five top questions facing emerging biotech companies this year:

Will the IPO market open back up?

The big question facing investors is whether the biotech industry will see the kind of boom it experienced in 2020 and 2021. More than 180 companies went public over that two-year span, compared to just 22 in 2022, according to BioPharma Dive data.

There were several factors for the slowdown: companies that had already gone public struggled to hold onto their value, while clinical and regulatory setbacks combined with macroeconomic forces to sap investor confidence.

Some believed a return to the more modest IPO pace of years prior would help the industry, which now has a surfeit of cash-burning companies.

Whether companies choose to make their Wall Street debuts depends on how the market performs and what investors’ appetite for risk looks like moving forward, analysts said.

“We’re starting to see secondaries, and expect IPOs to eventually follow,” analysts at BMO Capital Markets wrote in a December report.

Lacking an easy path to IPO, young biotechs and their backers might see dealmaking as more attractive. Last year, 16 private biotechs were acquired for at least $50 million.

Dusan Perovic, a partner at Two Sigma Ventures, expects the rate of dealmaking to “speed up” in 2023.

“A lot of large pharma companies are actively looking and speaking to a lot of startups about deals and potential partnerships,” Perovic said. “There are lots of signs that the environment is much healthier than it was [in 2022].”

Are platform companies still an attractive investment?

Platform companies, which endeavor to apply a foundational technology across many drugs for different diseases, have drawn significant backing in recent years. The success of biotechs like Moderna attracted investors who saw them as having a higher chance of success.

But as last year’s market downturn endured, some investors have appeared less receptive to platform companies and their often sprawling, resource-demanding drug pipelines.

“A couple of years ago when money was so abundant, you could pick three different things that are preclinical, go after and pursue them all independently and aggressively,” said Jon Norris, a managing director at Silicon Valley Bank. “I think now what you’re seeing is investors and a management team saying you need to pick the best one.”

Venture firms that specialize in platform companies, such as sovereign wealth fund Mubadala Capital, say they’re still optimistic. But they’re doing greater due diligence before deciding which biotechs’ technology to fund.

Companies must demonstrate the ability to create a clinical-stage medicine, said Alaa Halawa, the head of U.S. ventures for Mubadala.

“When you invest in a platform company that has an agile and robust enough platform to create broad and deep pipelines, at the time of investment you have at least a line of sight of which indication or specialization you're building at the company,” Halawa said.

Will the pace of private funding continue to slow?

Venture investment in biopharmaceutical companies declined in 2022, with much of the dropoff versus 2021 occurring in oncology and neurology, according to a new report from Silicon Valley Bank. It’s likely the lower volume in deals will continue into 2023, Norris said.

Still, both the number and total value of investments last year remained above 2020 numbers, suggesting some resilience. Part of the decline may also reflect investors letting their previous bets play out before backing new companies in the same fields, the report noted.

Companies that raised Series A rounds in 2020 and 2021 would in theory need to return to their backers for Series B rounds in 2023. But a small flurry of Series A extensions at the end of 2022 indicates biotechs are still trying to collect data before attempting a fresh round of private funding.

“If you look at the valuations that those companies have raised at the peak, the majority of those are hard to justify at this time,” Halawa said.

Should the second half of 2023 bring more private financing rounds as startups that previoulsy raised two to three years ago finally hit milestones, investors will have an opportunity gauge was was signal versus noise.

“Their progress will pretty quickly show that they're better than the ones that are just thinking about the technology and how cool the technology is, but not about how it translates into it being helpful to patients,” Perovic said.

Will company restructurings continue?

Biotechs were forced to cut jobs en masse in the second half of 2022, with both large companies and young startups trimming their workforces to conserve cash.

Among those that did were a good number of formerly high-profile or richly backed private companies, including Faze Medicines, Rubius Therapeutics and Vesalius Therapeutics.

With economists still concerned a recession could emerge, analysts believe biotech companies will tighten their purse strings to start the year. Already, a dozen publicly traded biotechs have announced job cuts, including CRISPR stalwart Editas Medicine, which is laying off 20% of its staff.

“Pharma and biotech companies will likely look to trim operating expenses and focus on assets certain to be differentiators,” according to the December report from BMO analysts.

Mubadala’s Halawa said his firm is advising its portfolio companies to trim their costs by as much as 25% if they are in the early stages of drug development, especially if they expect to run out of cash by early 2024.

How will the Inflation Reduction Act affect biotech startups?

The law, signed by President Joe Biden in August, aims to reduce the price of prescription drugs in several ways. It gives Medicare the authority to negotiate prices on certain drugs that lack competition, while penalizing drugmakers that increase prices of their products within Medicare faster than the rate of inflation.

Though it will primarily affect large pharmaceutical companies, drugmaker executives have said it could have a chilling effect on investment in new research, particularly for small molecule medicines.

Still, early-stage investors are bullish on certain types of small molecules, such as covalent drugs. With uncertainty around which drugs will be affected, it’s too early to judge what the law will mean years down the line, said Vineeta Agarwala, a general partner at Andreessen Horowitz.

“It’s very hard for me to buy that small molecule innovation is dead,” Agarwala said.

For small drugmakers, the threat of reduced revenue could push larger pharmaceutical companies to do more deals.

“If you look at big pharma, they definitely are cash rich and slightly [intellectual property] poor today,” Halawa said. “If you look at the patent expiry over the next five years, we will see a lot of blockbusters that are going to be off patent. The question is, how is pharma going to fill that pipeline?”

Still, the IRA’s incentives could shape how startups plan their drug development.

The IRA is going to push investors and startups to think more about “how they can become best-in-class as opposed to the second- or third-line of treatment,” Halawa said.

Already, the law is pushing companies to adjust their plans, such as by focusing on larger indications early, or by developing several drugs at once, investors said in a recent BioPharma Dive panel.

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Though the recent market slump has scared many biotechnology startups from initial public offerings, it hasn’t turned off venture capitalists like Bruce Booth, a partner at Atlas Venture. 

Booth has spent nearly two decades at Atlas, a Cambridge, Massachusetts-based venture firm and prolific creator of biotech startups, and consulted at McKinsey & Co. before that. Over that time, he’s seen investors abandon and return to the sector more than once, and built biotech companies in booming markets as well as downturns. His firm has raised two new funds since the beginning of the COVID-19 pandemic. 

“The depth of the capital markets today is way stronger, both on the private and public side, than it was 20 years ago,” Booth said in an interview.

That sentiment was put to the test in 2022. After a multi-year run in which more biotech startups went public than ever before, IPOs ground to a halt, with only 23 companies pricing new stock offerings in 2022 versus 104 a year ago, according to BioPharma Dive data. Private financings for companies nearing an IPO are harder to come by as well.  

BioPharma Dive spoke with Booth about the turbulent state of the public markets, the changing shape of biotech venture capital, and what he’s expecting.

The following conversation, which took place in August 2022, has been edited and condensed for clarity.

BIOPHARMA DIVE: How is this recent biotech downturn similar to and different from ones in the past?

BRUCE BOOTH: We’ve had a bunch of periods where the markets corrected by 20% to 40%. In late 2015 and early 2016, there was a downdraft associated with drug pricing. In late 2018, there was another downdraft that happened for a quarter. In March 2020 when COVID hit, the markets tanked for a few weeks. 

What’s different about this relative to the 2018 or 2015 ones is both its duration and the broadness across all of the more risky asset classes. In a lot of ways, it's similar to the 2000 to 2003 period of time when the dual bubbles in dot-com and in genomics significantly pulled back. That kind of sentiment is a very similar phenomenon to what we’ve seen in the past two years.

It’s easy to say “this is so different from what we’ve seen in the past.” But what were the unique factors that led to this particular downturn for biotech?  

BOOTH: The four words in the investing world that have lost more value than anything else: “this time is different.” The animal spirits of the markets lead to bull and bear cycles, and that's going to be an intrinsic feature to markets driven by people because of the way emotions and FOMO set in as the euphoria sets in. 

In 2020 and 2021, we certainly saw that. We saw a huge number of companies going public, more so than at any point prior in biotech’s history. And it's no wonder that you're going to pull back from that because let's face it, that was a frothy, more bubblicious environment than was warranted by the nature of the stage of the companies and the assets that we were developing. 

How are biotechs better positioned today to deal with an environment like this? 

BOOTH: There was a very shallow pool of investors in the public world that wanted to do biotech investing 20 years ago. Today, there’s a huge number of specialist healthcare funds. Almost every mutual fund has a specialist team of healthcare investors. It’s a significantly larger [group] that withstands more of the volatility. As the markets have re-strengthened, we’ve seen investors coming back and doing follow-on financings with new public companies, many of which are going to need to finance this year or next year.

Still, despite a notable uptick in biotech index funds like the XBI in recent months, few IPOs are pricing, and the ones that did raised small amounts. Are any of your other portfolio companies considering an IPO? 

BOOTH: We'll keep our eyes open to the markets and try to understand where public investor appetite is.

With a portfolio of 45 companies, we constantly have companies that are thinking about either accessing later stage private capital or the public markets. Because of the JOBS Act, you can explore the idea of going public confidentially and flip the switch and go public in about a month if you're prepared. There are a lot of companies in biotech that have confidentially been exploring this and if the markets re-strengthen on the IPO side, I’m sure we’ll see more and more offerings. If it weakens, those companies will exercise their options to do private financings.

What advice would you give to companies that might be ready to go public, but no longer can in this environment?

BOOTH: The important thing for young biotech companies that are private, growing and advancing their science is to have options. The job of any great management team, and particularly a great CEO, is to create a set of strategic choices for companies, whether it’s equity financings privately, IPOs and public equity financings, partnerships, or maybe acquisitions. 

Those kinds of things are all the corporate development cards that you can play, and at the end of the day, biotech needs capital to fund new medicines, right? It takes a super long period of time to be profitable. Most biotech is what we call lossmaking. We are burning money to advance drugs deeper into clinical development. 

In August, Bay Bridge Bio indicated that investments from traditional biotech venture firms have slowed of late, with newer firms picking up the slack. How is the venture capital landscape changing? 

BOOTH: Over the last five years, we’ve seen new players enter the space. There's also been big tech funds that have decided to engage, whether that's Andreessen Horowitz with their biotech fund, or General Catalyst, traditionally a tech firm, adding team members that are going to be doing some healthcare and biotech investing. We are seeing more [firms] bringing – I’ll call it “corporate diversity” –  into the venture investing world. People who have different backgrounds and different firms with different interests. That is a good thing to bring to bear in a space as rich with opportunities as biotech is.

Still, if you take all of venture capital, biopharma and biotech is like 10%. Biotech is completely dwarfed by the tech side. When we thought things were booming in biotech, things were also booming in tech. So it's not like biotech grew to 25% of venture, it was that both sides were increasing in sync with each other in the last few years. 

You said in a July blog post that “the private biotech ecosystem is awash in more capital today than all but two years in the 40-plus year history of the industry.” What does that mean for companies considering another round of financing?

BOOTH: Sure, we’re down from the peaks in 2021 but there are still historically high levels of financing happening for private companies. If you think of 2013 to 2015 as being the early days in a long bull run, lots of great companies were founded and funded then. But they had a fraction of the cash available that we do today.

Despite whatever pullback there is, there is still just an enormous amount of capital available for young companies, in particular at the very early end. So seed rounds, series A’s — a lot of firms have focused on those spaces.

A recent report from SVB indicated that in the first half of 2022 there were far fewer rounds for companies ‘likely to IPO,’ a sign that the ‘crossover’ investors that pull companies public have retreated. Do you expect that to change in the coming months? 

BOOTH: These investors have seen their portfolios get hammered over the last five or six quarters, so a lot of them have pulled back from doing further private investments. But what we’ve seen in the last few weeks are ‘green shoots’ [signs of economic recovery] in the market, both in later-stage private rounds and importantly, public follow-ons. It’ll be interesting to see whether those translate into an open IPO market in the fall.

Building a successful biotechnology startup is challenging in the best of times. But the task has grown more daunting since late last year, when an investor retreat from the sector fueled a steep market downturn.

Venture investors and biotech executives hosted by BioPharma Dive in a Nov. 1 panel highlighted the difficulties startups now face. Now more than ever young drugmakers need to spend wisely, have a clear development plan and be willing to get creative to advance their science, the panelists said.

“We want to see progress and discrete programs that are going to get into the clinic and show proof of concept very quickly,” said Christiana Bardon, co-managing partner at BioImpact Capital and portfolio manager at MPM Capital. “I think investors are demanding that.”

Yet the group suggested the current shakeout could be a “healthy” response to a prolonged bull run that, in 2020 and 2021, brought nearly 200 new biotechs onto the public market. They also touched on trends they’ve observed in funding deals and what’s catching investors’ attention.

Read on for three takeaways from the discussion, which can be watched on demand here.

Expect biotech’s contraction to continue

2022 was tough for biotech, with publicly traded companies restructuring to save cash and initial public offerings hard to pull off. The sector consolidated, too, as acquisitions, reverse mergers and delistings shrank the overall number of biotechs.

Investors expect more of the same, at least in the near term, amid a tougher funding environment.

“I don't want to sound all gloom and doom, but the truth is, not all biotech companies are meant to go forward,” Bardon said.

Venture capital firms are more selective now than they were in 2020 and 2021 when biotech valuations were sky high. That could lead to fewer new biotechs, as investors put money into private rounds for more mature startups instead and funds stretch their investment windows.

Panelists stressed that companies need to get creative and adjust their expectations to get the attention of investors and potential partners. They expect companies will be more willing to discuss research collaborations and deals for drug rights, but fewer of the large private financing rounds that have become commonplace in recent years.

In September, for example, Scribe Therapeutics got $25 million from Sanofi, as well as the potential to receive up to $1 billion in future payments, by giving the company “non-exclusive” rights to use its gene editing technology to make cancer treatments.

“That allowed us to do a deal that made sense for both parties,” said Benjamin Oakes, Scribe’s CEO. “It’s non-exclusive, we can do it again if we want to. It gets Sanofi the technologies they need very quickly to push their own drugs into the clinic.”

Startups need a plan, not just an idea

At the market’s peak, when going public quickly was expected, new biotech companies — particularly those led by experienced teams — had little trouble pitching their stories to investors. Now, with IPOs hard to pull off and acquisitions the primary source of investor returns, startups need a better plan if they want to get funding.

Young companies need to clearly show how their technology is different, and what their path is to proving it in clinical testing, said Chris Garabedian, the chairman and CEO of biotech company creator Xontogeny.

“In today’s environment it's even more important that the early founding team, besides having good technology that people might be interested in, has a clear plan on how to de-risk it with the most efficient use of capital possible,” he said. “M&A doesn’t really happen [before] clinical proof of concept.”

That means companies have less wiggle room than previously to use early funding to try many different things. “All of those several $100 million-sized financings where people could spend infinity and beyond building their platforms, I don't think we're going to see that now,” Bardon said.

Instead, they need to answer “later-stage questions,” like how their drugs could really help patients, earlier, said Mira Chaurushiya, a senior partner at Westlake Village BioPartners.

“Right now, I think the opportunities that are going to get funding have a much more clear idea of where they're going to take it into the clinic,” she said.

Drug pricing law could change investors’ calculus

The biotechnology industry is still grappling with the impact of the Inflation Reduction Act, which President Joe Biden signed into law in August.

Industry executives have warned the law could shift research dollars away from small molecule drugs, which could be subjected to government price negotiation nine years after their initial approval. Some large companies, like Alnylam Pharmaceuticals and Eli Lilly, have already cited the IRA for recent strategic decisions.

The law may change the calculus for startups and their investors, too. Garabedian said the law is causing companies to adjust their development plans for small molecule drugs by either evaluating them in larger indications early, or developing multiple drugs at once.

“I don’t think the investor market for biotech pharmaceuticals is going to go away,” Garabedian said. “We’re all going to adjust and figure this out.”

Still, the law could add momentum to a shift that’s already underway. Drugmakers have moved towards drugmaking approaches like protein therapeutics and genetic medicines, and the law will accelerate that, Bardon said.

“At least at our firm, we’ve made a conscious decision that we would prefer non-small molecule modalities,” she said.

Colin Babej contributed video editing.

In November 2022, a well-funded biotechnology startup called Faze Medicines abruptly shut down.

The specific reasons for Faze’s closure aren’t yet known. In a statement then, Third Rock Ventures, which led Faze’s initial $81 million funding round in 2020, said the company’s scientific progress didn’t “meet our bar for further investment.” Management recommended it close and the board agreed, the investor said.

Faze’s fate is a lesson for a promising field of drug research into “biomolecular condensates” — microscopic, fluid-like droplets found within cells that partake in an array of important functions.

Identified in 2009 in the cells of worms by researchers at the Max Planck Institute of Molecular Cell Biology and Genetics, biomolecular condensates are viewed as a source of new drug targets and an alternate way to treat a range of disorders, from neurological conditions to heart disease and cancer.

Research progress has led to the formation of at least five startups in recent years, several of which have drawn the interest of large pharmaceutical companies. Yet their work remains in early stages and, as Faze’s fall demonstrates, has significant obstacles still to overcome. Here’s where things stand:

What are biomolecular condensates, and how do they work?

Biomolecular condensates are tiny blobs inside cells that are filled with hundreds of proteins, nucleic acids and other molecules.

Under a microscope, condensates look like the shape-shifting contents of an ultra-small lava lamp. They are constantly forming, merging with one another and then, once their job is done, vanishing into the cell’s cytoplasm.

These membraneless-droplets were once ignored by scientific researchers. But they have several purposes. Condensates help organize chemical reactions within a cell. They’re involved in its response to stress as well as in its signaling mechanisms. They can speed up or slow down cellular reactions by bringing molecules together or by keeping them apart.

Since condensates’ discovery, researchers have studied them in greater depth and begun to associate malfunctions within them to disease. Genetic mutations can affect how pieces of condensates function, for instance by making them stickier and unable to dissolve as quickly as they should. Early research has tied aberrant behavior within condensates to cancer, infections and neurodegenerative conditions.

Those properties have made biomolecular condensates an intriguing area of biology for drugmakers to mine for potential therapies.

Still, there are many hurdles ahead, as a team of scientists at one condensate biotech wrote in Nature Reviews Drug Discovery in August. Researchers need to understand the structure and function of specific condensates, as well as how they form. They have to tease apart the signaling and regulatory pathways that misfire within them, figure out how to target them and prove that interfering can treat a disease.

Condensates’ shape-shifting nature, meanwhile, will make reaching them with drugs harder.

“To address each of these challenges, the drug-hunter must understand the individual components of a target condensate as well as the collective behavior of the molecular community,” the authors, who work at Dewpoint Therapeutics, wrote. “However, this remains challenging.”

What makes biomolecular condensates an intriguing drug target?

Small molecules, the chemical-based drugs that have been a mainstay of the pharmaceutical industry for nearly a century, are typically used to block a protein’s action or change how it works. These types of drugs often latch onto the nooks and crannies of a protein, like a molecular lock and key.

But that isn’t always possible. Small molecules can only currently hook onto a fraction of the proteins produced by “druggable” genes, leaving many drivers of disease beyond their reach. Companies and researchers have spent years trying to unlock more targets, with mixed results.

Homing in on condensates could be one way to expand the target universe. Rather than trying to go after a tough-to-drug protein directly, companies could indirectly change its function by using small molecules to interfere with a condensate that protein resides in.

Biotechs could try to stop a condensate from forming or, alternatively, speed up its creation. They might design a medicine to infiltrate the droplet. In their Nature paper, Dewpoint scientists described using drugs to stop a protein from entering a condensate, or forcing it out.

One example is an RNA-binding protein called TDP-43 that, when mutated, causes condensates to harden and is associated with ALS. Dewpoint is developing an ALS drug that’s meant to change the composition of condensates to release the protein.

Another company in the field, Aquinnah Pharmaceuticals, is developing drugs that affect the presence of “stress granules,” a type of condensate the body creates to repair damage but that can become sticky and harmful in neurodegenerative diseases like ALS. It’s zeroing in on stress granules related to TDP-43 as well as other targets, according to CEO Glenn Larsen.

Additionally, as condensates contain so many different molecules, affecting them as a whole could be useful in treating complex conditions, like heart disease or cancer, that can involve many factors. But that hasn’t been proven.

Which companies are working on biomolecular condensates?

With Faze’s closure, there are at least four biotech startups still developing drugs aimed at condensates.

Dewpoint officially launched in January 2019 based on the work of Anthony Hyman, the head of the team of Max Planck researchers that discovered condensates. It’s since raised $287 million in three funding rounds and struck partnerships with Bayer, Merck & Co., Pfizer and biotech Volastra Therapeutics. The company is led by Ameet Nathwani, a former Sanofi and Novartis executive.

Nereid Therapeutics debuted in November 2020 with $50 million in funding from investment firm ATP. Nereid was spun out of the research of Clifford Brangwynne, a former post-doctoral fellow in Hyman’s lab and also a pioneer in the field. (Brangwynne is now a Howard Hughes Medical Institute investigator at Princeton University.)

Transition Bio was seeded that November as well and followed up earlier this year with a $50 million Series A round. The company’s founding research comes from Harvard University professor David Weitz and University of Cambridge professor Tuomas Knowles, who developed a way to study the properties of condensates and design drugs to target them. The startup is run by Greg Miller, who previously worked at Visterra, Concert Pharmaceuticals and Genzyme.

Aquinnah has existed longer than the others, forming in 2014 around research from Ben Wolozin, a neuropharmacologist at the Boston University School of Medicine. The company has publicly disclosed just over $15 million in investments from Pfizer, AbbVie and Takeda. In February, it inked a collaboration with Roche.

Faze was backed by Third Rock and the venture arms of Novartis, Eli Lilly and AbbVie.

What is the status of the technology?

As condensates are a young field of drug research, the work remains in early stages. Some companies are still building the technologies they’ll eventually use to make drugs, while others have made their development intentions clearer.

Dewpoint appears the furthest along. The company claimed to have over 20 pipeline programs when it closed a Series C round in February, and has said it intends to get into human testing by the end of 2023. Among those prospects are treatments for ALS, an HIV drug being developed with Merck and a treatment for a neuromuscular disorder known as myotonic dystrophy type 1 that it’s working on with Pfizer.

The company is also researching with Bayer possible drugs for diseases of the heart and lungs.

Aquinnah has three programs in preclinical testing and could begin human testing in two to three years, according to CEO Larsen.

Nereid has said it plans to develop drugs for neurodegenerative diseases and certain cancers, but hasn’t disclosed any specific programs. Neither has Transition.

Before it closed, Faze was studying the role of condensates in ALS, cancer and myotonic dystrophy.

In 2011, cancer cell therapy was closer to science project than treatment. 

Immunologist Carl June and his colleagues at the University of Pennsylvania were struggling to raise money for a small study of a cell therapy for leukemia. The trial “was an academic exercise,” said June. “We had no idea it would turn into a commercially viable product.” 

The treatment June was working on, now sold as Kymriah, became the first CAR-T cancer therapy to reach market, establishing cell therapy as a new class of medicines. Other, similar treatments have followed since and are used to treat leukemia, lymphoma and multiple myeloma. When they work, they can produce durable remissions. 

Yet, despite a decade of rapid progress since June’s 2011 study, CAR-T therapy’s reach remains limited. It hasn’t been used effectively for non-malignant diseases and, even in oncology, its success is confined to blood cancers.

Many companies are working to overcome CAR-T’s shortcomings and broaden its potential applications. One strategy involves turning CAR-T from a complex process performed outside the body into a simpler infusion. This inside-the-body, or “in vivo,” approach could make cell therapy more accessible. It also may open up other conditions for CAR-T treatment. 

At least five startups have formed in recent years to develop in vivo cell therapy. June co-founded one of them, Capstan Therapeutics, and the rest have drawn interest from top-tier investors or large pharmaceutical companies. Here’s where things stand: 

What is in vivo cell therapy and how does it work? 

Constructing a CAR-T therapy is delicate, laborious work. Doctors must first draw out a patient’s white blood cells, which are then frozen and shipped to a laboratory. There, scientists alter T cells by adding a gene for a new receptor — called a chimeric antigen receptor, or CAR — that helps them grab proteins on the surface of cancerous cells. These souped-up T cells are multiplied many times over, frozen and — about two to three weeks after the whole process began — reinfused back into the patient. 

With Kymriah, for example, T cells are modified to lock onto a protein called CD19 that’s expressed on cancerous B cells in leukemia and lymphoma. Multiple myeloma cell therapies like Bristol Myers Squibb’s Abecma, by comparison, consist of T cell hunters seeking a protein called BCMA. 

Once these engineered CAR-T cells are infused, they search for and destroy cancer cells expressing their target proteins, sometimes driving an immune response so strong it can be life-threatening.  

As the bulk of this work takes place in a lab, CAR-T is considered an “ex vivo,” or outside-the-body, procedure. With in vivo cell therapy, companies aim to modify immune cells inside the body, with the help of technologies like gene editing and messenger RNA. 

June’s startup, Capstan, is using mRNA technology similar to that involved in COVID-19 vaccines to teach T cells to recognize diseased cells. Its founders showed that mRNA stuffed into fatty spheres known as lipid nanoparticles are taken up by heart cells in mice, where they were translated into new surface proteins and helped repair damaged tissue. Umoja Biopharma, meanwhile, is using lentiviruses to deliver genes designed to help the body make its own CAR-T cells. 

Other startups are also turning to in vivo cell engineering. Ensoma is carving out the viral genome of an adenovirus and using it to carry gene editing instructions into the body. Vector BioPharma, meanwhile, uses virus-like particles to transfer genetic material into the body. Both approaches could be used to treat inherited diseases as well. 

These methods come with risks. Synthetic mRNA, for example, can trigger an immune response that, while helpful for a vaccine, could be harmful when used as treatment. Adenoviruses have a checkered past, having been the source of safety concerns in gene therapy experiments long ago. Lentiviruses can erroneously trigger cancer-causing mutations, a risk flagged by the Food and Drug Administration in the review of two Bluebird bio gene therapies and a reason they’re mostly involved in tightly controlled ex vivo processes. 

What advantages does in vivo cell therapy have over existing treatments? 

CAR-T therapies take weeks to produce. While patients wait, their disease can worsen or they might become too weak to receive treatment. They also require a “conditioning” chemotherapy regimen to prepare them for treatment, and monitoring for weeks afterwards to guard against potentially severe side effects. 

These hurdles have made CAR-T an expensive treatment primarily available at specialized centers and less accessible to people who live in rural areas or poorer nations. They’ve also weighed on the commercial outlook of other “ex vivo” gene-based treatments for inherited diseases like sickle cell and beta thalassemia, which are made with similarly complex manufacturing processes. 

An “in vivo” solution delivered through an infusion could be quicker and less costly to manufacture. Inside-the-body techniques could also provide an alternative to the “off-the-shelf” therapies involving donor cells, which have safety concerns and efficacy questions of their own. They might eliminate the need for chemotherapy conditioning regimens.

Some companies working on inside-the-body approaches aim to overcome the limitations of gene therapies that rely on adeno-associated viruses, or AAVs, to deliver their genetic cargo. While AAVs are widely used, the effects of the treatments they deliver may wane in cells that frequently divide. They can only carry a small amount of genetic material, too, and are sometimes targeted by the body’s defenses. 

What companies are working on in vivo cell therapy?

At least five startup companies have emerged since last year with technologies they claim are capable of producing in vivo cell therapies. 

Umoja was seeded by MPM Capital and DCVC Bio and formed by scientific researchers at Seattle Children’s Research Institute and Purdue University. It has since raised more than $260 million and brought its first drug candidate into clinical testing in May. 

Ensoma officially launched in February 2021 alongside a wide-ranging partnership with Takeda that covers up to five experimental programs. It’s run by Emile Nuwaysir, the former CEO of Bluerock Therapeutics, a cell therapy startup Bayer bought in 2019.  

Interius BioTherapeutics followed in May 2021 with $76 million from Cormorant Asset Management and others including Bain Capital and Pfizer’s venture arm. The company is based on research by UPenn physician-scientist Saar Gill and is led by Phil Johnson, who was once chief scientific officer at The Children’s Hospital of Philadelphia. 

Vector BioPharma launched in August with $30 million from Versant Ventures and technology spun out of protein engineering expert Andreas Pluckthun’s lab at the University of Zurich. The month after, Capstan, co-founded by June, fellow CAR-T innovator Bruce Levine and mRNA pioneers Drew Weissman and Hamideh Parhiz, came out of stealth with the backing of five pharma companies. 

Publicly traded biotech Sana Biotechnology is also working on in vivo cell therapy. Novartis, meanwhile, is developing a CAR-T manufacturing process that minimizes the amount of work done outside the body, allowing modified cells to expand inside patients rather than in a lab.  

What is the status of their research? 

Most in vivo cell therapy work is still in early stages, though some developers have revealed details about their plans. 

Sana has more than half a dozen experimental treatments in preclinical testing for blood cancers and rare inherited diseases. It expects to ask the FDA later this year to begin Phase 1 testing of one candidate being developed for two types of leukemia and non-Hodgkin lymphoma. 

Umoja’s first program, for a type of bone cancer tumors, is a typical ex vivo CAR-T treatment with a separately administered drug that “tags” tumor cells for destruction. The company could ask regulators as soon as next year to begin human testing of two in vivo programs for solid tumors and blood cancers, according to its website.  

Vector expects to have “technical proof-of-concept” data in 2022 and animal data for its lead programs in 2023, it said in a statement. 

Capstan is starting with in vivo CAR-T therapies for diseases with no effective treatments, but plans to develop drugs for certain genetic blood disorders too. It hasn’t disclosed timelines. Neither have Ensoma or Interius, the latter of which is also looking at cancer immunotherapy.

The key ingredient in the coronavirus vaccines developed by Moderna and BioNTech doesn’t last very long. Once in the body, this messenger RNA, or mRNA, degrades within days. Still, that’s enough time for the vaccines to train the body to recognize and attack the virus in the event of infection.

Drugmakers have long understood the potential of RNA. These strands of genetic information play an essential role in creating proteins and regulating genes, giving drugs that harness their power the potential to treat diseases once thought to be unreachable.

Over the last decade, drugs based on multiple RNA technologies, known as RNA interference and antisense oligonucleotides, have made it to market. Yet, it took a historic pandemic to thrust RNA into the global spotlight. Equipped with new tools, scientists are now exploring how other types can be used to make therapies that last longer and treat, as well as prevent, more diseases.

At least 9 biotechnology startups are developing next-generation RNA drugs. Though years of research lie ahead, these companies have already raised hundreds of millions of dollars from venture capitalists, large pharmaceutical firms and other investment groups.

If their work pans out, it could provide new treatments for cancer, rare diseases, and chronic illnesses that affect organs, the nervous system and the immune system.

What are next-generation RNA technologies, and how do they work?

The companies working toward this new wave of RNA-based drugs use different approaches.

One of the most popular revolves around transfer RNA, which transports and delivers the molecular building blocks that cells need to make proteins. Alltrna, a startup that launched publicly in late 2021, claims to be able to engineer tRNA to correct for errors in the genetic code that would otherwise impair protein production. The company is one of many formed and financed by Flagship Pioneering, the biotech incubator and investor that founded Moderna. It’s also one of at least four pursuing tRNA in one way or another.

Another Flagship-backed company, Laronde, and a well-funded startup called Orna Therapeutics, are focused on what’s known as circular RNA. This type occurs naturally in cells and is considered much more stable than its mRNA counterpart. However, circular RNAs usually don’t make proteins.

Laronde and Orna are trying to change that through engineered versions of these molecules. Their technologies attempt to program synthetic circular RNAs with certain genetic codes, as well as outfit them with a site that many RNA viruses use to dock onto the cell’s protein-producing machinery.

Replicate Biosciences, a startup focused on self-replicating RNA, takes a page from viruses, too.

The company aims to strip viral RNA of its more worrisome attributes, like spreading uncontrollably across cells, but to leave intact the genetic instructions that allow it to continuously duplicate. This self-replicating RNA would then be designed to manufacture helpful proteins.

What advantages would this technology have over its predecessors?

Generally, these technologies are meant to overcome some of mRNA’s limitations.

Replicate’s method, for example, may lead to medicines that could be administered less frequently or at smaller doses.

“The difference with self-replicating RNA is we’re delivering a copy machine into the cell along with that instruction manual, so you can make a lot more copies and they last for a much longer period. And that creates a lot more protein,” Nathaniel Wang, one of the company’s co-founders, told BioPharma Dive in a fall 2021 interview.

Another goal is to make more durable medicines, given that most RNA is quickly broken down and flushed from the cell. For companies working with circular RNA, one of the draws has been the molecule’s non-linear shape, which lacks the loose ends that digestive enzymes latch onto. Laronde executives have said that their approach could, in theory, help protein expression last weeks or months.

Scientists are also trying to prevent newer RNA-based drugs from triggering unwanted reactions from the immune system. The U.K.-based biotech VaxEquity, which is focused on self-amplifying RNA, has a technology it says can suppress responses from the “innate” immune system, the body’s first line of defense.

What companies are working on these technologies?

Formed in 2018, Alltrna recently came out of stealth mode with an initial commitment of $50 million from Flagship. But it’s far from alone. Shape Therapeutics, Tevard Biosciences and HC Bioscience are all researching tRNA, too.

ReCode Therapeutics, a biotech backed by EcoR1 Capital and several pharmaceutical companies, initially was, too. But over the past year the company decided to pivot, deprioritizing a tRNA program in favor of an mRNA one, a spokesperson for the company confirmed to BioPharma Dive.

In circular RNA, Laronde and Orna have both raised significant amounts of cash. In August, Orna, which was created in 2019 by MPM Capital and BioImpact Capital, brought in another $221 million through a Series B round. Merck & Co. participated in the round and has also entered a collaboration with Orna to discover, develop and sell vaccines and other therapies for cancer and infectious diseases. The deal carries a $150 million upfront payment, though Orna could take home an additional $3.5 billion should its programs hit various milestones.

A stealthy startup named Circ Bio is also reportedly working on circular RNA, though the company hasn’t yet publicly disclosed any funding.

What is the status of the technology?

Companies working with next-generation RNA technologies remain in the earlier stages of drug development, though some are advancing quickly.

In tRNA, Lovisa Afzelius, an origination partner at Flagship and the founding CEO of Alltrna, told BioPharma Dive last November that the startup could, in the “not too distant future,” reach the stage where it asks regulators for permission to begin human studies.

The leadership team at Laronde, meanwhile, has said the company is on track to request multiple circular RNA drugs be cleared for human trials in 2023.

And Orna isn’t far behind, estimating that its first program — an experimental treatment for cancer — will be ready for human testing in 2024.

Infused or injectable medicines that interfere with RNA, the messenger molecules that turn genetic instructions into proteins, have taken the spotlight in recent years, winning approvals for several rare diseases. A group of biotechnology startups are trying to find similar success by targeting RNA with pills instead.

History shows they face a daunting task. It’s long been considered futile to use chemical-based compounds to go after RNA because of its shifty nature. When scientists have succeeded, it’s typically been by accident. Last decade, for instance, Merck & Co. discovered an experimental antibiotic it was developing blocked a type of bacterial RNA. Pfizer inadvertently found one of its drug prospects affected translation of a protein that regulates cholesterol.

Now, drugmakers are doing it intentionally. Helped by better sequencing technologies, screening methods and a broader understanding of RNA, researchers can more easily capture how the information molecules look and design drugs that attach to them.

If successful, they could help unlock disease targets that small molecules can’t currently reach, bringing forward new ways to treat neurodegenerative disorders, cancer and other diseases.

At least eight startups are developing small molecules that target RNA. Large pharmaceutical companies including Sanofi, AstraZeneca, Amgen and Roche have shown interest in their research, promising hundreds of millions of dollars in a string of deals. Here’s where things stand.

What are RNA-targeting small molecules, and how do they work?

Small molecules are chemical-based drugs that usually target proteins and block or change the way they work.

Due to their size, they can reach most tissues in the human body, slip into cells and bind to the craggy parts of their targets. They are the bedrock of the pharmaceutical industry, making up a large majority of drugs on the market.

But small molecules have limited reach. About 3,000 of the roughly 20,000 known genes are considered “druggable,” meaning they can be targeted by a medicine. Of the proteins they produce, only a few hundred are targeted by available drugs. Many of the others don’t have the well-defined pockets that small molecules can nestle into, making them more challenging to reach.

Targeting the RNA molecules that help make disease-associated proteins could give drugmakers an alternate route. In theory, such a drug could stop production of a potentially harmful protein, or make more of a helpful one.

For example, Arrakis Therapeutics is working on a medicine that would block the body from making a well-known, but long thought “undruggable,” cancer protein called Myc. An experimental Expansion Therapeutics drug destroys RNA implicated in a type of muscular dystrophy. Accent Therapeutics and Storm Therapeutics, meanwhile, aim to target the special proteins involved in transcribing and modifying RNA.

They and others in the field face significant challenges, such as finding the right RNA sequences and, within them, the correct locations to target. They also need to ensure their small molecules only stick to their intended targets and not other RNA, which could lead to side effects or other health risks.

What advantages would RNA-targeting small molecules have over existing technologies?

Drugs that interfere with RNA have proven to be powerfully effective tools to treat a range of diseases.

One method, pioneered by Alnylam Pharmaceuticals and known as RNA interference, involves using small, synthetic RNA molecules to “silence” genes and prevent them from creating harmful proteins. Another, similar method, used by Ionis Pharmaceuticals and others, uses strips of nucleic acid called antisense oligonucleotides to adjust or shut off protein production.

Both have advanced RNA drug research, leading to medicines for rare genetic diseases such as spinal muscular atrophy and transthyretin amyloidosis, as well as more common conditions like high cholesterol. The effects of the medicines can last up to months at a time.

While significant progress has been made in delivering these kinds of RNA therapies into the body, they’re still largely restricted to disease targets in the liver, meaning there are many diseases they can’t yet treat.

Research has also noted their propensity to trigger immune responses and, in some cases, difficulty in crossing the blood-brain barrier or entering cells.

Small molecules could help solve these problems. They’re a better known quantity to drugmakers, easier to deliver than nucleic acid-based therapies and, because they’re taken orally, are more convenient for patients.

Small molecules might also be better at permeating cell walls and are more easily absorbed and taken up by the body. They’re cheaper to manufacture, too.

Which companies are working on small molecules that target RNA?

At least eight startups have formed to develop oral RNA-targeting drugs. Half have already caught the eye of bigger pharmaceutical companies looking to invest in the field.

The most richly funded, Skyhawk Therapeutics, has raised at least $181 million in private funding and equity, and more than $400 million in upfront cash from partnerships, according to the company. In July, Sanofi partnered with Skyhawk to develop drugs for cancer and research programs for oncology and immune diseases. Skyhawk also has deals in place with Merck, Biogen and Vertex Pharmaceuticals.

Arrakis, launched in 2015 by a team of Biogen veterans, has raised $113 million to date. Its research has drawn the attention of first Roche and then Amgen, which handed the company a combined $265 million through deals to develop medicines aimed at a variety of disease targets.

Accent has also been successful in luring big pharma, having signed partnerships with AstraZeneca and Ipsen. The company, which is focusing on cancer research, has also raised more than $100 million in venture funding.

Remix Therapeutics joined the field more recently, launching late in 2020 with $81 million in funding. The company added another $70 million this May, a few months after it teamed up with Johnson & Johnson.

Expansion, formed by pioneering RNA researchers at the Scripps Research Institute, has secured $135 million in funding and is backed by a wide range of investors including the venture arms of Sanofi and Novartis.

Storm, Gotham Therapeutics (which was folded last year into another private biotech called 858 Therapeutics) and Twentyeight-Seven Therapeutics are also researching RNA-targeting small molecules. Storm formed a cancer drug collaboration with Exelixis in 2021.

What is the status of the technology?

While several drugs built on other RNA technologies have made it to market in recent years, small molecules capable of targeting RNA are just beginning to show their potential.

The first to do so was Evrysdi, a drug from Roche and PTC Therapeutics that was approved in 2020 and helps produce a protein that people with spinal muscular atrophy lack. An experimental Huntington’s disease drug from Novartis, known as branaplam, is also in human testing, though recent safety concerns could derail its progress.

So far, none of the startups developing RNA-targeting small molecules have brought a drug prospect into clinical testing. The pipelines for some are beginning to take shape, however.

Skyhawk Therapeutics appears on the cusp of entering clinical trials, previously indicating plans to begin to advance its first drug into human testing sometime this year.

has previously said it expected to test its two lead therapies, both neurodegenerative disease treatments, in humans by the end of 2021. Storm plans to launch a clinical trial for a cancer drug by the end of this year and Accent is working to push forward a cancer medicine with Ipsen. Both candidates target METTL3, an enzyme that affects RNA function.

Arrakis lists early research programs for cancer, dyslipidemia and a COVID-19 antiviral as its most advanced targets. Expansion, meanwhile, is pursuing drugs for muscular dystrophy and ALS.

A decade has passed since the first scientific paper emerged describing a new way to alter DNA with a bacterial defense system known as CRISPR. Two of the authors, researchers Jennifer Doudna and Emmanuelle Charpentier, are now Nobel laureates, and the gene editing technology they pioneered birthed a group of biotechnology companies now testing it as a way to potentially cure a range of inherited disorders.

But innovation happens fast in the biotech industry. Even before the first CRISPR drug developers complete their clinical trials, new startup companies aiming to surpass them are following quickly in their footsteps. “Base” and “prime” editing, touted as more precise tools, have attracted sizable investment. So has another approach targeting the RNA molecules that help turn DNA into proteins. All represent ways to broaden the reach of genetic medicine.

The latest twist may come from a field of research, known as epigenetics, that’s intrigued drug researchers for years. Here’s where things stand:

What is epigenetic editing, and how does it work?

Epigenetics studies the proteins and chemicals that turn genes on and off, without altering the underlying DNA.

For years, scientists and drugmakers have tried to find the right molecular switches that cause a gene to make a protein, and use that information to treat disease. For instance, a chemically linked configuration of carbon and hydrogen atoms — known as a methyl group — can bind to DNA and change how, or whether, certain genes are “read” by specific proteins. Chemical changes to proteins called histones that hold onto DNA can also alter gene expression.

So far, that knowledge has led to limited drug development successes in the form of a few chemical-based cancer medicines. Merck & Co.’s lymphoma drug Zolinza targets a protein that affects the chemical makeup of histones. Epizyme’s soft tissue cancer drug Tazverik, meanwhile, blocks an enzyme involved in gene expression.

But in many cases it's been difficult to determine which switches control what genes, or how to get to them without causing other problems. Using new computing tools and advances in genomic research, a number of biotech companies pushed ahead with research, and are now joined by others seeking to use CRISPR-based tools. Their idea is to use CRISPR components to turn genes on or off, or to alter the expression of several at a time without cutting into or changing DNA.

What advantage would epigenetic editing offer over existing technologies?

The first iteration of CRISPR is often likened to “molecular scissors.” But, relative to the genetic changes researchers might want to make, the scissors’ blades are somewhat blunt. By cutting through DNA’s double-stranded helix, CRISPR can make accidental, off-target edits, which could have real health risks, such as damage to genes that suppress cancer.

Newer approaches are designed to make more pinpoint changes. Base editing can alter single nucleotides, or “letters,” in a gene, but only for certain combinations. Prime editing is more flexible still, capable of swapping any DNA letters as well as editing out specific sequences of nucleotides.

However, both approaches involve breaking or rewriting DNA in one way or another. Epigenetic alterations don’t, meaning they might be reversible and could help developers to more subtly dial up or down gene expression. Proponents of the approach believe these capabilities may allow gene editing to be used for a wider range of diseases, including complex conditions beyond the reach of existing technologies. But that hasn’t yet been proven.

Which companies are working on it, and who is backing them?

Since last November, three biotechs planning to edit the epigenome have launched with significant funding.

Chroma Medicine was seeded by Atlas Venture and Newpath Partners and is based on the work of MIT scientist Jonathan Weissman, who co-founded the company along with gene editing specialists David Liu and Keith Joung.

Tune Therapeutics, co-founded by Duke University researcher Charlie Gersbach and another gene editing pioneer at UC Berkeley, Fyodor Urnov, is backed by New Enterprise Associates and led by the former CEO of Precision Biosciences.

In July, Chroma and Tune were joined by Epic Bio, which revolves around the research of Doudna disciple Stanley Qi of Stanford Medicine. The startup is funded by Horizons Ventures and led by Amber Salzman, who has headed multiple genetic medicine companies, most recently Adverum Biotechnologies.

Sangamo Therapeutics, a publicly traded company best known for its work on an older gene editing method known as zinc fingers, is also working on epigenetic editing through alliances with Novartis and Biogen.

What is the status of the technology?

Work at all three of the startups is in the earliest stages. Only Epic has said which diseases it intends to target, specifically two forms of genetic vision loss, an inherited disease that causes high cholesterol, a liver disorder called alpha-1 antitrypsin deficiency and a type of muscular dystrophy. Human testing on the neuromuscular disease treatment could reportedly begin in 2022.

Chroma and Tune, which both launched within the past year, have yet to disclose specific development plans.

Sangamo, meanwhile, has published preclinical research on epigenetic editing techniques in Alzheimer’s and Huntington’s disease. Both are targets of its 2020 collaboration with Biogen.

Twelve years ago, Bill Ludwig and Doug Olson were running out of options when they enrolled in a clinical trial at the University of Pennsylvania.

They had chronic lymphocytic leukemia, a type of blood cancer, and their disease had progressed despite several treatments. They became the first volunteers to receive what would become known as CAR-T therapy, a cutting-edge treatment that turned their own immune cells into cancer killers.

CAR-T therapy drove both Ludwig’s and Olson’s tumors into remission, a finding that opened a new frontier in cancer drug research. More than a decade later, Olson remains cancer free, and Ludwig was, too, when he died from COVID-19 last year, researchers reported in February. Over that time, CAR-T therapy has gone from an academic research project to a growing class of medicines, with multiple products approved to treat several blood cancers.

Researchers and drugmakers now aim to test whether cell therapy can similarly impact other diseases. One strategy now reaching clinical testing could lead to a new way to attack autoimmune conditions like rheumatoid arthritis and Type 1 diabetes. The approach involves genetically modifying a different type of immune cell than the ones at the heart of CAR-T therapy, but holds a similar goal: a treatment with powerful and potentially curative benefit.

Over the past four years, a group of biotechnology companies have formed to develop these treatments, known as regulatory T cell, or “Treg,” therapies. Several have raised substantial funding. Larger drugmakers have begun to show interest, too. Here’s where things stand:

What is Treg cell therapy and how does it work?

Regulatory T cells are a specialized type of immune cell. They guard the body from attacking itself and prevent the malfunctions that lead to inflammatory conditions.

Those characteristics make Tregs an intriguing option for cell therapy, where, in theory, they could be harnessed to restore order to the immune systems of patients whose internal defenders have gone rogue.

The idea has intrigued researchers for decades. Academic studies of Treg cells — trials in which a person’s cells were removed, multiplied and re-infused — date back to 2004, according to Nature. But in those early studies, the experimental treatments weren’t very effective for patients receiving organ transplants or with autoimmune diseases.

Drug researchers and biotechnology companies now have more tools at their disposal, however. CAR-T therapy showed an effective treatment could be made by genetically manipulating a patient’s T cells to add a receptor that binds to a protein flag, or “antigen,” on the surface of tumors. That blueprint, along with advances in gene editing technologies and manufacturing capabilities, has made it possible for researchers to envision similar medicines being made with Treg cells.

In theory, these therapies would train Treg cells to seek out antigens on inflamed tissue and then use their multifaceted capabilities to suppress wayward immune responses. One Sangamo Therapeutics treatment in early human testing engineers the cells to target an antigen on the surface of cells in a newly implanted kidney.

But there are challenges awaiting Treg cell therapy developers, among them identifying the right antigens and ensuring the new cells don’t start causing damage themselves. For example, CAR-T treatments are associated with a potentially fatal immune reaction, but they’re being used to treat deadly cancers, not chronic health conditions.

It’s also unclear how long the effects of a Treg cell therapy would last, as some research has shown transplanted cells have trouble persisting.

What advantage could Treg cell therapy have over existing treatments?

Autoimmune diseases like multiple sclerosis, rheumatoid arthritis and Type 1 diabetes are treated with a variety of medicines meant to help slow their progression or ease symptoms. Patients who receive organ transplants, meanwhile, typically take a lifelong regimen of immunosuppressive drugs.

In each case, there is room for improvement. Drugs like Humira that are used to treat a range of inflammatory diseases can leave patients vulnerable to infections and may increase the risk of certain malignancies.

Long-term use of immunosuppressive drugs to thwart organ rejection can also lead to heart disease or cancer. A 2018 paper published in the Journal of Nephrology found that, between 1996 and 2014, heart disease was the leading cause of death among U.S. kidney transplant recipients.

Safety concerns involving cardiovascular and cancer risk have also been linked to a newer class of oral drugs for inflammatory diseases, leading the Food and Drug Administration to limit their use last year.

By comparison, Treg cell therapies are meant to help the body return to normal, potentially permanently, and without leaving its defenses compromised. For a kidney transplant recipient, treatment could train the immune system to accept the new organ rather than fight it. In autoimmune disease, a Treg cell therapy might reprogram the immune system to stop its attack without simultaneously compromising its ability to fight infections.

Which companies are working on Treg cell therapy?

At least five biotech companies have launched in recent years, raising hundreds of millions of dollars in funding. Other more established companies are in the mix, too.

The first was Kyverna Therapeutics, which was formed in 2018 and backed by Westlake Village BioPartners, Vida Ventures and Gilead Sciences, one of the industry’s top cell therapy developers. The company was co-founded by Jeffrey Greve, who started another biotech focused on autoimmune diseases, Delinia, that was acquired by Celgene in 2017.

Kyverna was joined next by Quell Therapeutics, a U.K.-based biotech formed by immunology experts at three universities in England and seeded by healthcare company creator Syncona.

The most richly funded so far is Sonoma Biotherapeutics, a startup launched by prominent immunologist Jeffrey Bluestone, who in 2019 left the Parker Institute for Cancer Immunotherapy to run the company. The startup has raised more than $335 million from a wide range of investors including Arch Venture Partners, the venture arm of Eli Lilly and the cell therapy biotech Lyell Immunopharma.

GentiBio was seeded by OrbiMed, RA Capital Management, Novartis’s venture fund and Seattle Children’s Research Institute in 2020. The startup emerged publicly with a $157 million Series A round one year later and is steered by Adel Nada, the former head of clinical development at gene editing specialist Intellia Therapeutics.

More recently, in 2021, Abata Therapeutics was launched by Third Rock Ventures and ElevateBio. Co-founded by Diane Mathis, a Harvard Medical School immunology professor and expert on Treg biology, the company is headed by Samantha Singer, a former executive with the Broad Institute of MIT and Harvard and Biogen.

Sangamo Therapeutics, a publicly traded biotech best known for its zinc finger gene editing technology, has pursued Treg cell therapy since 2018, when it acquired French biotech TxCell. A Maryland startup named TeraImmune and AZTherapies, an Alzheimer’s disease-focused company with a cell therapy platform, are also pursuing Treg cell therapy.

What is the status of the technology?

Sangamo’s kidney transplant treatment is the first of the new group of Treg cell therapies to reach clinical testing, with a Phase 1 trial that began in late March.

Others involved in the field are still in preclinical testing, but have started to make their development plans clear.

Quell is working on a treatment for patients who’ve undergone a liver transplant, while Sonoma is developing a cell therapy for rheumatoid arthritis. Kyverna is eyeing autoimmune diseases such as lupus nephritis and systemic sclerosis, and has deals in place with both Gilead and Intellia. It aims to start clinical development of one candidate in 2021.

GentiBio is targeting diabetes with its most advanced program and this month struck a partnership with Bristol Myers Squibb to develop a treatment for inflammatory bowel disease.

Abata aims to have candidates for multiple sclerosis, Type 1 diabetes and an inflammatory condition called inclusion body myositis in human trials by 2025.