Does Deerfield have The Cure?

We certainly have come a long way since Martin Cline’s disastrous gene transfer experiment at University of California, Los Angeles ignited a public scandal forty years ago.

Cline injected recombinant DNA to treat two patients at foreign clinics with terminal hereditary blood disorders, however, the ethical debate remained in its infancy.

US guidelines explicitly forbade the experiment, although, technically, without jurisdiction over Cline’s subjects. The conservative religious lobby still had a field day and Cline was forced to resign his departmental chairmanship, amid the glare of an extensive public inquiry.

Regulatory scrutiny also daunted the inventors of the first successful gene therapy, Strimvelis, decades later, although they possessed one crucial advantage.

In severe combined immunodeficiency (SCID), the team at San Raffaele Telethon Institute for Gene Therapy (SR-TIGET) was addressing devastation to life from a very young age, and a disease that had had comprehensive media coverage.

The public had been fascinated previously with the plight of brave young David Vetter, whose SCID condemned him permanently to a sterilised, transparent chamber.

Dubbed subsequently as the bubble disease, just 15 people in Europe are born with the genetic variant of SCID targeted by Strimvelis each year, according to GlaxoSmithKline, which licensed the drug for commercialisation.

The stakes remained high as an earlier iteration of SR-TIGET’s programme had, tragically, caused five patients to develop leukaemia. As it turned out, the retroviruses used to insert genetic constructs into the body could also trigger cytotoxic DNA switches.

But the momentum was apparent. For the families enrolled in clinical trials, Strimvelis was not an ethical betrayal but an unanticipated reprieve from acute distress.

Gene therapy today perhaps represents the most exciting medical advance since the introduction of monoclonal antibodies in the late 1980s.

In the global crusade for a coronavirus vaccine, for instance, hope largely springs from gene therapy developers that have pivoted to tackle the RNA-driven disease, using viral vectors to elicit an immune response.

And how could we forget the headline exit at University of Oxford-founded Nightstar Therapeutics, the gene therapy developer focused on rare eye diseases, swept up by Biogen for $800m in March 2019.

But the commercial case for rare disease gene therapies needs further work. Tackling rare diseases often means accepting first-mover advantage, given the small disease populations, which can also make it harder to plan clinical trials.

At a cost of about €594,000 ($700,000) per patient, GlaxoSmithKline had reportedly sold five Strimvelis treatments as of March last year.

The corporate has closed its internal rare disease unit and sold off its wonder drug for a stake in University College London-founded Orchard Therapeutics, which has a second SCID candidate in its pipeline.

An estimated 80% of orphan diseases could be corrected with genetic therapies that address a single gene or gene pair, but the chances to crack each will decrease without the risk-tolerant capital to bring forward foundational research.

And TTOs can no longer bank on riding the crest of the biotech venturing boom once markets have adjusted to any coronavirus-driven recession.

To capture gene therapy’s full benefit it is imperative to help programmes targeting smaller disease populations across that valley of death so that the full spectrum of medical needs can be met, but the economic context may no longer be as permissive.

Step forward healthcare-focused investment firm Deerfield Management, which has committed more than $2bn to early-stage life sciences research to be deployed over this decade.

Deerfield aspires to breathe more dynamism into the fight against conditions including rare and orphan diseases, and has endowed 17 academic institutions – 16 in the US plus Weizmann Institute of Science in Israel – with pre-clinical bridge funds ranging from above $50m to around $130m.

Deerfield’s academic partnerships include University of Michigan; Yeda Research and Development the commercial arm of the Weizmann Institute of Science; Duke University; Columbia University; Northwestern University; Harvard University; Vanderbilt University; Johns Hopkins University; Dana-Farber Cancer Institute; Broad Institute; University of North Carolina-Chapel Hill; University of California, San Diego; and University of Illinois at Chicago. Deerfield also has a combined association with Rockefeller University, Cornell University and Memorial Sloan Kettering Cancer Center through their joint discovery unit, the TDI. Finally, Deerfield has a project-specific collaboration with MD Anderson Cancer Center.

Deerfield’s commitment

With more than 30 years of expertise biotech, Deerfield managing partner James Flynn certainly has the pedigree and he has faith his industry will continue to prosper as the market evolves.

Flynn reflected: “When I started, almost everything was a guess because the biology had not been worked out – people were testing soil samples on mice, tree twigs and everything.

“What has been so exciting has been the progress from genetics to disease and disease back to its roots and biological causes, and the simultaneous development of technologies to target diseases more precisely.

“Gene therapy is a great example – it is the combination of knowing where to look and having the tools to fix things. It has really amplified our ability to come up with real, genuine threads.”

Flynn sees no issue in continuing to underwrite Deerfield’s projects but in any case, believes there will be plenty of co-investment, thanks to the allure of what has proven an exceptional period of biomedical research.

He proclaimed: “We are really in a terrific time as far as therapeutic discovery is concerned. And people should be investing money in biotechnology and drug development.

“Certainly, we believe in it and we are doing it, and if we are successful and it is clear there is a lot of wood to chop, then I suspect the environment will continue to be healthy for raising capital.

“But you know if the price of assets is driven up, or if all the unique opportunities dry up and everything remaining become difficult, then I could see the situation changing sometime down the road.”

Deerfield’s financial contribution is one thing, but what also stands out is the dedication to grassroots biomedical resources and tearing down some of the barriers that kill off promising science too often.

The planned incubation real estate at Deerfield’s marquee New York City development speaks for itself: more than 300,000 square feet of research labs funded to the tune of $635m, equating to some seven gridiron football fields laid side-by-side.

Deerfield’s endeavour, known as The Cure. – and Flynn is quick to point out the full stop, which implies a definitive remedy – will act as the gateway for its academic partners into its vast drug discovery engine: Deerfield Drug Discovery and Development (3DC).

Armed with advanced genetic tools, in-vitro assays and regulatory expertise, it is here many academic researchers will confirm the finer points around whether their idea has clinical merit, and, if so, the best means of securing it.

Flynn exalted: “The Cure will be the hub for all our academic partnerships – a number of them will be represented within the building.

“And we will also have our discovery team, which we call 3DC, within the building working on all of the projects we have across our partner institutions.”

The opportunity

And boy Deerfield’s partners are rubbing their hands at the opportunity. Most of the funds GUV spoke to view its strategic presence – the firm provides input through the steering committee of its funds – as crucial to focusing faculty on plausible, viable disease targets.

Deerfield has licensing options in place and initially invests ahead of the traditional VC lifecycle but will also supply further financing for assets that make it to clinical development.

Jorge Aquino, director, ventures, for Johns Hopkins Technology Ventures – the commercialisation office for Johns Hopkins University that works with Deerfield in the $65m Bluefield Innovations collaboration – said: “It is not just about advancing the science but also doing the nitty-gritty of drug development.

“Sometimes that does not receive the attention it deserves from an academic standpoint, but it is needed to put the pieces together to do the regulatory activities that get you to that end-stage through to commercialisation.”

TJ Augustine, vice-chancellor for innovation at University of Illinois at Chicago (UIC), backed by Deerfield’s $65m West Loop Innovations, believes the fund improves UIC’s commercialisation resources where it had shortcomings previously.

Moreover, the firm is perceived as enticing more academic talent to tackle biochemical pathways that may be less of a priority for other biopharmaceutical investors.

Augustine observed: “I think Deerfield are a perfect match for what we lack at the university: bringing the strength in research and ideas that can be turned into products.

“At the end of the day we do not have the same understanding of the market for pharmaceuticals, nor honestly the financial resources required to commercialise in that space. We do not have a team of business leaders on call to build these startups.”

Bryan Baines directs scientific collaboration at Four Points Innovation, the $130m Deerfield partnership at Duke University. He voiced similar points to Augustine but stressed how Four Points was starting to convince even faculty sceptical of its involvement.

Baines recounted: “When I first approached them [about Deerfield], the researchers could perhaps be a little circumspect, and I would not blame them for that.

“But then they recognise ‘oh this is the bit where I am really not an expert’. And you should remember that Deerfield and Four Points will still need their fundamental biology – you still need to interrogate the underlying science.

“So, it is a nice marriage and I have realised we probably have more projects that can fit into that model.”

The best research

Academic bridge funds have become all the rage ultimately because early-stage investors believe in the fundamental science and the capabilities of the institutions they choose to ally with.

The scale of Deerfield’s involvement is unusual, but many are heading down a similar path – drug discovery firm Evotec has several in place, including the £13m ($16m) Lab282 partnership with University of Oxford, while the $50m AstraZeneca, GlaxoSmithKline and Johnson & Johnson Innovation-backed fund Apollo Therapeutics is aimed at Imperial College London, University College London and University of Cambridge.

What factors influence selecting an academic partner with which to entrust bridge funds? Deerfield has a number of rubrics.

Flynn explained: “We looked at every institution in the US and a handful from outside for the amount of grant dollars they receive within certain buckets of research, and we also studied what cores the university has.

“Some had gene or cell therapy cores, others have large chemical libraries – different institutions have different capability sets.

“Then there were structural questions – some institutions are divided up into sub-institutions, all of which have their own income concerns and methods.

“Those can be very difficult to deal with. If you have an agreement you need it to apply to all areas of an institution, for instance, not just one of them.”

UIC takes pride in its inter-disciplinary programmes and the contribution they play in discovering new medicines. The brainstorming exchange includes the university’s UI Center aligning medical and chemistry schools in the search for new drugs.

Melissa Maderia, scientific director at West Loop Innovations, said: “It really is an interdisciplinary approach where we have a strong College of Medicine, Pharmacy, Dentistry, Nursing and Applied Health Sciences – and we are able to pull all these elements together to solve problems in an application setting.”

Augustine added: “One of the things we learned with Deerfield is they want to work with universities that have a track record for success because once they have done this before it proves you can do it again.

“We have tried to build programmes such as our Office of Technology Management’s engagement at early-stage, or programmes like the Chancellor’s Translational Research Initiative, where we provide much small dollar amounts than Deerfield that are nevertheless meaningful in moving early-stage investments forward.”

Deerfield’s partners enthuse over the quality of their foundational research but concede they need more managerial and business acumen to focus on the potential commercial impact.

Many possess enviable records already – UIC currently has five faculty-invented drugs on the market, for example – or massive health systems, like that of Duke University, from which clinical data can be acquired.

Taken together with a university’s existing funding channels, Baines argues Deerfield permits research to be diversified beyond an institution’s traditional areas of expertise.

He predicted: “At Duke, the research is mainly cancer and cell biology – brain cancer in particular, and orphan diseases and vaccines are also really strong.

“But I think having the money there allows us to move some of these out and gives us other options besides the ones we generally encounter.”

Deerfield may also incentivise faculty to concentrate on commercial prospects. Amid a deluge of competing research priorities, scientists need milestones and deadlines to ensure their discovery does not get left by the wayside.

Baines clarified: “My understanding is they put forth a development plan and it is important to have that discipline early on.

“Deerfield will come out and lay down a plan and say, here is the blueprint we are going to follow, and if we do not get a result to a certain threshold then we are going to cut the funding off. It is important to have that path of agreement.”

Universities endeavour to deliver the quality Deerfield seeks and will be forbearing in screening each project   – most of the funds GUV spoke to were still in the process of finalising their initial request for proposals.

Once passed by the steering committee, they expect prudence to pay dividends by drawing the attention of external venture capital investors in latter-phase rounds, leveraging Deerfield’s reputation.

Big pharma can also be expected to be keeping a close eye, with many of Deerfield’s management previously having worked in industry.

Baines noted: “A high percentage of people that are in VC in Deerfield are ex-pharma people, and they can be expected to have connections. When they say something looks good – it has to make a big difference.”

Flynn, however, clarifies that the firm could single-handedly sustain programs well into clinical development, staying the course without industry so long as it is convinced of the market potential.

Faculty inventors anxious about the challenging nature of their proposals will likely be pleased with Deerfield’s perseverance and its stance could well prove critical in rejuvenating the campaign against rare diseases.

Flynn reasoned: “Deerfield is an investment firm not a drug company, so at the end of the day we are not going to own these products.

“We are going to facilitate the advancement of exciting science, and turn it into a pharmaceutical-grade product, look to prove that it works. And then it is up to somebody else.

“But I will also say we are committed to funding these projects through their utility. So, if we have to take them to market, then we will.”

Orin Herskowitz, executive director at Columbia University’s tech transfer office, Columbia Technology Ventures, added: “Columbia University’s ecosystem for commercialisation and science-based entrepreneurship is extremely robust.

“We believe Deerfield’s selection of Columbia further validates that it is an outstanding institution for identifying innovations with potential to make a huge impact on society.

“Access to early-stage risk capital is always a constraint for teams looking to bring their innovations to market, and hence we are incredibly excited to be working with an experienced and well-funded firm such as Deerfield.”

Much of the Deerfield academic pipeline remains too early-stage to discuss in any detail, with delays at some of the more recent funds due to operational barriers surrounding the pandemic.

Four Points Innovation, for instance, is still making its way through the first round of 29 submissions from principal investigators, although Baines said something concrete could be ready to announce at some stage this autumn.

Baines’ early picks at Four Points include an oncology drug candidate that he feels could slot nicely into Deerfield’s risk-tolerant portfolio.

He ventured: “Deerfield is willing to take a chance on a non-validated target. They are not jumping in second-or-third, instead they are saying OK this project might have an edge, based on the people they have to evaluate, and then they will decide whether the project is worth taking a chance on.”

Conclusion

Biotech’s ability to continue the incredible momentum of recent years could depend on the life jacket for nascent research Deerfield and others can provide, so the firm’s commitment may be a boon to tech transfer in years ahead.

The company has laid down a marker in terms of investment, but only time can tell whether it has the right procedures and management in place to convert into clinical grade-assets.

Often the bigger bets are the ones more susceptible to going awry, and it will be fascinating to compare Deerfield’s exploits to peers that have been slightly less bullish in setting up academic bridge funds.