For the past ten years I have been a biopharma investor at NEA, and in that time I have witnessed the drug industry truly enter the genomic age. With technologies such as gene and mRNA therapy, gene editing, CAR-T and other cell therapies, we are living in a time of unprecedented potential (and peril, as demonstrated by Chinese researcher He Jiankui’s rogue experimentation with gene editing on two human embryos). The public markets (and in some cases, strategic acquirors) have valued these platform technologies at enormous levels, in some cases with minimal or no clinical data. While it remains to be seen how biopharma as a whole will fare in 2019, most commentators believe these high science platforms will remain front and center in investors’ minds. The attention placed on emerging, risky, but potentially revolutionary technologies provokes the question: are investors still interested in traditional drug development? And if so, what circumstances drive funding for more straightforward development plans?

Our experience at NEA is that traditional drug development programs continue to be of interest to VCs, if the risk-reward balance is right. In the current market, there is more risk that a story (particularly if it’s still preclinical) without high science “sizzle” will struggle in the public markets, which does mean that the bar is higher (and the valuation will likely be considerably lower than platform companies can achieve). However, if a molecule has a proven or novel mechanism of action for a target indication with high unmet need, it could be compelling based simply on strong animal data or early clinical data. Today, NEA announced its investment in Tiburio, a clinical-stage neuroendocrine company, which provides an excellent case study of important elements for a traditional drug development company. Tiburio is a spinout of our rare disease accelerator Cydan, which NEA founded in 2012 with the mission of acquiring and de-risking promising therapies for “orphan” diseases. (Read more about Cydan here.) The Cydan management team, led by CEO Chris Adams, boasts experience across preclinical and clinical drug development, venture capital, business development, drug manufacturing, and clinical medicine. Given the team’s unique set of skills and relationships, they can find and evaluate under-appreciated assets from large pharma, academia, biotech, and even government agencies. Alongside co-investors Lundbeckfond Ventures, Longitude Capital, Pfizer Venture Investments, Bay City Capital and Alexandria Venture Investments, NEA has funded Cydan and now three spin-outs: Vtesse for Niemann-Pick type C (built around an NIH / NCATS asset and acquired in 2017 by Sucampo), Imara for sickle cell disease (in Phase 2a with a PDE9 inhibitor licensed from Lundbeck), and Tiburio, which has licensed two assets for neuroendocrine diseases from Ipsen. Tiburio’s $31 million Series A financing will fund the company’s lead compound, TBR-760, through human proof-of-concept for the treatment of non-functioning pituitary adenoma (NFPA), as well as fund further clinical assessment of TBR-065 for other rare endocrine diseases.

While Tiburio doesn’t have a splashy new genomic platform, it has all the elements of a compelling drug development program:

• First, NFPA represents a high unmet need, with 5,000 new cases in the U.S. yearly and approximately 50,000 prevalent patients in the U.S. NFPAs are non-metastatic pituitary tumors which don’t release functioning hormones; as a result, they go generally unnoticed until they are very large and causing “mass effects” (visual symptoms due to pressure on the optic chiasm, headaches, etc.) Current initial treatment is surgical removal through the nose / sinus passages, but 40-50% of NFPAs will regrow within five years of surgery, requiring a second procedure and / or radiation. Both surgery and radiation have significant risks and side effects. TBR-760 could serve an important need in controlling regrowth of NFPAs following trans-sphenoidal surgery (TSS) or potentially mitigating the need for TSS in some patients.

• Second, TBR-760 has already been de-risked in several ways. Most importantly, the mechanism of action is clinically validated. TBR-760 is a dopamine-somatostatin chimeric molecule; both dopamine agonists and somatostatin analogs have been shown in numerous small clinical studies to shrink / halt the growth of NFPAs. While randomized, placebo-controlled data is required to change clinical practice for this indication, we view the clinical data with other agents as very encouraging. Preclinical work with TBR-760 also supports its activity against NFPAs. In addition, TBR-760 has already been in the clinic in Phase 1 and in a Phase 2 for another indication, and has demonstrated a favorable safety profile. We also have confidence in the work Ipsen performed on the compound preclinically and clinically.

• Third, an excellent CEO has joined Tiburio – Abraham Ceesay, who has 17 years of experience leading biopharmaceutical companies and was most recently Chief Operating Officer at scPharmaceuticals. Former Ipsen executives Heather Halem and Michael Culler, both of whom were involved in TBR-760 and TBR-065 previously, will also join the company and its SAB, respectively. In addition, members of the Cydan team such as CMO Shi Yin Foo, CBO Imran Babar, and VP of Development Niels Svenstrup will continue to support the company’s operations as Mr. Ceesay builds a team. An advantage of the Cydan model is the ability to quickly attract talented entrepreneurs such as Mr. Ceesay from the Cydan network, without requiring a lull in operations for a protracted fundraising period. Small biotechs, particularly those that emerge from academia, often face a “chicken and egg” dilemma; a strong CEO is required to garner institutional funding, but without funding it is hard to attract entrepreneurs.

NEA continues to invest in big science platforms such as gene editing, gene therapy, engineered T cells, synthetic engineering, etc., with portfolio companies such as CRISPR, Nightstar, Akouos, Synlogic, etc. But we take the long view, not only because developing drugs we believe will actually help patients is important to us, but also because our funds are too large to depend on “momentum investing” — when we own a sizable share of a company, a quick sale or distribution of stock once the lock-up is expired is not in anyone’s best interest. Ultimately, even the big science platform companies will have to (and in some cases, such as with gene therapy, already have) demonstrate the critical elements described above. Does the company have a therapy of relevance to a patient population that lacks good alternatives? Is there a strong likelihood that the therapy will work (and, perhaps more difficult with cell-based therapies, can be operationalized on a large scale?) Is the drug likely to be safe and tolerable? (While confidence in the safety of adeno- and lentivirus-based gene therapy has increased, we still require more data on technologies such as gene editing.) Grand visions aside, we all just want to develop drugs with a meaningful clinical benefit and a reasonable probability of regulatory success. As long as this remains the goal of biopharma venture capital, traditional drug development companies like Tiburio will always represent compelling opportunities for investors, entrepreneurs, and of course — patients.