Karuna Therapeutics, Inc.

iStock, SvetaZi Big-name venture capital firms are raising billions again, though funding a small number of de-risked companies. Meanwhile, smaller VC firms are catching the less flashy companies they think could be future pillars of the sector. The biotech industry’s largest venture capital firms are reloading with billion-dollar funds for the next generation of biotechs, a welcome sign of good times ahead. But that high-pro is largely earmarked for clinical-stage companies with well-known executives and data to show. Sara Choi, a partner with Wing Venture Capital, said when a billion-dollar VC fund is announced it’s important to “double click” on what they’re focused on. If they incubate their own companies, the major raise is likely going to just a handful of splashy companies. Think Flagship Pioneering, the “venture creation” firm that does just that, incubating innovative companies and pumping hundreds of millions into early raises. Flagship raised $3.6 billion in July, which will be used to support 25 new companies . Another is ARCH Venture Partners, a familiar name in some of the buzziest biotech raises of the past year including Metsera and Xaira Therapeutics . ARCH raised $3 billion recently to found and invest in early-stage companies, with a particular focus on companies working with AI and data-driven biology. Those new funds are good news for the biotech sector, said Cain McClary, managing partner and founder of KdT Ventures. “It’s good for us that those larger companies exist. They’re taking big swings.” But venture capitalists who spoke with BioSpace pointed out that these huge new funds do not provide a full picture of companies outside of that orbit that may be smaller with preclinical or more experimental science. That’s where smaller VC firms like Choi’s or McClary’s come in. Both say they’ve been plenty busy funding early-stage companies, even if their work has a lower profile. “A lot of dollars are being raised. Where they’re going to really matters,” Choi said. “I would like to see more funding at the pure-play series B stage, because to me, that’s where the drop off is happening.” Setting the Table Jakob Dupont, executive partner with Sofinnova Investments, said that small companies need to do their research before approaching a VC firm. That’s always been important but has become more so given the market’s current preference for de-risked, late-stage assets. “It’s important to recognize that all funds are not created equal,” he told BioSpace . Sofinnova, a veteran life sciences investment firm that’s been around since the 1970s, lives between the smaller funds and the billion-dollar raisers. The firm is currently on the back-half of its 11th fund, according to Dupont, which was $510 million. Sofinnova targets clinical-stage private companies and the fund has so far contributed to 10 investments. It’s latest was Seaport Therapeutics, the neuroscience biotech from the former leaders of Karuna Therapeutics, which just raised $255 million in a quick Series B after emerging from stealth in April. Other VC firms may be focused on seed funding, angel investing or early Series A rounds. They may be looking for more platform companies or singleassets. Are they oncology experts or into cell therapy? All of these specifics are need-to-knows before going out to investors in this market to ensure you’re not wasting anyone’s time, Dupont said. The market is full of biotechs with proven leadership teams and existing investor syndicates to tap into right now, Dupont pointed out. In addition to Seaport, BioAge is another good example in Sofinnova’s portfolio. “If you’re a relatively unproven management team, then maybe think that the table is not going to be set for you in the same way,” he said. “What’s happening to a degree now is that we’re still in a somewhat conservative space where we’re more interested in investing in proven management teams [and] de-risked clinical data.” Dupont hopes that will change and preclinical, riskier bets will rise again. But for now, companies need to hit the books and do their research to find the right investors. A Return to Normal, Whatever That Is While the larger market stays on the conservative side, smaller VC firms like Wing and KdT that target earlier-stage biotechs are more than willing to take some bets on new science. Wing’s portfolio companies include Cartography Biosciences , which launched in July 2022 with $57 million and a focus on developing immunotherapies using computational technology to identify targets. Another is Veo Therapeutics, which also launched in 2022 with $12 million to find drugs using an in vivo data generation platform. Over at KdT, the portfolio includes Rejuvenate Bio, which is developing a gene therapy to treat multiple age-related diseases that will initially be tested in dogs to assess its ability to extend lifespan. The biotech launched in 2022 with $10 million. Another biotech that KdT has supported, generative AI–focused Terray Therapeutics, announced a multi-target small molecule discovery agreement with Bristol Myers Squibb in December 2023. Seed and series A funding is definitely still happening, according to Choi, but biotechs are facing a higher burden of proof than companies that started out in the post-pandemic frenzy of 2021. During that time, megarounds were everyday occurrences for early-stage companies. There was plenty of money to go around for riskier bets, plus interest from outside investors. Now, fundraises pushing $100 million or more require a bit more convincing. “There has been a—quote, unquote—return to normalcy or correction when it comes to valuations,” Choi said. “On the front lines, things haven’t really slowed down.” McClary said smaller VC firms are a great proving ground for early biotech leaders, and that’s what he hopes to be a part of with KdT. He started the firm in 2017, riding through the pandemic when cash for biotechs was easy to come by. “Folks have moved the goalpost on earlier stage companies and are requiring clinical data and are requiring you to go longer with less,” McClary said. That has required KdT’s companies to be extremely judicious with resources and carefully prioritize their pipelines. These companies have to work harder in this earlier stage to make it to the late-stage when larger firms will take notice, he added. Just like its larger peers, KdT has recently reloaded , collecting $100 million in its fourth fund. That brings the firm’s total assets under management to $250 million. KdT made a point of keeping the fund small, although it was up on the $80 million raised in the last round. McClary said KdT actually turned down some money, aiming to keep the fund small. “We’re willing to sacrifice the upfront, the fee flow that a lot of these larger funds have to stay myopically focused on that zero to one stage,” McClary explained. “Not having unlimited capital for these early-stage checks forces a much more thoughtful process in underwriting these early-stage opportunities.” KdT has also pointed companies toward government dollars to additionally bolster cash reserves when possible, McClary said. “We’ve actually done quite a bit of work in trying to build relationships and bridges with different governmental entities to make sure that we have access to any and all capital, and not just equity capital for our companies,” he said. Dupont said larger firms want to see discipline as companies transition into the later stage. Instead of the heady days of the pandemic when a slate of pipeline projects showed depth, investors want to see one or two of the strongest assets. They also want to know that clinical trials are well designed, the FDA has been engaged and the potential patient population and unmet need has been studied. Being careful with the capital you have is also key when thinking about future investment needs. That means keeping the staff and executive team as small as possible, according to Dupont. “Just keep it small, keep it lean,” he said. “Really protect that money that you have, because it is still a bit of an uncertain fundraising environment.”

iStock, leolintang BioSpace has been compiling a list of the most innovative and exciting biotechs for a decade. Here we take a look back at noteworthy companies from each of those lists. 2024 marked the 10th year of BioSpace ’s NextGen list, a collection of biotechs that are on the cutting edge and poised to break barriers in the industry. As we prep next year’s list, to be released in January, we decided to take a look back at a notable honoree from each of our past lists. There were many fascinating companies that have gone on to great things; on the other hand, sometimes things don’t go as well as we predicted. We have a few not-so-great stories to tell, too. ___________________________________________ 2024 ReNAgade Therapeutics Status: Bought by Orna Therapeutics This company made our list for a pretty big reason: a massive $300 million series A in one of the toughest financing environments in recent memory. The company was launched in May 2023 to develop RNA medicines to treat diseases anywhere in the body. One of the lead investors in the round was MPM BioImpact, whose managing partner Ansbert Gadicke founded ReNAgade. Early in the biotech’s history as a stealth company, there was a bit of foreshadowing as to where the company would end up. ReNAgade struck up a partnership with Orna Therapeutics, which was also working on RNA therapeutics. The work attracted the attention of Merck in a deal worth up to $3.5 billion with development and commercialization milestones. Given the money on the line, Orna went all in on ReNAgade, buying out the biotech in May of this year—almost a year to the day after its launch. Financial details were not disclosed. See the full class of 2024 . ___________________________________________ 2023 Mariana Oncology Status: Bought by Novartis What a year 2023 turned out to be for Mariana Oncology. After raising a $175 million series B in September of that year, the company was bought out by Novartis for $1 billion , plus $750 million in milestones. Originally known as Curie Therapeutics, Mariana emerged from stealth with a $75 series A raise in December 2021 to develop new radiopharmaceuticals. The company caught our eye and made the 2023 list, but apparently Novartis was keeping an eye too. The radiopharmaceutical-hungry Big Pharma said at the time of the deal that Mariana’s technology would help it double down in the field of radioligand therapeutics. On a recent earnings call, Novartis executives expressed their excitement in the Mariana technology, saying that candidates from the buyout are speeding toward the clinic and could go after well-established antibody-drug conjugate (ADC) targets. See the full class of 2023 . ___________________________________________ 2022 Eikon Therapeutics Status: Operating Eikon has spent the two years since landing on our list racking up cash and poaching executives from CEO Rodger Perlmutter’s former employer Merck. The biotech’s raises have been huge in a really tough market: a $148 million series A in May 2021, $518 million for a January 2022 series B and most recently, $106 million in series C financing in June 2023 . At the most recent raise, Eikon also announced the acquisition of a clinical pipeline. The company now boasts oncology assets in Phase I and II testing for non-small cell lung cancer and melanoma, respectively. The rest of Eikon’s pipeline is in preclinical research or discovery. See the full class of 2022 . ___________________________________________ 2021 EQRx Status: Bought by Revolution Medicines, assets terminated EQRx emerged with a lofty goal we could all get behind: develop drugs at a lower cost. It raised a cool $200 million in a July 2020 series A, then caught the special purpose acquisition company (SPAC) wave to the Nasdaq just over a year later, adding $1.8 billion in an August 2021 IPO. The company was helmed at first by serial biotech entrepreneur Alexis Borisy. Trouble emerged shortly thereafter, with EQRx cutting lead asset sugemalimab for NSCLC after determining it had no path to market. The company shifted to two other assets, aumolertinib and lerociclib, but later dropped the former. Several rounds of layoffs made the company ever smaller before EQRx finally gave up entirely. The assets were terminated as Revolution Medicines bought out the company and its hefty $1 billion bank account. Borisy has since gone on to start a venture capital firm called Curie.Bio . See the full class of 2021 . ___________________________________________ 2020 Cerevel Therapeutics Status: Bought by AbbVie Cerevel as a company is no more, but its medicines live on at AbbVie, which bought the biotech for $8.7 billion in December 2023. The deal was part of a trend of neuroscience-focused biotechs being bought up by Big Pharma, with Cerevel moving in the same month as Bristol Myers Squibb bought Karuna Therapeutics for $14 billion. BMS was rewarded quickly with a recent FDA approval for KarXT (now Cobenfy) for schizophrenia, but AbbVie too has had success since sealing the deal. Cerevel’s investigational Parkinson’s disease therapy tavapadon improved control of motor symptoms when used with common treatment levodopa in a Phase III trial that read out in April. The data would support a regulatory filing for the therapy, executives said at the time. Two additional late-stage readouts for the therapy are due later this year. But the real star of the deal was emraclidine, which is in Phase III studies for schizophrenia. Cerevel also brought a major depression treatment to the table. “These assets clearly will be great additions to our neuroscience franchise,” said AbbVie’s CEO Rob Michael on the company’s second quarter earnings call. See the full class of 2020 . ___________________________________________ 2019 Genevant Status: Operating One of Roivant’s offshoots, Genevant is still operating today, working on developing nucleic acid delivery technology. Just last week, Genevant signed a deal with CRISPR gene editing company Editas Medicines to develop in vivo gene editing medicines for two undisclosed targets. Genevant has also recently signed deals with Novo Nordisk, Tome Biosciences, Gritstone bio and Repair Biotechnologies. But perhaps the most compelling story from Genevant since we named them to our NextGen list has been their litigation with famed biotech Moderna over the lipid nanoparticle delivery system used for its approved COVID-19 vaccine. Genevant and Arbutus Biopharma filed several patent infringement claims against Moderna arguing that the vaccine developer used their technology without license or proper compensation. A judge sided with Arbutus and Genevant in April, with a trial set for next year. See the full class of 2019 . ___________________________________________ 2018 BlueRock Therapeutics Status: Bought by Bayer Bayer bought cell therapy biotech BlueRock Therapeutics in August 2019 for $1 billion, but rather than absorbing the company into itself, the German pharma kept the name and unit operating. This unusual but refreshing strategy means that the company essentially lives on. In June 2023, BlueRock reported that Parkinson’s disease stem cell therapy bemdaneprocel was well tolerated with no significant side effects in a Phase I trial with 12 patients. It was the first cell therapy to show positive results in human testing, Bayer said at the time. A September update showed similar safety results. The therapy has since received a regenerative medicine advanced therapy tag from the FDA. Elsewhere in the pipeline, BlueRock’s investigational iPSC-derived cell therapy OpCT-001 for certain retinal disorders was cleared for human testing in September. The therapy was licensed from FUJIFILM Cellular Dynamics and Opsis Therapeutics. See the full class of 2018 . ___________________________________________ 2017 Decibel Therapeutics Status: Bought by Regeneron Regeneron made a splash at this year’s American Society of Gene and Cell Therapy meeting in Baltimore when it showcased results of a Phase I/II trial of hearing loss therapy DB-OTO. The therapy restored hearing in two children who had a genetic form of hearing loss. While Regeneron’s branding was behind the conference presentation, the gene therapy came from Decibel Therapeutics. Regeneron bought the biotech for $109 million in August 2023, at which point the two companies had already been working together for six years. The biotech was integrated into Regeneron’s genetic medicines portfolio. See the full class of 2017 . ___________________________________________ 2016 CRISPR Therapeutics Status: Operating CRISPR Therapeutics made history last year as the first company, along with partner Vertex Pharmaceuticals, to gain an FDA approval for a CRISPR-based gene edited therapy. The companies were granted an FDA greenlight for Casgevy in sickle cell disease. The same day, bluebird bio got a similar nod for a competing gene therapy, though not one that involves CRISPR technology. The FDA approval was a triumph of modern biotechnology. But the roll out has been slow given the nature of gene therapy treatment, and only recently have patients begun receiving infusions of the medicine. Casgevy is now also approved for beta thalassemia, another blood disorder. The company has turned to the rest of its pipeline, including a CD19-directed CAR T cell program called CTX112, which is being tested in both cancer and autoimmune disorders. CTX131 is in development for hematological malignancies as well. CEO Sam Kulkarni has expressed confidence in CRISPR’s leading position in gene editing and pledged to be on top of emerging technologies. “One of the most important considerations for us is that we don’t get disrupted,” he said at the Goldman Sachs healthcare conference in June. “We are the leaders in the gene editing space and we have been, but we want to make sure that we’re looking at every improvement that’s coming out there.” See the full class of 2016 . ___________________________________________ 2015 Spark Therapeutics Status: Bought by Roche Like BlueRock, Spark Therapeutics was folded into a Big Pharma but kept its identity. Spark earned a spot on our very first NextGen list in 2015 thanks to its active clinical hemophilia program and fundraises totaling $122.8 million. The company caught the eye of Roche, which swooped in with a $4.8 billion bid in February 2019. The deal eventually turned into a bit of a boondoggle, with regulatory delays slowing things down until it finally closed that December. At issue was Roche’s hemophilia Hemlibra. Regulators worried that Spark’s hemophilia program and Hemlibra together could stifle competition and create a monopoly. Spark brought with it the approved eye disease gene therapy Luxturna. With the deal closed, Spark has charged forward under the Roche banner. The unit is developing a 500,000-square foot Gene Therapy Innovation Center in Philadelphia as its flagship manufacturing space. See the full class of 2015 .

Seaport has developed a platform called Glyph designed to enhance efficacy and reduce the side effects of potential drug candidates. The original research behind the platform came from Monash University in Australia. Potential medications developed using Glyph are absorbed like fats in the diet through the lymphatic system. The Series B adds to Seaport’s $100 million Series A round that was announced ​ in April, alongside the launch of the company, meaning they now have $325 million in total funding. The round was led by General Atlantic and had several new investors including T. Rowe Price Associates, Inc., Foresite Capital, Invus, Goldman Sachs Alternatives, and CPP Investments. The original investors in Seaport also contributed to the Series B including ARCH Venture Partners, Sofinnova Investments, Third Rock Ventures, and co-founder PureTech Health. American entrepreneur Daphne Zohar is both a co-founder and CEO of Seaport. Zohar was previously co-founder and CEO of PureTech Health, which was launched almost 20 years ago. Since then, PureTech has developed 29 therapeutic candidates across a range of different indications, three of which have FDA approval. PureTech has also launched several successful spin-out companies including Karuna Therapeutics, which was acquired ​ by BMS earlier this year and was behind the successful development and recent approval ​ of the schizophrenia drug Cobenfy (KarXT). Zohar was also a co-founder of Karuna. “Seaport is advancing novel therapeutics that have proven clinical efficacy but had previously been held back by an issue we can now address with our Glyph platform,” said Zohar in a press statement. googletag.cmd.push(function () { googletag.display('text-ad1'); }); “This financing enables the important clinical work that brings us another step closer to delivering new medicines to make a difference in the lives of patients and their families.” The quest for better psychiatry medicines ​ Seaport is hoping to use its oversubscribed fundraising rounds to create better psychiatric drugs that are more effective, last longer and have fewer side effects than those currently on the market. The Glyph platform allows previously discovered potential neuropsychiatric therapies, that may have been abandoned due to adverse events, or poor absorption, or similar, to have a new lease of life, as well as new potential drug candidates. “The development of important new neuropsychiatric medicines is often halted due to poor drug-like properties or unacceptable tolerability, challenges that our Glyph platform can now uniquely address,” said Steve Paul, co-founder and Board Chair at Seaport. “For instance, xanomeline was an effective drug that faced tolerability challenges, but once resolved, led to the FDA approval of Cobenfy for schizophrenia. With Glyph, we believe each of Seaport’s programs could create similar life-changing value for patients.” Seaport currently has three candidate medicines in its pipeline. The most advanced, SPT-300 is a prodrug of allopregnanolone being developed to treat major depressive disorder with or without anxious distress. Allopregnanolone has been shown to quickly reverse the symptoms of depression and anxiety, but previously was only effective in an intravenous format. Seaport has developed an oral version of this candidate, which is now at phase 2b. The other two candidates are at an earlier stage and include SPT-320, a novel prodrug of agomelatine soon to enter phase 1 studies for the treatment of generalized anxiety disorder and SPT-348, a prodrug of a non-hallucinogenic neuroplastogen in development for the treatment of mood and other neuropsychiatric disorders.