By the end of next year, Cambridge, MA-based OvaScience will likely begin selling its first product. It’s a system called Augment, designed to boost the success rate of in vitro fertilization.
Normally, that would be a milestone that any life sciences company would be thrilled to achieve. But for OvaScience (NASDAQ: OVAS), it’s nowhere near as critical as a proof-of-concept study unfolding overseas, where the company hopes to fine-tune a process in which a woman’s immature egg cells are turned into young, healthy eggs that can be fertilized. It’s a process that, if successful, could change the IVF paradigm altogether.
“This is really why the company was started,” says OvaScience president and CEO Michelle Dipp. “This was the big discovery.”
The task isn’t easy—in fact, it’ll take years ultimately to move from preclinical test to a sold product, as OvaScience anticipates having to take a traditional route through the regulatory gauntlet to get there. But that is why OvaScience is pushing Augment—which isn’t subject to the same level of regulatory scrutiny—into fertility clinics first. By establishing a credible product, selling it successfully, and raking in revenue, OvaScience can buy the time—and raise the investor cash—it needs to potentially reach its value inflection point.
OvaScience was founded in 2011 by Dipp, Rich Aldrich, and Christoph Westphal (all of whom worked together at Boston-based Sirtris Pharmaceuticals), and Massachusetts General Hospital’s director of reproductive biology, Jonathan Tilly. The company raised about $43.4 million through two financing rounds from investors such as General Catalyst, BBT Capital Management Advisors, Cycad Group, Hunt BioVentures, RA Capital, and Bessemer Venture Partners before going public in November through a process called Form 10, which allows a company to sell shares at a fixed price and then list on the Over-the-Counter Bulletin Board before graduating to a larger exchange (such as the Nasdaq) when it meets certain requirements. OvaScience began trading on the Nasdaq in April, just two years after it was formed, and has raised a total of about $83 million.
That quick trajectory is emblematic of the 37-year-old Dipp’s quick rise through the biotech ranks. She was trained as a general surgeon and had a stint at the U.K.-based Wellcome Trust before becoming the vice president of corporate development at Sirtris, famous for developing drugs based on the anti-aging supplement resveratrol. Dipp helped spearhead Sirtris’s $720 million sale to GlaxoSmithKline in 2008 and stayed on as GSK’s head of business development for three years before getting the itch to again build companies. She left GSK and reunited with Sirtris vets Westphal and Aldrich to form Longwood Fund before setting up shop with OvaScience in 2011.
The idea for OvaScience came to Dipp, she says, after several of her friends relayed their troubles either getting pregnant or unsuccessfully attempting IVF—a process in which an egg is fertilized by sperm outside the body, in a petri dish, and then injected back into the womb. Indeed, according to the Centers for Disease Control and Prevention’s latest report on assisted reproductive technology in 2010, some 41.5 percent of IVF cycles from fresh embryos resulted in live births.
“I started to realize that IVF was the only thing we have,” Dipp says.
So Dipp scoured academic centers in the U.S., U.K, and Europe to find something that would improve IVF. She and her team acquired technologies being worked on Tilly and Harvard University scientist David Sinclair.
The idea was this: there are stem cells in the ovary known as egg precursor cells that ultimately mature into eggs. If there were a way to isolate these cells and jumpstart that process, a woman in her late 30s or early 40s with older eggs could use those cells to ultimately produce younger, healthier eggs and increase her chances of not only getting pregnant, but having a healthy baby. That process, if proven, would debunk the idea that a woman has a finite number of eggs.
OvaScience’s business model to capitalize on this approach is a two-step process, the first of which is Augment.
Augment is a process designed to upgrade the success rate of IVF by injecting mitochondria, the cell’s power plant, from egg precursor cells into older eggs outside the body, rejuvenating them and theoretically increasing the chance of pregnancy. OvaScience has a portfolio of patents and patent applications surrounding methods for isolating egg precursor cells and using them to treat infertility.
The selling point for OvaScience would be for women to avoid potentially going through IVF several times, shelling out, on average, about $16,000 a pop if a women uses her own eggs—$26,000 if she uses eggs from donors—and dealing with the hassles of the procedure. Those involve, of note, 10 days of hormone injections, which have a number of side effects.
“Women typically have to go through two to three cycles before they get pregnant or they quit,” Dipp says.
The Augment process is the same as traditional IVF, except for two key additions: First, a doctor performs an ovarian tissue biopsy, through which the egg precursor cells and their mitochondria are retrieved. Second, when the father’s sperm is injected into an egg, the mitochondria are injected along with it. This, OvaScience says, gives the eggs the energy boost needed for a successful pregnancy.
OvaScience doesn’t need to take the Augment procedure through the three phases of clinical trials that a biotech would have to for a new chemical entity. But it is conducting an 80-patient clinical study of Augment anyway to prove that it works. OvaScience began the study in December, and aims to enroll 80 women between 38 and 42 years old that have failed anywhere from two to five IVF procedures.
“The whole goal here is to identify patients who basically have age-related infertility—so, those where we think we can make a big difference,” Dipp says.
Half of those women will undergo standard IVF procedures, while the other half will use Augment. OvaScience’s goal is to show a big increase in the number of healthy, live births. Dipp expects those results by the end of 2014, at which point OvaScience hopes to have the data in hand to begin selling the system. (Dipp says the company also plans to do an international study before selling Augment outside the U.S., and is slowly adding to its team to help push that effort forward.)
The question then becomes whether OvaScience can successfully ramp up sales, and the company faces a key challenge in doing so: are the benefits of Augment big enough to convince people to pay for it? The problem with that, of course, is it’s a big out-of-pocket check. But Dipp argues that that’s an expense most women choosing IVF are already logging. While roughly 15 states in the U.S. offer some form of reimbursement for IVF, Dipp says coverage can depend on the person’s employer, and women often don’t want to go through the steps mandated by the insurance company—such as first trying, and failing, several cycles of a generic drug named clomiphene citrate (Clomid) that is supposed to stimulate ovulation.
“So even when they have the insurance, they’re often paying out of pocket,” Dipp says.
OvaScience is discussing right now whether to price it at a premium to current IVF treatments, or comparably.
“We’re thinking about it as, if we can save you an IVF cycle, would you be willing to pay the cost of that cycle up front?” Dipp says. “That’s generally the ballpark we’re thinking about, but to be clear we haven’t decided on a price yet.”
Then, once OvaScience rolls out Augment, its real test will begin. Namely, whether it can prove that OvaTure—the name for its process of turning egg precursor cells into eggs, and successfully fertilizing them—works.
Here’s the process OvaScience has in mind: A woman would get an ovarian tissue biopsy to retrieve an egg precursor cell. That egg would be matured and fertilized in vitro before being injected back into the womb. The upshot is big: not only does it eliminate hormone injections, which, side-effects notwithstanding, aren’t available to all women (those with cancer, for example); but also, the egg created is young and healthy, increasing the chances of pregnancy and lowering the likelihood of birth defects.
Of course, OvaScience has a very long way to go to get there. Researchers behind OvaScience have only proven so far that the egg precursor cells from mice can be matured and fertilized. Dipp says the company is in the process of proving that concept works in a human egg right now, with pre-clinical studies underway overseas, and hopes to have proven, by the first half of next year, that fertilization in that scenario can take place. While OvaScience may be gearing up to sell Augment around that time, even Dipp acknowledges what’s more important.
“If I had to pick why did people invest in this company, it’s because of OvaTure,” she says.