Theraclone, VLST Founders Form New Antibody Startup, V-Gene

1/26/12Follow @xconomy

Two of the scientific founders of a couple of Seattle’s best-funded biotech startups have come together in a new company that aims to create a valuable antibody drug candidates while burning through the least amount of venture capital possible.

The new Seattle-based company, called V-Gene, is being started by combining a couple of technologies developed by Johnny Stine and Steve Wiley. Stine is the founder of Theraclone Sciences (formerly Spaltudaq), and Wiley is the co-founder of VLST, a pair of companies founded at Accelerator. The new startup has gotten a term sheet for an initial $1.2 million in financing from an undisclosed venture investor, Stine says, and although the deal isn’t signed yet, he expects that round to close before the end of March.

V-Gene is setting out to develop two or three antibody drug candidates for infectious diseases and cancer, and put them into preclinical testing in the next 12-18 months, Stine says. If V-Gene can deliver on those milestones, it should be in position to raise a second round of financing. At that point, Stine says, he’ll go back full-time to the lab bench at his other company, North Coast Biologics, which he says is being positioned so t0 spin out multiple antibody drug development startups.

The new company is being structured in a different way, now that Stine and Wiley say they’ve been around the block in the venture business. They turned down a $40 million venture offer from a couple of large VC firms to instead go for a smaller $1.2 million deal, which enables them to keep a much larger (30 percent) equity ownership stake. On the lean budget, V-Gene can get to a value-creating milestone after a relatively fast 12-18 months. If that goal is reached, a bigger venture syndicate could advance the drugs in development, and the founders would leave. Stine, who has been outspoken about his desire to bring biotech back to its “garage” roots, says he wants to stay in control this time and keep focused on doing what he does best—discovering antibodies at the earliest stage.

“Since we know the rules now, we can play the game according to our rules,” Stine says. “We can rapidly get in some money, rapidly create antibodies, get some quick validation, raise a Series B, and then we can wave goodbye to the company. I have no plans to keep working beyond the Series A financing. I’ll come back here (to North Coast) and do this process again. We think we have an antibody incubator.”

North Coast, which Stine founded in 2008, currently has partnerships to discover antibodies for five large biotech companies, and one large pharmaceutical company that he says he can identify—Novartis. The partnerships have provided North Coast with more than $1 million in upfront payments for discovering antibodies against targets the customers choose, and allows North Coast to earn milestone payments and royalties if the candidates advance in development, Stine says.

Stine was the driving force behind the Theraclone antibody discovery approach. That process starts with looking at blood or tissue samples from patients, and identifying natural antibodies that are made by people’s immune systems against foreign invaders like viruses, bacteria, or cancer cells. Mother Nature has evolved pretty efficient defense mechanisms against these bad actors, so Stine’s insight was to look for antibodies with broad potential to neutralize many kinds of invaders, and make genetically engineered copies of them as drugs. North Coast follows a similar philosophy in how it looks for antibody drugs, through what it calls BLAST technology. The new technology, Stine says, is more versatile and efficient than we he developed at Theraclone (then Spaltudaq) more than five years ago.

Wiley, who met Stine when the two were starting their companies at Accelerator, brought a second key piece of technology to help V-Gene get started. The latest DNA sequencing instruments have gotten so fast and cheap that it is now possible to get detailed genetic readouts on a variety of immune system B-cells that people develop in response to certain pathogens. Wiley described some of this work in a July paper in Science Translational Medicine, in which he said his affiliation was with a company called Imdaptive, Inc.

So by combining the in-depth look at the underlying DNA in the “immune repertoire” of B-cells, and combining that with Stine’s technology that works at the level of functional proteins, the two scientists believe they have a new tool for narrowing down a list of antibody drug candidates with the right properties for animal and human trials. An antibody candidate could come out of that screening process with a better ability to be the key that fits just right into the lock, or to bind more tightly with the target, Stine says.

“You may actually be missing antibodies that are better than the ones you’re screening for. That’s why it makes sense to add next-gen sequencing,” Stine says. Customers of North Coast, he says, have been asking about incorporating the genetic screening capability quite a bit recently.

Other companies are jumping in to the game by using next-generation DNA sequencing tools to examine the immune system’s diversity, including Seattle-based Adaptive Biotechnologies and South San Francisco-based Sequenta. And there are several aggressive antibody discovery startups out there, including Lebanon, NH-based Adimab and San Franciscoo-based Ablexis. Stine says V-Gene is different in how it is combining its gene-and-protein technologies specifically for developing antibody drug candidates.

Now with its financing on the way, Stine says he plans to get the new company going at the North Coast Biologics operation, with plans to hire a core team of a half dozen people. He says he’s eager to get started because his North Coast customers have been asking about how to incorporate some of the genomics work into his antibody screening technologies. “This is exciting. It’s finally happening. We’ve got partners, and this is the next step. I think we’re going to be like an antibody accelerator,” Stine says.

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