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Tales From the Start up Financing Front on the West Coast

by

Johns Hopkins Alumnus

Dr. Jeff Oster, Ph.D., J.D.

This is an article for the Hopkins Bio Network to share experiences with fellow alumni who are considering taking the plunge into a start-up life company. I am a Hopkins undergrad alumnus, who went to get a Ph.D. in pharmacology and then turned down post-docs to get out of academia. Instead, I went straight into big pharma as an exploited scientist who eventually wound up running clinical trials and managing FDA submissions (investigational new drugs=INDs and new drug applications=NDAs) for Pfizer. However, even with all the busyness, I became bored with that routine. So, I decided to go to law school at night and was able to have Pfizer to pay for it (thanks Pfizer!) and after graduation I eventually left to start at the bottom of a new law firm.

My journey after years in different law firms (patent litigation and IP management) and as an in-house (life science and clean energy companies) counsel, I am now a part time (50%) in-house IP counsel for a public pharma. Practicing law in this capacity gives me sufficient income to spend the rest of my time starting up life science and clean energy companies. So, for my message, there are two companies I am highlighting. They are designated as company A and company I, as I seem to like names that start with vowels. I am a co-founder of company A with a physician who was once partnered with a very high profile and very wealthy business owner in the Los Angeles area involved in therapeutics.

Anyway, our strategy has had twists and turns, which is much a part of the nature of the business of being entrepreneurs and especially being biotech entrepreneurs. We rejected traditional United States (US) venture capital because quite frankly our approach is that  life is  too short and we did not want a venture capitalist (VC) controlling the company with preferred shares convertible to 80-90% control with the founders often fired in favor of so-called “experienced” management (meaning those Big Pharma folks who will focus on short term IPO to allow a quick exit for the VC fund). Yes, it can be brutal. We came up with some known compound combinations and then a known compound that has never been an API (active pharmaceutical ingredient). We dipped into our pockets for about $100K (total) to come up with a few formulations and run small in vivo assays for two lead pharmaceutical compositions and a new in vitro model for smooth muscle cell relaxation (asthma and PAH model).

But the key was a business plan that showed the lead products, the data showing safety and efficacy in predictive in vitro and in vivo models, the target markets showing an unmet need, a timeline to get through phase 2 clinical trials (starting in about a year) and into phase 2 trials (maximum 30 months’ time), and a five-family patent portfolio that is product focused (not academic mechanism of action and avoiding functional claims) and emphasizes term of protection over attempting to pre-empt a field of research. We added a few more folks to form an experienced management team (MD for chief medical officer), added a professor from The Scripps Research Institute as an advisor (I’m currently enforcing one of his patents in a law suit against Illumina). We sent the business plan out and got the meetings we were looking for around the world with private equity and non-US venture funds.

What happened? We’re getting a Series A (no seed round) commitment and looks like a famous lead fund for $30Mil of financing at a $40Mil pre-money valuation. That covers two lead drugs through phase 2 trials. We remain virtual (no labs or expensive cash-burning real estate to lease) and we live throughout the west coast (San Diego and Seattle). We kept the execution momentum going while we’ve financed the company to maintain our time line and show execution to our investors. Company I is 9-12 months behind company A in time. I’m still organizing and adding value to the lead API assets of I.   As a cliffhanger, the Company I story, is a different one, but following the same product-focused, clinical development as the goal formula, it  will be the next article once the financing is completed. In other words, to be continued, I have exceeded the article length!

 

 

 

 

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