Cytera Cellworks hopes to revolutionize the so-called ‘clean meat’ industry through the automation of cell cultures — and that could mean one day, if all goes to plan, the company’s products could be in every grocery store in America. Cytera is a ways off from that happening, though. Founded in 2017 by two college students in […]
Cytera Cellworks hopes to revolutionize the so-called ‘clean meat’ industry through the automation of cell cultures — and that could mean one day, if all goes to plan, the company’s products could be in every grocery store in America.
Cytera is a ways off from that happening, though. Founded in 2017 by two college students in the U.K., Ignacio Willats and Ali Afshar, Cytera uses robotic automation to configure cell cultures used in things like growing turkey meat from a petri dish or testing stem cells.
The two founders — Willats, the events and startups guy and Afshar the scientist, like to do things differently to better configure the lab as well — like strapping GoPros to lab workers’ heads, for instance. The two came together at the Imperial College of London to run an event for automation in the lab and from there formed their friendship and their company.
“At the time, lab automation felt suboptimal,” Afshar told TechCrunch, further explaining he wanted to do something with a higher impact.
Cellular agriculture, or growing animal cells in a lab, seems to hit that button and the two are currently enrolled in Y Combinator’s Summer 2018 cohort to help them get to the next step.
There’s been an explosion in the lab-made meat industry, which relies on taking a biopsy of animal cells and then growing them in a lab to make the meat versus getting it from an actual living, breathing animal. In just the last couple of years startups like Memphis Meats have started to pop up, offering lab meat to restaurants. Even the company known for its vegan mayo products Hampton Creek (now called Just) is creating a lab-grown foie gras.
Originally, the company was going to go for general automation in the lab but had enough interest from clients and potential business in just the cell culture automation aspect they changed the name for clarity. Cytera already has some promising prospects, too, including a leading gene therapy company the two couldn’t name just yet.
Of course, automation in the lab is nothing new and big pharma has already poured billions into it for drug discovery. One could imagine a giant pharma company teaming up with a meat company looking to get into the lab-made meat industry and doing something similar but so far Willats and Afshar says they haven’t really seen that happening. They say bigger companies are much more likely to partner with smaller startups like theirs to get the job done.
Obviously, there are trade-offs at either end. But, should Cytera make it, you may find yourself eating a chicken breast one day built by a company who bought the cells made in the Cytera lab.
Mammoth Biosciences, the biotech company that grew out of a close relationship with CRISPR legend Jennifer Doudna, has raised $23 million in a sturdy Series A. Mammoth previously raised $120,000 from NFX and the company continued quietly picking up funding as it built toward its exit from stealth mode in April 2018. Its current round […]
Mammoth Biosciences, the biotech company that grew out of a close relationship with CRISPR legend Jennifer Doudna, has raised $23 million in a sturdy Series A. Mammoth previously raised $120,000 from NFX and the company continued quietly picking up funding as it built toward its exit from stealth mode in April 2018. Its current round was led by Mayfield with participation from NFX and 8VC.
Mammoth also has some high profile interest from individual investors. Apple’s Tim Cook and Jeff Huber, former CEO of early cancer screening company Grail, also quietly participated in the round for an unspecified amount.
The discovery of CRISPR, by all accounts a transformative scientific and technological breakthrough, is many things to many people, but for Mammoth Biosciences, it’s all about the search functionality.
“CRISPR is biology’s search engine first,” Mammoth co-founder and CEO Trevor Martin told TechCrunch in an interview. That means using a guide RNA to direct a CRISPR protein to search for any specific DNA or RNA sequence. That process provides a world of utility across fields like genotyping, oncology, infectious disease and even agriculture.
Mammoth plans to use the funding to make key hires and flesh out its IP portfolio, but most of the company’s resources will be used toward developing the platform that allows the company’s partners to plug in and search for their own biomarkers. Martin adds that the funding will also allow Mammoth to educate people about how CRISPR can play a powerful role in diagnostics.
Mammoth is led by two Stanford PhDs, Trevor Martin (CEO) and Ashley Tehranchi (CTO) who work with a small research team of PhDs from UC Berkeley. Jennifer Doudna is a Mammoth co-founder and chair of the company’s advisory board. Along with its funding news, Mammoth adds protein engineering expert Dave Savage and infectious disease specialist Charles Chui to its scientific advisory board.
Future partnerships are central to Mammoth’s business, and the company aims to make its CRISPR-powered search engine the platform of choice for disease detection. The company is particularly keen on building out partnerships in the pharmaceutical and agricultural world, though also has long term plans to provide affordable point-of-care testing in the developing world.
“Mammoth has developed a transformative platform, able to detect nucleic acid assays on DNA and RNA without an associated device,” Mayfield’s Ursheet Parikh said of the company’s mission. “This has the potential to significantly reduce costs in diagnostics, which is a fundamental driving force in transforming healthcare.”
Joanna Glasner Contributor More posts by this contributor While tech waffles on going public, biotech IPOs boom Shoe startups aren’t dragging their feet Startup exit tallies commonly underestimate biotech returns. Unlike most tech deals, the biggest profits in bio often come long after an IPO or acquisition. Take Juno Therapeutics, a publicly traded cancer immunology company […]
Startup exit tallies commonly underestimate biotech returns. Unlike most tech deals, the biggest profits in bio often come long after an IPO or acquisition.
Take Juno Therapeutics, a publicly traded cancer immunology company that sold to pharma giant Celgene this year for $9 billion. At first glance, it doesn’t seem like a deal that would impact Juno’s early investors.
After all, Juno went public back in 2014. Though the Seattle company raised more than $300 million as a private company, pre-IPO backers had years to cash out at healthy multiples.
Yet some held on. Bob Nelsen, managing director of ARCH Venture Partners, Juno’s largest VC backer, told Crunchbase News that his firm was still holding nearly its entire 15 percent pre-IPO stake when Celgene bought the company.
In the end, the acquisition netted ARCH’s limited partners 23 times their money, bringing in close to a billion dollars. It’s an exceptional return, even by venture home run standards.1
“We tend to distribute on milestones, not financing events,” Nelsen said of his firm’s approach to exiting a portfolio investment. That often means holding for years after an IPO awaiting positive clinical trial outcomes or other value-creating inflection points.
For public companies, that can be done over time or all at once, and usually comes in the form of company shares rather than cash.
So when is it an exit?
It’s outcomes like Juno that help explain why life sciences, despite bringing fewer first-day IPO pops and buzz-generating unicorn exits than the tech sector, still consistently attracts roughly a third of venture investment. Big exits do happen. But oftentimes it’s not with a lot of fanfare and usually not with a public market debut.
“I don’t think IPOs are ever an exit in biotech. It’s always a financing event,” Nelsen says. While ARCH may hold shares longer than the typical VC, he says it’s not uncommon to hang on the stakes for a while post-IPO.
That IPO-and-hold strategy appears to have worked out well for the firm on other occasions. Other portfolio companies that went public and were later acquired for multiple billions include Receptos, a drug developer, and Kythera Biopharmaceuticals, best known for an injectable to reduce chin fat.
Using Crunchbase data, we looked to see how common it is for a venture-backed biotech company to go public and then sell a few years later for multiple billions. We found at least eight examples of companies selling for $2 billion or more in the past five years that went public less than four years before the acquisition. (See list here.) Altogether, these acquisitions were valued at more than $47 billion.
Racking up post-IPO gains
It’s also not uncommon for biotech startups to grow into multi-billion dollar public companies a few years after IPO.
Using Crunchbase data, we put together a list of a dozen life science companies that went public in roughly the past five years and have recent market values ranging from $1.5 billion to nearly $9 billion. (This is a sampling, not a comprehensive data set, and was assembled based on exits of several top-tier life science VCs.)
On top was gene therapy juggernaut Bluebird Bio, which has seen a seven-fold rise in its stock price since going public five years ago. Next was Sage Therapeutics, a developer of therapies for central nervous system disorders, up more than six-fold since its IPO four years ago, reaching a market cap of nearly $8 billion.
Then on the device side there’s Inogen, a maker of portable oxygen concentrators for patients with respiratory ailments. It went public at a valuation of less than $300 million in 2014. Today it’s worth around $4.3 billion.
Yes, it’s true tech stocks can see massive gains a few years after going public, too. But the drivers are usually different. In tech, a company may see its stock jump after a big rise in sales, but it probably had sales in prior quarters. The business hasn’t fundamentally changed; it’s just improved.
Moreover, tech venture capitalists do generally consider an IPO an exit. While insiders usually can’t sell shares immediately, they’re typically comfortable liquidating when they can around the IPO price.
For bio, hitting key milestones changes the entire value proposition. A company can go from having no marketable product and no sales to quickly having one or both of those things.
Milestones and money
Returns from biotech startup M&A exits are also hard to pin down because of the widespread use of milestone payments. Buyers pay an upfront price with the agreement of more to come following favorable clinical trial results and a commercially successful therapy.
Often, it’s several multiples more to come if milestones are met. Take Impact Biomedicines, one of this year’s biggest private company exits. Celgene bought the company for $1.1 billion. However, the deal could be valued at up to $7 billion over time.
But the probability of hitting all the milestones seems low. To get the full $7 billion, global annual net sales of Impact’s therapies would have to exceed $5 billion. However, some milestones look more feasible, such as a $1.25 billion payment for obtaining regulatory approval.
This kind of deal structure is pretty common, and not just for M&A. A study by medical news site STAT analyzed nearly 700 biotech licensing deals and found that, on average, just 14 percent of the total announced value was paid out up front.
As with returns from post-IPO acquisitions, it’s hard to gauge just how well investors end up doing on these milestone-based purchases. The largest payoffs can be years down the road.
The opposite of tech
If it seems like the dynamics of a bio exit are, in many ways, the opposite of a tech exit, it’s worth considering how different the two sectors are at the early stages, too.
In the tech startup world, it’s common for a company to launch with an idea that sounds silly (tweeting, scooter sharing, air mattress rentals) and then suddenly be worth billions.
Bio companies are kind of the reverse. Practically every one sounds like a great idea (curing cancer, alleviating pain, treating neurodegenerative disease), and many turn out to be worth nothing. Investments that work out, however, may take a while, but eventually deliver in a big way.
Making 23 times your money back is exceptional at all stages of investment. However, when it does happen, it’s most common at the seed stage for investment, where investors put in single digit millions or less. In the case of ARCH, 23X it is a particularly high return because it encompasses all the rounds Juno raised before going public.
Y Combinator backed Zbiotics has spend two years developing what they’re billing as the world’s first genetically engineered probiotic. The startup’s initial product isn’t exactly world-changing but it might just save your day — given they’ve invented an elixir of ‘next day’ life: Aka a hangover cure. Although you actually have to take it before — or, well, during […]
Y Combinator backed Zbiotics has spend two years developing what they’re billing as the world’s first genetically engineered probiotic. The startup’s initial product isn’t exactly world-changing but it might just save your day — given they’ve invented an elixir of ‘next day’ life: Aka a hangover cure.
Although you actually have to take it before — or, well, during — drinking rather than waiting until the moment of regretful misery when you wake up.
How have they done this? For their first product they’ve bioengineered probiotic bacteria to produce more of the enzyme that the body naturally uses to break down a toxic chemical byproduct of alcohol which is in turn responsible for people feeling awful after too many alcoholic drinks. So you could say they’re hoping to put probiotics on steroids. (NB: No actual steroids are involved, obviously.)
While probiotics themselves aren’t at all new, having been in the human diet for thousands of years — with wide acceptance that certain strains of these live ‘friendly’ bacteria/microorganisms can be beneficial for things like human gut health — the team’s approach of using gene editing techniques (specifically fiddling with the bacteria’s DNA) to enhance what a probiotic can deliver to the person who’s ingested it is the novel thing here.
So new they haven’t yet conducted the placebo controlled, peer-reviewed clinical trials that will ultimately be necessary to back up the efficacy claims they’re making for their biotech enhanced hangover cure.
Nor are they therefore in a position to defend their forthcoming hangover elixir from accusations of supplementary ‘snake oil’ — and, well, the supplement industry as a whole often has that charge leveled at it. And yet people keep buying and popping its pills. (Therein lies the temple rub, vitamin potion and wellness capsule. And, well, also the investor appetite for carving a fresh chunk out of a very large pie.)
Zbiotics co-founders Zack Abbott and Stephen Lamb freely admit it’s going to be a challenge to stand out — and be considered credible amid all this, er, goop noise.
“This consumer space is rife with pseudo science,” agrees Abbott, who has a PhD in microbiology and immunology from the University of Michigan. “Everybody is banging the drum of real science. And so we have a huge challenge to differentiate ourselves. And really convince the consumer that we’ve built something specific.
“And it really is a first effort to invent a product to specifically address their problem, as opposed to grabbing vitamins off a shelf, putting them in a bottle and labelling it.”
“There are some companies… [that] address dehydration [for hangovers]; that’s not enough. There are other companies they just put [vitamins] into a bottle, that’s not enough. There’s so much noise out there. How do we break through that? It could take some time,” admits Lamb. “And it could take a lot of work.”
Tested in vitro — and on birthday beers
At this pre-launch stage, the founders say they’ve tested their beefed up probiotic on themselves — and will go so far as to say they’ve seen “promising results”.
“I had the fortune of having the final prototype built just a week or two before my birthday and so I ended up trying it out for my birthday and it was great,” adds Abbott.
They are also keen to say they don’t want to encourage irresponsible drinking. So don’t expect their future marketing to talk about ‘a biotech license for your next bender’. Product pricing is tbc but they say they’re aiming for widely affordable, rather than lux or overly premium.
With hangover results that could speak for themselves, their hope is that people will feel confident enough to have a pop and see whether the idea of a biotech enhanced probiotic that’s pumping out extra alcohol-metabolizing enzymes stands up to several pints of lager and a few chasers (or not).
Though — when asked — they do say they also want to carry out clinical trials to glean data on the efficacy of their hangover cure.
“We are a very science-first company and so we don’t want to be making any claims about anything that we don’t have data to back up,” says Abbott.
“At this point… we’ve done significant testing in a test tube, in vitro, and shown that the bacteria we’ve built do perform the function that they’re supposed to perform. Which is to break down acetaldehyde. But we can’t make further health claims until we do clinical trials. And we in the process of drafting up a protocol for a human clinical study with one of our scientific advisors — Dr Joris Verster — a world expert in academic hangover research. But in the meantime we can’t make those claims until we have that.”
They are also planning to launch a crowdfunding campaign later this year — in order to start making some of their own noise and trying to drum up interest and, well, willing guinea pigs.
Though they are also adamant the product is entirely safe. It’s just the efficacy vs hangover misery that’s yet to be stood up in human clinical trials.
While a hangover cure might seem a trivial problem to focus high tech bioengineering effort on, they say the unmissable fact of a hangover — or indeed the lack of one — was one of the reasons why they selected such an “everyday problem” for the first application of their technique vs going for a more fuzzy (and, well forgiving on the efficacy front) generic goal like ‘wellness’. Or indeed targeting an issue where a ‘cure’ is pretty subjective and hard to quantify (like anti-aging).
Absolutely no one is going to mistake a hangover for feeling great. Though of course the power of the placebo effect working its psychological magic cannot be ruled out — not until they’ve clinically tested their stuff against it in robust trials.
On the other hand, even if it ends up that a placebo effect is what’s making people feel better, given that the target problem is (just) a hangover there aren’t likely to be too many consumer complaints and cries for money back.
“One of the reasons why we chose this use-case was that it would allow people to try it and feel the advocacy for themselves. That was very important,” says Abbott. “It’s something you can feel the results of. So that was really important. Having a visceral read-out of efficacy. People can experience the product working for themselves.”
The other reason for choosing a hangover cure was more practical: They needed a problem that could be solved with an enzyme and therefore which could be helped by genetically engineering bacteria to produce more of the sought for substance.
“The whole point here is that we’ve engineered a bacteria to express an enzyme specifically that can solve a problem,” he explains. “Enzymes are these really powerful complex molecules that are not easy to deliver to people. So it has to be a problem that you can solve with an enzyme.
“There has to be a nice fit with the technology. So we look for things where parts of the body where bacteria has access to you; you have a lot of bacteria in your gut, in your skin, in your mouth, in your nose… places were we can deliver bacteria and they can express these enzymes to solve problems of everyday health.”
“We start with probiotics that have an extremely good safety profile, have been used in regular food by humans for centuries. And we identify those because we know that they’re going to be safe, and we know that they’re going to be able to interact with your body in the way that we want them to. And then we engineer those bacteria as oppose to choosing something that your body may never have seen before,” adds Lamb, who brings prior experience helping food companies enter new markets to the startup.
He says they’ve been safety testing their prototype probiotic for the past year and change at this point — “making sure that this is ready for market before we actually launch anything”.
“We are not going to launch any kind of product until it’s completely safety tested according to every regulatory framework here in the U.S. — and we’re totally comfortable with that,” he adds emphatically.
They do also intend to move beyond hangover cures, with the plan being to develop additional probiotics that target other use-cases. And say they’ve been building a gene editing platform that’s flexible for that purpose. Though they’re not disclosing exactly what else they’re working on or eyeing up — wanting to keep that powder dry for now.
“I spent over a year building the first product, and the lion’s share of that time was spent making sort of a genetic platform… that was adaptable to multiple use-cases,” says Abbott. “At first I just engineered the bacteria to be able to make a lot of enzyme generally. Whatever enzyme I put into the platform. And so the first enzyme I put in was to break down acetaldehydes. That being said it could be easily switched out for an enzyme to break down… a different toxin that your body has to deal with. So the platform is very adaptable and it was designed to be that way.”
“That being said there are certain use-cases we’re really excited about that may require additional optimization techniques in order to make them work specifically for that use-case. So, generally speaking, some may require more work than others but the platform we started with gives us a good launch pad,” he adds.
As well as YC’s standard startup deal, the team has raised an additional $2.8M in seed funding this year for R&D and the initial product roadmap. They’re hoping the forthcoming crowdfunding campaign will give them the additional lift to ship the consumer product into the US market.
Investors in the seed round aren’t being disclosed at this stage. Abbott also notes that he previously got a small amount of pre-seed funding, early on, to fund building the prototype.
It’s fair to say that biotech as an investment space isn’t a bet for every investor — given product development risks, timeframes and perhaps also some of the deflated hype of past years. Which perhaps explains why Zbiotics investors aren’t ready to shout all about it just yet. Even if they’re feeling great about not having a hangover.
“We’ve found different levels of success with different investors,” agrees Lamb. “Where we’ve found the most success is in investors who see the vision for the technology and understand it as something that is and can be truly innovative relative to what’s on the market today. So probiotics themselves — traditional probiotics — are a $40BN industry, and the fact is that most of those probiotics don’t do anything or are inconsistent at best. So we found investors who have a mindset where they can see how a novel probiotic, something that actually is engineered to work and is based in a high level of biotech is something that can really disrupt that area. And that may or may not be traditional biotech investors. Oftentimes it’s investors who are really looking to push the envelope.
“We definitely had to find the right investor and the traditional biotech investor often is looking for different things than we had to offer,” adds Abbott. “And different pathways — more traditional pathways. We’re going not conventionally I think with bringing this hard biotech to market quickly. So it definitely is threading the needle and finding the right investors.”
With our fixation on all things tech, we’re missing out on the big picture — there are actually more biotech and healthcare startup IPOs than tech offerings.
For people who make investment decisions based on revenues and projected earnings, biotech IPOs are kind of a non-starter. Not only are new market entrants universally unprofitable, most have zero revenue. Going public is mostly a means to raise money for clinical trials, with red ink expected for years to come.
That pattern may be one reason the venture capital press, Crunchbase News included, tends to devote a disproportionately small portion of coverage to biotech IPOs. It’s more exciting to watch a big-name internet company pop in first-day trading or poke fun at an underperforming dud.
But with our fixation on all things tech, we’re missing out on the big picture. There are actually a lot more biotech and healthcare startup IPOs than tech offerings. In the second quarter of this year, for instance, at least 16 U.S. venture-backed biotech and healthcare companies went public, compared to just 11 tech startups. In three of the past four years, bio offerings outnumbered tech IPOs, according to Crunchbase data.
In the following analysis, we attempt to get up to speed on the pace of biotech offerings, assess where we are in the cycle and spotlight some of the rising stars.
Biotech outpaces tech
As mentioned above, U.S. bio IPOs outnumber tech offerings in most years. However, the bio cohort raises less total capital, partly because the largest technology IPOs tend to be much bigger than the largest bio IPOs. In the chart below, we compare the two sectors over the past four years.
Globally, the numbers are much higher. Using Crunchbase data, we’ve put together a chart looking at global VC-backed biotech and healthcare IPOs over the past four years. While we’re just over halfway through 2018, biotech and health IPOs have already raised more money than in any of the prior three full calendar years.
Fundamentals driven, cycle amplified
It’s pretty clear we’re in an upcycle for all things startup-related. VCs are flush with cash, late-stage rounds are ballooning in size and IPO and M&A action is picking up, too.
So what does that mean for bio IPOs? Is the uptick in the pace and size of offerings mostly a result of bullish market conditions? Or is the current slate of pre-IPO candidates more compelling than in the past?
We turned to Bob Nelsen, co-founder of ARCH Venture Partners, one of the top-performing biotech investors, for his take, which is that it’s a “fundamentals driven, cycle amplified” IPO boomlet.
More companies are launching well-received IPOs because the pace of startup innovation is faster than in the past. Nelson calls it “the result of the previous 30 years of investment and innovation in biotech that has finally led to essentially data-driven innovation.” That’s leading to more curative treatments, disease-modifying therapies and preventative technologies.
Yet we’re also in a bullish segment of the market cycle for biotech. That’s prompting companies that might have stayed private under other conditions to give going public a shot. It’s also providing bigger outcomes for emerging companies that were already on the IPO track.
The latest example of a big outcome IPO is Rubius Therapeutics, which develops drugs based on genetically engineered red blood cells. This week, the five-year-old company raised $241 million at an initial valuation of over $2 billion, making it the largest bio offering of 2018. The Cambridge, Mass. company, which previously raised nearly a quarter-billion-dollars in venture funding, is still in the pre-clinical trial phase.
This year has delivered several other good-sized offerings as well, including drug developers Eidos Therapeutics and Homology Medicines, recently valued around $800 million each, along with Tricida, valued around $1.2 billion. (See the full list of 2018 global bio and health offerings here.)
As for aftermarket performance, that’s been up and down, but includes some big ups. Last year, biotech led the pack for best-performing IPOs on U.S. exchanges. The sector accounted for four of the six top spots, according to Renaissance Capital, led by drug developers AnaptysBio, Argenx and UroGen, along with Calyxt, an agbio startup.
While things are already up, bio VCs, generally an optimistic bunch, see several reasons why bio IPOs could go higher.
Nelson points to what he sees as the lagging pace of in-house innovation at big pharma and biotech players. Increasingly, they need to acquire startups and recently public companies to stay competitive and build out new product pipelines.
There is also tons of fresh capital earmarked for healthcare startups. In the U.S. in 2017, healthcare-focused venture capitalists raised $9.1 billion. That figure was up 26 percent from 2016, per Silicon Valley Bank.
Still, Nelson observes, deep into an IPO bull market, the average quality of offerings does tend to decline. That said, he’s been through similar inflection points in previous cycles and “for the same point in the cycle, the quality is markedly higher.”