Coronavirus and Venture Capital

Despite a research focus completely unrelated to COVID-19, Camarillo’s ImmPACT Bio managed to accomplish something unusual: It garnered $18 million when its Series A funding round closed in August. Many investors in recent months have not been interested in much of anything unrelated to COVID. Indeed, ImmPACT Chief Executive Rick Kendall said the company was met with hesitation and pullback from investors in March and April when the pandemic began. However, ImmPACT had several things going for it, including promising research and an impressive talent pool. The biotech company has been investigating a certain kind of therapy to fight solid cancer tumors since its founding in 2017 at Israeli incubator FutuRx. The company still does lab work out of the incubator, although its headquarters have been in Camarillo since August 2019. One thing in ImmPACT’s favor was its research on what’s called CAR T, short for chimeric antigen receptor therapy. It involves extracting certain cells called T cells from a patient’s body, then engineering them to target cancer cells and injecting them back into the body to do their work. “It’s designed to selectively target a tumor, a solid tumor, and spare healthy tissue, or normal tissue,” explained Kendall. Other companies have gotten approval for CAR T drugs, although not for solid tumors. “There’s a lot of interest in the great potential of the technology,” said Kendall. “There’s a lot of interest and investment from the venture community that has been going into this type of technology.” Dry times Still, ImmPACT’s funding is unusual because it comes at a time when biotech venture capitalists have gone on hiatus, with the exception of companies seeking COVID-19 treatments or tests. “For the first couple months of the pandemic, angel investing activity that I’m associated with basically dried up completely,” said Michael Panesis, president of Tech Coast Angels – Central Coast. “There was a lot of concern about the pandemic, a lot of concern about the public markets.” Panesis is also executive director of the Center for Innovation and Entrepreneurship at California Lutheran University as well as the campus incubator Hub101. “It became pretty clear, for reasons unbeknownst to me, that the stock market seemed to soldier on. We became active again,” continued Panesis, referring to positive market trends beginning in May. But even in an improving market, investors can be particularly reluctant to plunge into a biotech startup. They historically have been a riskier option for investors compared to other types of technology, Panesis said. It takes longer to see a return on investment, and unless you are an expert in that startup’s field, or have access to an expert, the risk-reward relationship becomes skewed, added Panesis. “Clinical trials are super expensive,” he said. “When you go in vivo, or when you start to test on animals, it gets expensive and the probability of success at these early stages is still very low, so to the extent that you get expertise on the investor side that can dive into the details and talk science with the founders, it makes the investor more comfortable that the reward is worth the risk, and they’re more willing to put up the money to see it all the way through.” ImmPACT’s investors ImmPACT had some legacy financing that helped. “We started moving forward, pounding the pavement in late November (for funding), but there was already a pre-existing group of investors that collaborated at FutuRx incubator, providing some seed money,” Kendall explained. Also, the fact that solid tumor research has received funding helped ImmPACT’s case with investors. South San Francisco-based Atara Biotherapeutics, which has operations in the Conejo Valley, just this month announced it was cleared by the Food and Drug Administration to start conducting clinical trials for its own CAR T therapies in solid tumors. A2 Biotherapeutics, another biotech startup in the Conejo Valley, also focuses on solid tumor cell therapy using its own technology. But for ImmPACT to get to the next level with investors, it needed some big names in the field along with corporate-level expertise. “The team is very bright and talented, but they didn’t have that much industry experience,” Kendall said of the startup’s roots at FutuRx. “They wanted to bring some people from the U.S. … more of that kind of experience and that’s how we got involved, more drug discovery experience.” ImmPACT already had one big name: Its founder, Dr. Gideon Gross, designed the first CAR T technologies alongside Zelig Eshhar at MIGAL – Galilee Research Institute. Also on the team is Dr. Adi Sharbi-Yunger, who worked at BARcure Ltd., another FutuRx company, before joining ImmPACT. Kendall was chosen in July last year to lead the company because of his experience as vice president of research at Kite Pharma, now a subsidiary of Gilead Sciences, and executive director of research for Amgen Inc. prior to that. Talent gives small biotech startups an edge over the competition, Kendall said. “I think it’s key,” agreed Brent Reinke, founder and chairman of the Conejo Valley’s BioScience Alliance, regarding startup talent. Reinke is also partner at law firm Musick Peeler Law Firm in Westlake Village. “It’s just the way investors are. I tell clients you don’t always have to have the full-time employees, a group that shows the experience, but you can have the advisory board, individuals who are extremely knowledgeable on the area you’re involved in.” So ImmPACT not only had promising research in its field and a warming climate for investment in solid tumor companies, it also had an impressive roster of talent – all of which helped it attract investment during a difficult time. Biotech’s future Reinke believes that in six to 12 months, we may see an uptick in biotech investment not only from VC firms and angel investors but from government entities. “I’m guessing that you’ll see greater attention for the industry beyond what it was before the pandemic hit. And whether that’s in the form of a (National Institutes of Health) grant, government grants or private investment, I think the investment community is going to see the potential need and value of that industry even more than it did pre-COVID,” he added. While current investment is being funneled into COVID research, making it difficult for those concentrating on other health conditions, once a vaccine is produced, these same companies might see ripples of interest in the life science industry translate to funding. “You can’t avoid how important developing a vaccine for this COVID is,” said Reinke. “I think that just heightens people’s knowledge of the importance of drug development and the life sciences industry.”