By Suzanne Elvidge
Bacterial resistance to antibiotics is growing worldwide — AvidBiotics has developed a first-in-class technology that could circumvent this deadly issue. Bacterial infection is a huge and growing medical burden worldwide — the Centers for Disease Control and Prevention estimates that there are around 500 million acute bacterial infections every year that need some form of antibacterial therapy. According to an article in the Wall Street Journal in April 2011, in the United States, hospital-acquired, drug-resistant bacterial infections cost the nation $34 billion a year and kill around 63,000 patients. In Europe, the costs are around $2.1B, with about 400,000 infections and 25,000 or more deaths a year. Only two new antibiotic classes have emerged in the last 40 years, and while there are new antibiotics in the pipeline, these are around five or six years away from approval, and it’s only a matter of time before bacteria develop resistance to these.
Tackling The Antibiotic Irony
San Francisco-based biopharma company AvidBiotics Corp. is tackling the issue of bacterial infections but taking a new approach that has potential to circumvent the issues of antibiotic resistance by killing bacteria using a different mechanism — (literally) punching a hole in the bacterium.
“Antibiotic therapy was once thought of as the magic bullet — ‘one drug, many bugs.’ The ‘antibiotic irony’ is that the cure is now a major source of the problem,” says James Knighton, president of AvidBiotics. Knighton, along with David Martin, CEO, and Jeffery Miller, Ph.D., of the David Geffen School of Medicine at UCLA, founded the company in 2005 to exploit the company’s lead technology — a platform that generates antibacterial Avidocin proteins. These are engineered to bind tightly to targets on the surface of specific bacteria and damage the cell envelope, causing cell contents to leak out.
“We are reengineering nature’s defense mechanisms to kill pathogenic bacteria,” says Martin. “It takes only a single hole to kill the bug, and because our Avidocin proteins bind only to specifically targeted bacteria, there is minimal or no ‘collateral damage,’ such as gastrointestinal side effects from killing off the ‘good’ gut bacteria. Because the damage results from a mechanism not affected by antibiotic resistance, it won’t lead to resistant bacteria.”
The focus on bacterial disease is a pragmatic one. Martin was on the Cubist board for more than a decade and there learned about the unmet medical needs and opportunities in bacterial diseases.
“Because preclinical models of bacterial disease are more predictive of the outcome in the clinic than other disease models, we decided that we could place a series of little preclinical bets with less money initially and then use positive results to raise additional capital,” says Martin.
“We decided to follow this model with the intent that if results were negative, we would shut the company down and go get real jobs,” says Knighton. “The alternative, which many companies pursue, would be to raise a lot of money to get to a proof of concept that might not be testable until well into clinical trials. If failure occurs so late, companies can lose a lot of money. The flipside is, if success occurs after raising so much money, the founders and employees have little ownership to show for their efforts,” says Knighton.
Finding The Funding
AvidBiotics has taken a slightly unusual approach to funding, both to tackle the lack of abundant investment available to biopharma start-ups in the days of the recent financial downturn and to avoid premature dilution of the company’s equity. Rather than raising money through more conventional routes, AvidBiotics was initially funded by a group of what Knighton refers to as “amateur angels” — the founders themselves, their friends, and families — as well as seven federal grants. The same individuals, with their contacts, also invested in a second small equity round in 2008.
“We talked to VCs from the beginning, but either we weren’t offered money, or we didn’t like their terms,” says Knighton. “We are getting offers now — but we haven’t found any yet where we agree with their terms. The approach of partnerships, collaborations, and grants gives us more flexibility with minimum early dilution.”
As an additional source of funding, the company has also affected two corporate collaborations during the last five years. The combination of all these sources amounts to $11 million raised. AvidBiotics currently has approximately two years’ worth of cash in the bank. The founders and employees still own a significant portion of the company, with only 25% of the equity held by outside investors. “This makes decision processes quicker and easier, but it also makes one more thorough — when you own that much of the company, you have no one else to blame,” says Martin. Knighton agrees: “When friends and family have invested heavily in the company, it’s motivating because you know that you are looking out for a group of people important to you personally. Our investments, including remortgaging our homes, means we own both the successes and the failures. As Warren Buffet likes to say, ‘Management should be eating their own cooking.’ Our diet consists solely of our own cooking. We have an emotional investment as well, and that is vital; it makes the risks and sacrifices worthwhile,” says Knighton. “It certainly outweighs the luxuries of working for a big company.”
Getting The Grants
AvidBiotics’ founders would recommend to other up-and-coming companies using the federal grant system and angel networks to raise early funding to get to the proof-of-concept stage. Pursuing federal grants can seem like a time-consuming process, with pages of forms to fill in, but Knighton argues that it takes no longer than a long series of presentations for the traditional venture community. “Applying for grants does take time, but there is an economy of scale because, within reason, one can use much of the same information in a number of applications. It’s also important to publish papers, and publications become important assets, as well as a source of credibility for later-stage grant applications,” Martin explains. Fundraising, however it is done, is an ongoing process. Martin adds, “However successful one is at raising funds in the early days, one must anticipate and plan for the cash-burn increase as you get into the clinic. However, there are still grants available to fund entering the clinic. In the United States, these include grants from the DoD and the National Institutes of Health.”
Keeping Afloat In Tough Financial Times
Though the company does have a healthy bank balance and cash flow from grants and collaborations, it started lean and prides itself in continuing as a lean-burn company. The company started virtual and now still only has nine employees. “We focus on having quality lab staff in-house but have outsourced our animal work, as well as our administrative, legal, and accounting teams,” says Martin. “We also fully use resources from collaboration partners and from lab and other resources for experience and advice. Because this is a small company, we know everyone well, and every member of our team can have an influence on what we do and why. This makes it more exciting for everyone,” says Martin.
“We began as low cost as possible,” says Knighton. “We started with secondhand equipment and furniture, including chairs from dumpsters. Even our conference table was donated by a VC, despite the fact that we turned down his investment — I guess that makes it our only venture capital investment! Even wage costs are kept down where possible — those for Dave and me are not the highest in the company and are nominal by industry standards, whereas we make sure that we pay competitive rates to the scientists in order to attract the best.”
Targeting The Pipeline: Developing Therapeutics
The key to AvidBiotics’ technology portfolio is specificity — Avidocins to bacterial receptors, Micacides, its second protein-based scaffold technology, to viral and cancer targets. Combined with greatly improved diagnostic technologies, these “targeted” therapeutics can make personalized medicine closer to reality.
In its Avidocin pipeline, AvidBiotics is developing a therapeutic targeting Escherichia coli O157 infection. This potent pathogen causes outbreaks of food-borne illnesses, which can lead to hemorrhagic diarrhea and kidney failure, and these have been traced back to spinach or undercooked hamburgers, as well as to farm or petting zoo visits.
Other projects include Avidocin proteins against antibiotic-resistant Acinetobacter, in collaboration with the NIH and Walter Reed Army Institute of Research (WRAIR), with potential applications in ICUs, and in protecting and treating wounded military personnel. The company is in late-stage research with a therapeutic against the bioterror pathogen, Yersinia pestis, which causes plague.
As well as targeting bacterial infections, AvidBiotics is also looking at the human microbiota, the entirety of the “good” bacteria that colonize the human body, including the skin, gut, nose, mouth, and urogenital tract, and their role in health and disease.
Broad-spectrum antibiotics damage the intestinal microbiota, allowing overgrowth of pathogenic bacteria such as Clostridium difficile, leading to severe diarrhea and potentially the surgical removal of the large intestine or even death. Depleting C. difficile in the gut before dosing with broad-spectrum antibiotics could prevent this overgrowth. The company has submitted a grant application to support this research.
The balance of the microflora in the gut may have a link to obesity, and manipulation of the microbiota could influence weight gain or loss. Martin believes that only targeted biocidal agents such as Avidocins are sufficiently specific for safe and effective manipulation of the microbiota.
AvidBiotics plans to develop the E. coli O157 therapeutic to IND (investigational new drug) stage with grant support and hopes to push the C. difficile therapeutic all the way to phase 1 before securing a biopharmaceutical partner. This approach should generate a lot of data, which will de-risk the collaborations for potential partners, making the deals more attractive and easier to close. “We have seen an uptick in interest in novel approaches to bacterial diseases, with more grants than there were five years ago,” says Knighton.
Getting To The Market
Because AvidBiotics’ Avidocin technology is first in class, it could be hard to get acceptance from the regulators and the market. Because of this, though the company is eventually aiming for a therapeutics market, it is initially focusing on the food safety arena, with a lead food safety product candidate targeting E. coli O157. It has significant potential in the meat-processing industry and could reach the market as soon as 2012. It is being developed in collaboration with Ecolab, a company well-established in the food safety market.
“Creating a food safety product and getting it to market will give our technology validation and help us attract attention, as well as provide us with another income stream. It also has allowed us to start a dialogue with the FDA and get our name and technology known by the regulatory authorities and eventually in the consumer market,” says Martin.
“Products for the food safety market have to be low cost because of the small margins, and this has helped us to develop lean manufacturing processes, which will be an advantage when we enter the therapeutics arena,” says Knighton. “It is also a much faster route to market than a therapeutic.”