In Two Months, Gene Therapy Startup Raises $100 Million
By Cathy Yarbrough, Contributing Editor
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Jason Rhodes, a partner at the biotech venture capital firm Atlas Venture, was searching for the right opportunity to advance the development of the next generation of gene therapies when the University of Massachusetts (UMass) medical school tech transfer office contacted Atlas in 2016.
UMass told Rhodes that faculty member Robert Kotin, Ph.D., had designed a novel linear DNA molecule that could transport a therapeutic gene into the nucleus of a cell without the use of a potentially immunogenic capsid, the structure that envelops the viral genome. Kotin’s research also had determined that the molecule, referred to as closed-ended DNA (ceDNA), is nonimmunogenic and could accommodate bigger payloads, including larger genes and regulatory elements, than can be transferred by current viral vectors.
Rhodes met with Kotin to discuss how ceDNA technology could expand the population of patients who could benefit from gene therapy. After a series of meetings, Atlas Venture provided seed funding in 2016 to launch a new biotech company, Generation Bio, based on Kotin’s ceDNA research. “Atlas Venture regards Kotin’s work on ceDNA as potentially very disruptive, as leapfrogging over existing gene therapy technologies that use viral vectors,” said Rhodes.
Kotin, the scientific founder and head of discovery at Generation Bio, began his research on ceDNA when he was a senior investigator at the NIH. He continued the research after his lab moved to UMass, where he was professor of microbiology and physiological systems.
For more than one year, Generation Bio operated under the radar as a virtual biotech at Atlas Venture’s offices in Cambridge, MA, and subsequently in the biotech company’s current space in Kendall Square. Generation Bio, which today has 28 staff members, made its official debut in early January 2018, when Atlas Venture announced that it had established the company in 2016 and had provided the startup with a $25 million Series A to grow the company and finance the proof-of-concept research needed to attract additional investors.
Additional investors quickly came on board. In late February 2018, Generation Bio announced it had raised $100 million in Series B financing led by Fidelity Management & Research Company. Also participating were Invus, Deerfield Management Company, Casdin Capital, Foresite Capital, and Leerink Partners’ Affiliates.
SERIES B OVERSUBSCRIBED
The Series B is financing the research that will enable Generation Bio to prepare IND applications on its two leading gene therapies for treating rare genetic liver diseases as well as advance new research programs targeting genetic diseases of the retina, CNS, and lungs. By the end of the year, the company’s two lead drug candidates should be identified, McDonough said.
In 12 to 18 months, Generation Bio likely will go public with an IPO. “We’ll do so when it makes sense for the financial markets and the stage of our science,” explained McDonough. Because of the Series B financing, the company will have sufficient funding for about two years.
Potential Series B investors who met with Mc- Donough were very aware of the substantial progress in gene therapy that had occurred in the past decade. In 2017, the FDA for the first time approved a gene therapy product. By the end of the year, the agency had authorized three viral vector-based gene therapies.
Current viral vector-based gene therapies are onetime treatments. According to McDonough, “They are more like therapeutic vaccines than drugs.” The gene therapies under development at Generation Bio will be like the off-the-shelf drugs that are repeatedly administered by injection as needed throughout a patient’s lifetime. Redosing will enable physicians to achieve and maintain the therapeutic gene expression level that is the most beneficial for each patient.
The company’s near-term goal is developing gene therapies for rare genetic liver diseases that affect young children. Examples include glycogen storage disease 1a, progressive familial intrahepatic cholestasis (PFIC), and phenylketonuria (PKU). Because the liver increases substantially in size as an infant grows to an adult, any treatment of these genetic liver diseases must be repeated periodically during the child’s lifetime in order to achieve and maintain ideal therapeutic gene expression levels, said McDonough, a pediatrician.
Redosing will be possible with Generation Bio’s gene therapies because they will use state-of-the-art lipid nanoparticles, not viruses, as vectors. Unlike viral vectors, lipid nanoparticles are not limited by acquired or background immunity. A patient treated with a viral vector-based gene therapy can develop antibodies to the structural proteins that compose the capsid. If a viral vector-based gene therapy is repeated a second time, those antibodies could zealously attack the capsid, thereby rendering the treatment ineffective and putting the patient’s health at risk from an immune reaction. In addition to patients with acquired immunity, some individuals have preexisting or background immunity to the capsid’s proteins. They cannot receive even the first dose of a viral vector-based gene therapy.
In addition to being redosable, lipid nanoparticle vector-based gene therapy should be less complex and costly to manufacture than viral vector-based treatments. “We will be able to quickly make a huge volume of pure material at a relatively low cost,” said Rhodes.
REDOSING HELPED PERSUADE INVESTORS
The simpler manufacturing process and the potential for redosing were among the factors that persuaded investors to participate in Generation Bio’s Series B round. In addition, investors voiced confidence in the company’s leadership team. “We recruited very capable individuals with proven track records in developing and launching novel medicines,” said Rhodes. “They also have the experience and expertise to build a company that will expand in scale and scope to achieve both near-term and long-term goals.”
Investors also were impressed that the company’s proprietary platform, GeneWave, had been validated in research studies. GeneWave combines the lipid nanoparticle vector with the ceDNA molecule carrying the therapeutic gene. It delivers ceDNA molecules directly to liver cells so that the therapeutic gene could target intrinsic genetic diseases of the liver. In laboratory animals, the therapeutic gene created stable, nonintegrating episomes in liver cells. The episomes produced high, long-lasting, and dose-dependent gene expression levels. The lab animal studies also showed that GeneWave can be titrated to effect with repeated administration.
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"There has been tremendous interest from sophisticated and experienced investors who know the biotech industry very, very well."
Jason Rhodes
Partner, Atlas Venture
EARLY 2018 VC INTEREST
Generation Bio is one of 60 biotech startups that received significant investments of capital during the first two months of 2018. VCs provided $2.8 billion to these companies, according to the 2017 Venture Monitor report published in January 2018 by PitchBook and the National Venture Capital Association. The report also noted that VCs invested a record sum, over $10 billion, in biotech companies in 2017.
“There has been tremendous interest from sophisticated and experienced investors who know the biotech industry very, very well,” said Rhodes, who was president of Epizyme before joining Atlas Venture in 2014. The biotech sector has evolved into a mature industry with numerous late-stage and revenue-generating clinical companies. The pace of scientific discovery has increased significantly in the past decade.
Many of the biotech companies established 20 to 30 years ago were unable to translate breakthroughs into potential products as quickly as current startups can today. “In the past, most biotech companies had to spend time and capital to build their own labs and manufacturing facilities,” said Rhodes. “Today, CROs and CMOs can help biotech companies, including Generation Bio, accelerate their R&D programs.”