The Biotech Pulse S1E7 - Trust, Translation, and Therapeutics: The Story of Complement Therapeutics

Dima: Welcome to the 7th episode of The Biotech Pulse. I'm Dmitry Hristodorov, General Partner at Forbion, and I am working mostly with our ventures fund, where we either build companies ourselves, or invest in existing companies and help them develop drugs in areas of unmet clinical need. I joined Forbion 5 years ago, and before that I held different roles in a large pharmaceutical company called Bayer, where I worked in research and development, in ophthalmology, and later in business development responsible for early and late stage licensing.

My current portfolio at Forbion is a diverse set of companies covering various stages, treatment modalities and disease areas. And one of those companies is Complement Therapeutics which we are going to talk about more in this episode. Today, we are going to explore how investors like Forbion and BioGeneration ventures work together with academic founders when it comes to building therapeutic companies. To make it a triangulated discussion. We are also going to touch upon the importance of universities and their tech transfer offices in the context of building companies.

And I am very pleased that today I am joined by my co-host, Daniela Couto from BioGeneration Ventures. As background to our listeners. Forbion has a joint venture with BioGeneration Ventures, whereby BioGeneration Ventures is working directly with academic founders. I am sure Daniela will explain it later in more detail. And of course I would also like to welcome our guest, Professor Dr. Simon Clark, co-founder of Complement Therapeutics who, I see similar to Daniela as a successful entrepreneur in our industry, and who kindly agreed to share some of the wisdom with us today of how to successfully build biotech companies. As indicated earlier, we will use a real life example of a company, namely, Complement Therapeutics, which is as I mentioned, Simon is the co-founder of, and Daniela, and later also myself, have been helping on the investor side.

Please stay with us until the end of the episode, because that is when we get to the answer to the crucial question for many future founders out there, namely, what advice would Daniela and Simon give to those starting out on their own biotech startup journey?

And now I think I will stop talking and let my co-host Daniela, and then our guest Simon, introduce themselves and share more details, on how the company Complement Therapeutics came together, and how different stakeholders played different roles at different times.

With that Daniela over to you.

Daniela Couto: Hi, Dima, thank you for having me. Thank you for the invitation. I am Danielle Couto. I am a General Partner with BioGeneration Ventures (BGV). I joined the fund 10 years ago. Before that I was an entrepreneur operator. So I have done 2 companies, one of our portfolio companies, Staten Biotech as Managing Director, and before that I was a co-founder of Cell2B, and CEO of that spin out of the Broad Institute. So I have been a founder myself. And I am a scientist by training. I am a biomedical engineer. Did my PhD in bioengineering and in Portugal and at MIT, and having the exposure to the Boston ecosystem really gave me a different perspective on biotech. And after I tried I never looked back. So after my PhD. I went straight to my first company. So that is a little bit about my journey. Happy to be here today, and maybe over to Simon.

Simon Clark: Thank you, Daniela, and thank you, Dima, also for inviting me to be part of this discussion today. I am a protein biochemist by training and an immunologist by trade, and I specialize in something called the complement system, which is a very powerful part of your innate immune system. I look at this as regulation of inflammation and tissue damage and health and disease all over the body. After my studies at Oxford I moved to Manchester, where I fell in with a bad crowd. I started hanging out with the ophthalmologists, and got particularly interested in the role of the complement system in driving a very common eye disease called age-related macular degeneration, or AMD.

I worked very closely with a consultant ophthalmologist Professor Paul Bishop, and a proteomics expert, Richard Unwin. And together we made some discoveries and we did some really cool stuff which we will talk about later on in the episode. And about 5 years ago, I left the UK to take up the Helmut Ecker endowed Professorship of AMD at the University of Tübingen, in Southern Germany.

Dima: Let us get started and share more about the story of Complement Therapeutics. Simon, I think it would be chronologically correct for you to begin by telling us how you guys, so you and your co-founders, came up with the idea to create this company.

Simon Clark: Yeah, thank you. So Paul, Richard and I were very lucky at that time in Manchester, because we actually had access to human eye material sounds a bit gory, but it was very important that we had human tissue, because up to that point a whole load of work in that particular field was using animal models and whatever. But it turns out the unique architecture of the human eye was going to reveal a whole load of secrets, and in fact, Paul and I founded the co-founded together the match to eye tissue repository that collected human eyes for academic. But the 3 of us together, using this material, made a series of discoveries that really explained the mechanisms that were driving the inflammation process associated with this blinding disease. But, more importantly, it also gave us hints as to how we can control it, and how we may deliver something into the back of the eye that could help do this. So we essentially designed a complement modifier, an asset, a drug that could help regain control of a runaway immune system in human eyes.

The trouble was, of course, that we knew exactly the science. We were pretty good at that, but we had absolutely no idea what to do with this. We needed to weaponize it in a way that benefited patients, and we had no idea how to do that. So we decided to form a company, a spin out company from the University of Manchester, and use that as a vessel for raising money and employing people who knew what they were doing in order to take this this asset forward. So we went to the Tech Transfer Office, which was called UMIT at the time, although it is now changed its name at the University of Manchester, and they were very helpful. In helping us with all the things like registering companies, designing a logo, giving us an idea of what we needed to do. But importantly, they gave us contacts, exposure to investors, and that is where the journey started with pitch decks. The trouble was, we were pretty rubbish at it to be brutally honest with you, I mean Paul, Rich and I spent the entire career traveling the world speaking at international conferences, but, as you know, a scientific talk is very, very different to a pitch deck, or pitch to an investor. So you know, we would have pretty junior investors sitting in the room with us, and we bore them to tears. So the University of Manchester helped us by introducing us to a CEO who would work for pro bono with us to help us develop that interaction or harness that interaction with investors, to create a much better chance of success, and rather luckily we also at the time we met up with Daniela and her colleague Max at BGV. And that was the kernel. The very start of this blossoming relationship.

Dima: Thanks Simon. Hearing this story. It sounds like that the strength of this founding team was not only the science, but also realizing that you had a lack of knowledge in how to build a company, how to found a company, how to equip it with money, and I think this is highly appreciated by investors like Daniela and myself. And maybe now, turning over to an investor, perspective would be great to hear from you Daniela, how you experienced this space when you came in into the mix and were helping Simon and the other co-founders to get the IP out of the university, and to start a company.

Daniela Couto: So this was introduced to us in the fund via one of our advisors, Hans de Hart, who understood the role of complement very well. And he basically said, I think this is something very special. So we were attracted immediately by the science. So after we were on the hook for the science, the pitch Simon did not matter so much, because we were already on the hook. The pitch is just to get that initial hook, and in this case, we were so much in love with the science from the get-go, that we just wanted to learn more and more. I think the perspective from an early stage investors, such as BGV, is we try to bridge academic founders with later stage investors where you need that pitch and that story much more tailored and neat. So we kind of try to make that bridge. So we try to speak both languages right? We try to speak the academic some academics when they come to us and say, Oh, I don't really have a business plan, say, well, we do not care so much about the business plan. Just send us the papers, and then we start talking science, and after we are on the same page, it is really about how we position that into the best indication, triangulate everything. You are being modest, Simon, because you were really ahead. We did not need to triangulate anything, so the indication was well mapped out. Everything was really crystal clear where you wanted to go, I think, where Max and I did the biggest contribution was on the complemental platform, how to how to shape that up into the next stage.

I think the interaction with the TTO. You have a fantastic person with a lot of experience helping out and getting the license out of Manchester at Innovation Factory. And I think that was a big help in our interactions with TTOs. This was one of the most, let us say, experienced people we have interacted so far in Europe in terms of getting IP and the license out of the Institute. That was a very big help. I do not know if Simon at the time you recognize that, or with the benefit of benefit of hindsight, you see it now. But, as I see it, it was a big help to have that person supporting you from very early stages.

Simon Clark: All right. So yeah, you are right. It is on the power of hindsight. It is fascinating, actually, because I think at the time, never having been through it before, we saw it quite differently than we do now, sitting here knowing everything that had gone on behind the scenes now. You are right, the wealth of expertise that that the team had at the TTO had in the University of Manchester really was very helpful. It was also very lucky in terms of timing as well, of course, because the University of Manchester as a whole had decided it was going to prioritize translational work. It was going to try and make more spin outs. It was going to try and do more licensing deals. So it was rather fortuitous that we ended up. We got a lot of support and interests internally in the University of Manchester, more so than perhaps we would have done had we tried to spin out a couple of years before. So we got a lot of attention a lot of help, in fact, I remember reading was it this week or last week? I think the University of Manchester has now become ranked fourth in the UK for spin-outs and translational work, so they are really reaping the benefits of that and that investment in time.

One thing that did strike me, though, was the glacial pace at which the academic institution appears to sometimes run, and that is because you are dealing with a 200-300 year old institution. Things do not happen quite as streamlined or as fast, and in the early days we were dealing with investors who slept with their phones and sort of demanded answers within a couple of minutes, and then we were working with the University that I remember one celebrated occasion there was a piece of paper we needed signing, and it turned out there was only one signatory or one person that could possibly sign this paper, and quite literally, if they walked out into the road and got hit by a bus, the entire institution would just grind to a halt, because there was no one to replace them. So it is two different worlds.

Dima: Thanks, Simon, for sharing your experience with working with the Tech Transfer Office at the University of Manchester. I think it is important for our listeners also to realize and to be realistic on how long it can take. You brought up a very good point that it can take a while for such organizations to close the deal, and we know that on the investor side, and we try to be patient, but also as a co-founder and entrepreneur. It is important to keep it in the back of your mind.

Daniela Couto: Maybe we can share some references, because I think from first meeting to closing a deal if it is the first time around typically will be 6 to 9 months. So I think people should have those times in mind. Even if it goes fast from a first meeting to everything done is, it is going to be a good 6 months even when a license is there. There has not been a single exception to this where we need to renegotiate the license with the Institute, even though the founders think the license has been already negotiated. So that is why it lands on 6 months.

Dima: A couple of minutes ago you mentioned a couple of key words like you were bridging, You were speaking the same language on both sides, and I think this partly describes also the strategy of BioGeneration Ventures of how we work. I am curious to learn on when and how you realized that this space is completed. And now the next phase is preparing the company for a larger fundraise attracting different type of investors who are typically not so much involved as you are in spinning out and building companies. And maybe also, what kind of qualities beyond the money itself you have been looking for in those investors.

Daniela Couto: I remember with Simon, Paul and Richard, the 3 founders of Complement at some point when we were preparing for the next phase. Okay, let me give a step back when you start working with the founders, still taking out from Academia you do establish, and you want to, a trust relationship where people are thinking investors. And there is a stereotype around what investor looks like feels like and is. So I think part of it is to demystify what an investor looks like, not physically, but what to expect from, and that helps with the trust and after trust is established, and you are ready to go into the next phase, that call of saying, look, this is what is going on, and dilution - A sensitive topic - is going to be more than expected. But this is what we have, and this is why, and this is what the market is willing to pay, and so on. It is a very important discussion to have and not just say, Oh, the terms are ready. You do not have a say you sign and we go. This does not work, and if you do that you break the trust. And if dilution is a sensitive topic, we can help out the founders think about how can we get more, and what are the mechanisms that will allow to get a little bit more than the founding share. So, as an example, but you establish, you build that relationship, and then the other phase is okay: Then investors, the Series A of investors come on board. You have prepared the pitch with the founders that speaks to those series, investors which speaks to what the clinical development would look like, and all the stages of IND stage and preclinical, and later stage, and so on. So you build a stronger case. But it is not like Simon and Paul and Richard. They already had the indication in mind. We have not changed any of that. I think the only thing we have not changed. But we started asking a lot of questions which led to more mature thinking about how to position it. For instance, natural history study.

We start discussing the need for a natural history study. So we understood the population we wanted to treat in the clinical trial from the get-go, and how that natural history, how our complement platform could support that natural history study. It was an idea that was already there. It was the maturity. You go a lot deeper, just because you are having the discussions through our eyes about what we think our peers would like to see down the road. And having done this a few times. I think that is what helps is to add a few layers of complexity. But that seems the thinking is a lot more mature. And in the case of Complement Therapeutics we had two stages. Right? Forbion came in on board to further support the seed stage and you asked me what else is needed beyond money? In this case? People is an essential part. Dima, you have introduced me to Rafiq Hassan, who has initially become a chair, and the chair is actually a funny story. So we need to go back to that. But he was a chair, and then he became the CEO 3 months later.

I think adds even more value than money is the network is the relevance of people bringing the right people to the right spots at the time, and Rafiq has been a colleague of yours. We have brought Rafiq. I think you felt the company was getting to that stage of maturity. But you can confirm that that you needed to see in order to invest. So you joined us on the seed, and then, having such a strong investor as Forbion supporting this will, of course, enable the series A to come and crystallize much faster with other investors joining in.

So I think those are critical elements beyond capital.

Simon Clark: And if can I just interject, you said something about communication and trust, that is 100% from a founder's point of view, is 100% the greatest value. Because, like you said that we all have a bit of a vision of what investors look like. What do they look like? Well, I have a bit of a funny story about that. But again we will come back to that later, and none of that is broken down. You look at social media and look at the news. When you look at the movies perception of investors, and what have you that is out there which is not necessarily correct. Also, what you could expect to get from a company as a founder is also completely skewed. No one actually tells you, I got this, or I did this, or whatever you only ever hear about. I do not know Steve Jobs, or all these other people who have utterly unique positions and utterly unique circumstances. But yet somehow everyone's expecting the same thing. It is complete nonsense. And I think breaking down that misunderstanding early on is really helpful, and dilution is a touchy subject, particularly for a founder. But it is not one that you can run away from, it is not one you can hide from. And just to have that open discussion is very important.

Dima: That is very insightful. And let me maybe spend one or 2 more minutes on this, because I think it is an important topic for any future founders and entrepreneurs. Simon, as I see it, part of building trust is also back to the Daniela's terminology, speaking the same language. Was it surprising to you and to other co-founders of Complement Therapeutics, that investors are actually sort of scientists. You know, they have PhDs, and they speak the same language literally, and they understand.

Daniela Couto: At least they try.

Dima: Right, or because there is a myth out there that investors only talk money, dollars, euros and cap tables.

Simon Clark: Yes.

Dima: How so was it surprising? And was it important for the trust building process?

Simon Clark: So you are right. I mean, when we first started, we just we kind of assumed they would all be a bit gung-ho, cowboy money more than anything. Also Wall Street type personas who did not really understand the science and, as you well know, and both of you worked in the laboratory before you went into the VC world. That is just absolutely not true, the majority, not all, of course, but the majority of investors do have a very good scientific background of founding. So they do understand what is going on, and again having proper conversations. But it also means academics have to break down their barriers, too. Right? Because we, as academics, we do have a tendency to kind of think somehow we know better, particularly around a scientific subject. And you have got to learn to let go a little bit of the fact that yeah, well, that is true in a test tube on your bench. But what does that look like in real life, and that that process he has to let go a little bit. That is where you build these relationships.

Daniela Couto: Yeah two things I have noticed that founders really like is when we make the extra effort to understand exactly what they are doing in the lab. So I understood very little of the complement, or I learned that at some point. I forgot it already about what the complement cascade looked like, and I had to study to make sense of it. I think what founders appreciate is the effort, the time we spend to really understand, and then, of course, sit down next to us, and I have not seen any founder that does not want to explain to us the science part. So if you show engagement, and there is really willingness and a lot of time available to make it very clear. But, Dima, this you were in an unfair advantage. You have an unfair advantage, because this is your background ophthalmology. So when I said we tried to understand, I was talking about my perspective. I really tried to understand when the founders and the academics recognize that the investor is really trying their best to understand the topic at hand, it becomes so much easier, and then the other side is they also make the effort to understand the term sheet and the terms, and so on. So if you are willing to spend the time again, that is how trust is built on both sides as understanding the science and then understanding the business side.

Dima: yeah, I think very important to emphasize this reciprocal effort, the extra mile by both sides to make it work in the end. You guys, made me curious because you mentioned multiple times fun stories that we are going to touch upon. Maybe war stories. Can you share some of them? I do not know who wants to start. Maybe Daniela will start with you, and then Simon can share another one.

Daniela Couto: Yeah. One I already alluded to was the CEO chair. So we started with a person that was supporting already the company before we invested as interim CEO, and then we were looking for one independent board member. That could also be the chair for the company, and Dima, you introduced us to Rafiq. It felt like fantastic match. And then we came across John Ford, which was another fantastic match, but both extremely complimentary. Now in the paperwork, we only accounted for one independent director. But then, we sat down with the three founders. And basically, we said, Look, we have two fantastic people, and we could not choose one. We love them both for their own strength. So I said, what? Well, we can change the paperwork, and just have both of them. One is an independent, which was John Ford and Rafiq as the chair. It happened that Rafiq at the time was CEO of a oncology company, and when he said I would love to go back to ophthalmology. Ophthalmology is my first love, and I would like to go back, Max and I were like, this is perfect opportunity! So we invited Rafiq to come on board as CEO. He immediately took it, and John stepped into the chair role until today and has been a fantastic chair. So I think it speaks to a number of things. But flexibility, I mean the smaller the company is, the more flexible and nimble it can be. And this was just we define it this way, but it did not need to go this way. So we just adjusted to accommodate the best resources we had available to us. And that was a great decision. And it is paying off well.

Simon Clark: Thank you. Probably on the spot. I mean, I am just trying to rattling my brains, trying to think what I can actually say in a public forum. But I think one of the most peculiar things for me actually touched on something that you said before about breaking down the barriers between perceptions between academics and investors. And well, before BGV and Forbion came along, our first interaction as co-founders with this world basically saw us invited to a meeting at the TTO’s headquarters in Manchester, and together they were to go through the car park, and we were going to meet somebody who was very interested in hearing about this new startup, and as you walk through the car park, you know we are walking past 7 year old Fords, Volvos, a smattering of Skodas, and right next to the entrance, we knew this individual had turned up early for the meeting because there was a stonking brand new sports car. It stuck out like a sore thumb and that did not really set the mood off in the right way, because, of course, already at that point we were thinking it was us and them, and we went to the meeting, and it was a lovely meeting, a lovely individual. We got them famously, but certainly that that initial impression did not help.

Daniela Couto: Simon, when did it stop to be us and them?

Simon Clark: That was not as immediate as perhaps I would like to admit. It took a little bit.

Daniela Couto: Tell me, tell me more. Okay.

Simon Clark: I am always waiting. I was always because I am told, categorically, academic founders are kicked out very early on. They are done over. There is stuff going on, usually from people who have not done it right. So, nibbling away in your ear, and over a while, you realize actually, it is just simply not true. You are actually all in this together. And it is the team that makes the product right is moving forward together as one. Yes, your position within that will change, and we can discuss that later. But ultimately, you are not going to mess me over because it does not help you, and I am sure not going to mess you over, because that really does not help me. And so, we all just get along a lot better. So I would say, by the time we have met you and Max, we had started to realize that things were not quite what we thought they were. By the time we had gone through the negotiations, and when Dima and Forbion came on it was obvious that we were being listened to as co-founders. I cannot remember anything specific, but I know that when raising cap tables, and things like this, we had some concerns or some questions, because we had never done it before. We contacted you and you jumped on a zoom call and you discussed it with us. We did not discuss with Manchester. We did not discuss it with the then CEO, or whatever else, we discussed it with you guys directly, and having that open, free conversation really did help.

Dima: I think it is a crucial moment when you switch from you to we in any negotiation or collaboration or partnership. Maybe I will use this analogy now to also say that not I did promise to our listeners that you guys will give one advice to them, but we promised. So let us hold on to our promise, and share one piece of advice each for the future founders out there, either positive one or negative one. So either avoiding a mistake or just a constructive one. Whatever comes to your mind.

Simon Clark: It will come as no surprise to the listeners of this podcast you know, we have talked about what we are going to cover this in this episode, and I kind of knew this question was coming, and I have been thinking about it for the last few days. I have come up with about a dozen things I want to tell you. But the one thing that I think is the most important is that as a founder you have got to accept, or you have got to strike a balance. You have got to learn to let go a little bit. Look, you invented something, or you discovered something. You founded a company. You helped raise money, but ultimately you will start to become the thing that holds it back. You have to accept that there are people out there who are better than you in developing a product, marketing a product and driving it towards the clinic. And you know, I think it was Steve Jobs that actually said, there is no such thing as a good idea. It is the process that makes the product. And that is true. Coalexin was the name of the product we gave it at the very beginning, our lead asset now is better, faster, stronger, because of the process, not because we had the idea originally that founded the company, but the process, all those people came in and streamlined it. It is a far better product now than it ever was before, and if you hold on to that too much, and you try and control too much, you will hinder this development. So you have got to learn to strike the right balance, find what is comfortable for you. But you got to let it go.

Daniela Couto: Well, Simon, that is really good advice, really good advice. We actually see companies where founders do hold too much their own babies right? And we see progression goes way slower, and it is a trade-off at the end of the day. But it is really good advice. I think my advice comes a little bit, for so Simon recognized that he was at Manchester at a unique point in time, where everything came together and they were nurtured as part of an ecosystem that was really trying to get spin outs out of the university. Not all academics benefit from this at a given point in time. So actually, my advice comes for those who do not have the ecosystem to nurture them or at least they do not think they have all the pieces of the puzzle to nurture them at a given point in time, is there is a number of resources now available in Europe and in US, but especially in Europe, for academics or PhDs or Postdocs, researchers that want to go out and venture into this different world is just map out who are the investors that do early stage investment and reach out directly to them. And again, there is no business plan that is needed. It can be a paper. It can be just a one-pager to trigger the initial interest. But I think it is more identifying who those are. Fortunately enough, in Europe there are a lot more early stage investors across different countries, but also we out of the Netherlands, we invest across Europe in all countries. We do early stage innovation, from Lisbon to Italy, to France to certainly the Netherlands and the UK. So it is more a given entrepreneur needs to identify. Who are those parties, and if you do not have the ecosystem next to your door. Just reach out to early stage investors, and I guess we will try to help where we can.

Dima: I agree with that as well. Daniela is a very important starting point and if you do it in the wrong way, you might end up in a dead end. So thanks, thanks for sharing this.

Daniela Couto: Maybe one more thing, Dima, if you allow me, just came to mind, which is it is very important to check with whom you are doing business. The best way to assess a fund is through the founders that that fund has supported. So if you are entrepreneur, go and do your own diligence, it is not only the fund doing the diligence on the company, it should also be the company doing the diligence on the fund. Reach out to other founders that that fund has supported and do ask around about, how is it to interact? What are the strengths, and so on, because it will pay off. The investment will pay off later on.

Simon Clark: Can I just add to that as well, Daniela? Because that is very, very true. One thing I say to people is, you have got to pick the right investors. But of course that is stunningly difficult for somebody who does not know. I mean, we landed on our feet with you guys. But and, as you well know, we have had interactions with other investment groups or investors who do not see the world in the same light as BGV and Forbion, and you know you would want to try and avoid those investors, if possible, because they would destroy the company from the inside out necessarily. And you want to focus on people who nurture that. I think that is one huge gap of knowledge in academic institutions who do not know what is a good investor or a bad investor, or what like you said that template of early investors, late investors, and everything else. So we need a handbook of good early investors and major investors, and distributed those academic institutions.

Dima: Unfortunately, we are already getting to the end of our episode. So thank you so much to both of you for sharing all the interesting insights and hopefully helpful insights as well to our listeners. If I were to summarize the key topics of our discussion today, I think there was a lot of emphasis on emotional intelligence. I have to say, rather than scientific intelligence when it comes to creating a company. So we heard things like trust. We heard things like speaking the same language, going an extra mile from both sides, and just being able to let go. But let people who are better than you in certain areas drive the business. So I think this is a very nice essence of this episode to show that. Yes, it is, of course, in the end about data. And you need to develop a real drug, but it does not happen without emotional intelligence as well. So thanks for sharing all these stories with us.

Dima: I hope that also our listeners enjoyed listening to the seventh episode of the Biotech Pulse. Remember, you can listen to all of our episodes wherever you get your podcasts or directly on the Forbion website. Again, many thanks to my co-host, Daniel Couto, General Partner at BGV. And Simon, co-founder of Complement Therapeutics, and also Professor at the Institute of Ophthalmic Research at the University of University of Tübingen Germany. Thank you to all of you out there for listening in and until next time. Goodbye, and thank you.