Biotech on the Rise

“Everything is bigger in Texas,” is a common refrain of Texans. And Houston does little to dispel the rumor currently ranked as the fourth largest city by population, and rising. Our city is known as the energy capital and hosts the Texas Medical Center (TMC), the largest medical complex in the world. Comprised of 58 institutions, the TMC sits on 1,345 total acres, employs over 106,000 people, supports 10 million patient encounters annually, and has an economic impact of $25 billion. Put into context, the TMC alone ranks as the 8th-largest downtown business district in the United States (US), right after Philadelphia and Seattle.

The TMC has long been recognized for its research and clinical care excellence. However, it has historically lagged behind other key hubs in converting that research into viable biotechnology companies (biotechs) whose primary aim is develop life-saving medicines to improve patient outcomes. Biotechs also generate a great deal of interest from investors. While more than 90% of publicly traded biotech companies don’t generate revenue, the promise of a holy-grail drug can support market capitalizations in excess of $1 billion. At the beginning of 2018, the biotech sector performed so well that its 10 year annual returns more than doubled the increase for the S&P 500 over the same period

Currently, Boston and San Francisco hold the top spots for biotech investment thanks to a symbiotic relationships across top academic institutions, venture capitalists, entrepreneurial academicians, and a large pool of experienced executive management. But a tectonic shift in culture and investment in recent years is fueling the rise of Houston as a global player in this industry. The vast trove of basic research discoveries coming out of our premier institutions such as M.D. Anderson, Houston Methodist and Baylor College of Medicine are now finding commercialization opportunities here at home. On its current trajectory, Houston’s biotech industry could be less than a decade away from being considered a leader in the biotechnology arena.

Recent Biotech History in Houston

Houston is already seeing the successful launch of biotechnology companies. For example, Houstonian Nancy Chang, PhD took her company Tanox public in a successful IPO in the early 2000’s. It was then acquired by Genentech in 2006 in a transaction worth about $919 million. Last year, Roche and Novartis grossed $1.83 billion in Xolair sales, the asthma drug that originated from Tanox.

Another example comes from Woodlands based Lexicon Pharmaceuticals which also went public in the early 2000’s. Though its trajectory was not quite as steep as Tanox, in 2017 the company had its lead compound, XERMELO approved in the US, the European Union (EU) and certain other territories for carcinoid syndrome diarrhea. Lexicon has a second drug for Type 1 Diabetes under review by US and EU regulatory bodies with a potential launch in mid-2019.

The Current State of Affairs

Over the past 5 years, there has been an unprecedented boom of investor dollars pouring into biotech companies here in Houston. Over this period, we have seen on average, 1 IPO per week. Bellicum Pharmaceuticals (based in the TMC and spun out of Baylor College of Medicine) is one such company. Bellicum is developing treatments to treat pediatric blood and bone cancers and is a good demonstration of the risk/reward profile of investing in biotech stocks. Bellicum’s capitalization has ranged from $120 to $500 million over 2018.

Organizations such as TMCx are working to create an environment where ideas, technology transfer, commercialization expertise and Fortune 500 companies such as Apple, AT&T and Johnson & Johnson can thrive. Specifically, J&J has built its JLabs facility at the TMCx spanning 30,000 square feet of space dedicated to the commercial development of devices and therapeutics in the life science area. It is the largest device incubator in the country for J&J.

The advent of big data, cognitive computing and sequencing technology and its aggregation and processing fueled the creation, under the leadership of immediate past president Ron DePinho, of a completely new organizational paradigm for developing drugs. Institute of Applied Cancer Science (IACS) at MD Anderson Cancer Center was set up to buck the 95% failure rate drugs entering clinical trials and reduce the exorbitant costs endured by cancer patients.

While some MD Anderson faculty were skeptical at first, IACS now represents a one-of-a-kind internal drug discovery program that identifies high-quality clinical candidates aimed at targets for both orphan indications and high unmet medical needs. IACS has generated a significant return on investment including: increased technology licensing revenue more than six-fold, from $42.6 million in the years 2006–2010 to $264.0 million in the years 2012–2016. Impressively, with more than $500 million in contractually committed funds, MD Anderson has earned the number one status nationally in both corporate alliance and IP/Commercialization revenue in recent years. These resources are further fueling its mission to end cancer.

The Future

With the inflow of investor dollars and programs being further de-risked, we are seeing the next generation of biotech companies surface in Houston. One recent example is Tvardi Therapeutics. Tvardi is a privately held, clinical-stage biopharmaceutical company headquartered in Houston, at based at the TMCx. The company was founded last year by Drs. Ron DePinho, David Tweardy, and Mike Lewis. Tvardi’s lead asset is cancer drug that not only targets cancer cells but also emboldens the immune system to better recognize tumors. The compound has already entered clinical testing, is well tolerated and has early signs of activity against tumors. The company recently announced the completion of a $9 million Series A financing and the appointment of Imran Alibhai, Ph.D. as Chief Executive Officer (www.tvardi.com). He is an example of a generation of experienced management in our biotech ecosystem. Dr. Alibhai was raised in Dallas and attended Duke University as an undergrad. He returned to Texas to attend UT Southwestern Medical School. “At the time, I thought it would be my last opportunity to live in Texas as there were a dearth of biotech opportunities in the state,” stated Dr. Alibhai.

After receiving his PhD, Dr. Alibhai headed to Seattle to work in biotech venture capital, followed by a hedge fund in San Francisco and eventually to NYC to be an M&A investment banker. During his time as banker, he convinced a Houston physician who spent 7 years as a hospitalist at Houston Methodist to marry him and move to NYC. They ultimately returned to Houston to raise their family.

Prior to joining Tvardi, Dr. Alibhai was an SVP and Managing Director at DNAtrix, another Houston success story in biotech. DNAtrix is based clinical-stage biopharmaceutical company spun out of MD Anderson Cancer Center developing oncolytic viruses for cancer. During his tenure, DNAtrix raised multiple rounds of financing, entered into and enrolled a Phase 2 immuno-oncology collaboration with Merck, and licensed and moved into the clinic a next-generation armed virus.

In addition to a world-class group of founders and a new CEO, Tvardi has a pre-eminent Advisory Board which is headlined by MD Anderson’s Jim Allison, Ph.D. This past month, Dr. Allison was awarded the Nobel Prize for Medicine for his work in elucidating how the immune system can be harnessed to treat cancer. “I am honored that Tvardi’s board has entrusted me to lead the company,” said Dr. Alibhai. “Our lead compound, TTI-101, has already demonstrated excellent safety with early signs of activity. This activity, coupled with the pre-eminent drug developers and scholars comprising Tvardi’s founders and board, is a fantastic platform to build an innovative, successful company in Houston.”
With its lead asset in already clinical trials and multiple other compounds ready for near-term human testing for indications beyond cancer including inflammation and fibrosis, Tvardi is poised to follow or perhaps surpass the groundwork laid by past successful Houston biotech companies.

Concluding Thoughts

In short, everything is indeed bigger in Texas and it seems the biotech industry is yet another reason why. With several success stories logged and new ones like Tvardi on the rise, it’s easy to see why Houston has one of the youngest, fastest growing and most diverse populations, cultures and industries anywhere in the world. For those looking to create health care technology, a new cancer treatment or a genomics company, the city of Houston presents opportunities many other cities can’t match.

Source: Memorial Villages Magazine (pages 12 – 15)

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