5:38 PM
 | 
Apr 27, 2017
 |  BC Innovations  |  Finance

Hatching VC incubators

How biotech VCs are cultivating innovation by forming incubators

While more VCs have created venture incubators to nurture early concepts into full-fledged start-ups, they are aligned more on the need to incubate than on how best to do it.

Indeed, a collection of VCs who spoke to BioCentury all think about incubation in different ways. Nevertheless, the group has managed to launch an impressive list of biotechs building potentially disruptive technologies by proactively sourcing or creating their own opportunities and culturing them internally.

The list includes the likes of Flagship Pioneering’s Moderna Therapeutics Inc., which has raised about $1 billion in venture rounds since its founding in 2010 to generate a pipeline of mRNA-based therapies.

Flagship was the earliest of the group to adopt the incubator model, forming Flagship VentureLabs in 2000.

The more recent spate of new incubators dates to 2011, when Versant Ventures established Inception Sciences Inc.. Since then, Versant has established two others, Highline Therapeutics and Blueline BioScience, and Avalon Ventures and 5AM Ventures have also joined the club (see “Venture Incubators”).

Table: Venture incubators

Several VCs have formed dedicated incubators to foster early-stage projects not yet ready for series A, which take a variety of forms and have different specialties. They broadly fall into the categories of internal incubators used by the firms to nurture opportunities sourced internally or externally, and regional incubators tied to academic institutions, often with specific pharma partners. The incubators also vary by whether they have physical lab space, a model dubbed “brick-and-mortar,” or whether they operate virtually and source experiments through CROs and academic partners. PureTech Health plc and Accelerator Corp. operate entirely by incubation, and unlike the other firms, do not create companies outside this model. Source: VC and company websites; interviews

YearVCIncubatorPurposeModelPharma partnersNewcos launched
Internal incubators
2000Flagship PioneeringVentureLabsExplore biological white spaces; disruptive platformsBrick-and-mortarNone 19
2003Accelerator Corp.N/ASingle targets; broad platformsBrick-and-mortarNone 15
2005PureTech Health plcN/ANew modalities for neurology, immunology, gastrointestinal diseasesBrick-and-mortarNone 12
2011Versant VenturesInception Sciences Inc.Small molecule drug discoveryBrick-and-mortarNone 6
2013Avalon VenturesCOI Pharmaceuticals Inc.Single target build-to-buys with GlaxoSmithKline plc (LSE:GSK; NYSE:GSK); Single assets at lead-optimization stage; disruptive platformsBrick-and-mortarGlaxoSmithKline plc12
2013Versant VenturesBlueline BioscienceBiologics drug discovery VirtualNone 1
20155AM 4:59 initiativeDisruptive platformsVirtualNone 2
2016Versant VenturesHighline TherapeuticsSingle targets; broad platformsHybridNone 1
Regional incubators
2014OrbiMedFutuRxTranslate Israel's academic scienceBrick-and-mortarJohnson & Johnson (NYSE:JNJ); Takeda Pharmaceutical Co. Ltd. (Tokyo:4502)9
2015SofinnovaBiovelocITATranslate Italy's academic scienceVirtualNone 1
2016Deerfield; Bay City CapitalBridge MedicinesIND-enabling studies for three universities in New York, N.Y.VirtualTakeda Pharmaceutical Co. Ltd.0

While all take different incubation strategies, the consensus is that promising early stage ideas need dedicated resources, measured funding and management by seasoned executives employed full-time by the firm before they can graduate to a traditional series A financing.

The variables boil down to how the firms source and validate projects, what activities they prioritize, and whether they pursue single assets or platforms.

At one end of the spectrum are brick-and-mortar structures that house discovery scientists performing wet lab experiments on ideas sourced internally or externally. At the other are virtual operations that design strategies internally, and execute them via CROs or academic labs.

Versant Managing Director Clare Ozawa told BioCentury the firm started Inception to have an internal group that would be an “entrepreneurial bridge” to pick up academic translational opportunities and advance them to industry-level drug candidates.

“We made it with the intent of basically having a plug-and-play team that is a very experienced drug discovery team,” she said.

Inception has launched six disclosed companies, including two in regenerative medicine. Inception 3 Inc. is developing regenerative therapies for hearing loss. Inception 5 Inc. aims to treat multiple sclerosis by remyelinating damaged axons, a strategy widely acknowledged as the next frontier in the disease....

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