A Virtual Company In A Virtual World

Posted March 16th, 2022 by Bob Clarke, in Bioentrepreneurship, From The Trenches, New business models

By Bob Clarke, CEO of Kinaset Therapeutics, as part of the From The Trenches feature of LifeSciVC.

In December 2019, I was in London meeting with my future co-founders to discuss an asset that would eventually become the cornerstone of a virtual drug development company. At that time, Kinaset Therapeutics, Inc. as it would become, had negotiated terms to in-license an asset from a UK based company that was changing its strategy. With terms agreed and a period of exclusivity in hand, the plan was to launch a private fundraising on the heels of JP Morgan in January 2020.

Kinaset had access to a potentially great asset for an important unmet need ready to advance to the clinic, the ability to build a strong team with significant experience in respiratory therapeutics, and an efficient development strategy that we thought would resonate well with investors through multiple points of inflection. We intended we could do something almost “old school” by 2020 standards—we could be a virtual company with a lean, mean efficient strategy. But as we planned, in the background, there were the first mutterings of a viral outbreak in Wuhan, China…

The Series A pitches began in person after JP Morgan in those last weeks before all of our worlds became Zoom meetings with interloping dogs, wayward home-schooled kids, and critiques of bedroom wall art. Whether we planned it or not, an airborne pathogen had determined we would be virtual while we raised our Series A.  A virtual drug development strategy had made sense. A virtual fundraising and licensing negotiation in the context of an unknown pandemic world was not something anyone had in their playbook.

We did nearly all our diligence work and responses to investor queries from the confines of home offices. By late spring we were all firmly living in a lockdown world but we had also locked in a great VC syndicate. We finalized a license agreement with our UK partner all via a multi-plexed Zoom theater. The lack of in-person connection definitely made this a challenging proposition of virtual negotiation. There was no ability to read body language cues or give that immediate response from just across the table. The addition of muted microphones and sometimes darkened screens added a layer of uncertainty to the process.  Perseverance and flexibility from all of us over the last two years have become ingrained in our collective skill sets.

Kinaset Therapeutics came together and was announced publicly in November 2020, having raised a $40MM Series A to support clinical POC in severe asthma with our in-licensed inhaled pan-JAK inhibitor. And now it was time to follow our virtual development model (which was now our only option). It was time to roll up our pajama sleeves and get onto the business of drug development and clinical trials all directed via CROs from the (dis)comfort of our home offices.

The concept of the virtual company was certainly in vogue not that many years ago when a model of capital efficiency had strong appeal. Jonathan Montagu wrote an eloquent summary of his virtual experience on this very blog some 8 years ago. Capital efficiency based on leveraging the expertise and availability of CROs/CDMOs and consultants certainly had its place.

However, as the biotech model has continued to evolve and the available capital from the VC/PE world has increased almost exponentially, the virtual company has been far less of a thing in the wake of nine figure Series A rounds… until COVID-19 made us all virtual.

Kinaset did fit a number of key parameters that made a virtual development model an appealing prospect in 2020/2021:

  1. At the outset, Kinaset is a single asset company (with potentially multiple indication targets). We are not a complex platform company that might struggle with an all-outsourced approach.
  2. The Kinaset team, while small (n=3), is very experienced in the domain we work in and the team has had experience running companies in the past. I’m not intending to fuel any founder-led biotech debate; we are founder-led biotech ourselves. But we also have decades of previous experience in developing respiratory therapeutics.
  3. The company’s lead asset was inherited at the clinical stage. Kinaset already had a lead molecule, a lead formulation, an extensive IP estate, and a strong pre-clinical data set to support moving into first-in-man. The need for heavy duty R&D had already been satisfied elsewhere. We were able to focus directly on our Regulatory path and clinical trial plan.

We didn’t set out to be fully virtual, but we did have a plan to use outsourcing as our primary approach to drug development. This was mainly out of practical necessity. In our specific case, our virtual challenge is more one of our truly global world, as Alex Harding recently coined “Globally Integrated Biotech” (GIB). Our CDMO work and clinical trial site is based in the UK, we have an investor in the EU, our API is manufactured in India, our Chairman lives in the US mountain time zone and our team is split between the UK and Boston. And with a core of 3 employee/founders, there was not a pressing need to build an internal R&D capability or have a showy HQ.

So how have we done trying to achieve virtual virtuosity (in the biotech sense) at a GIB through a global pandemic? So far so good.

As with any drug development program, there have been challenges that we’ve had to sort out with our outsource partners. Open, consistent communication with our team, consultants and CROs has been a vital facet of our virtual approach. For our team, updating goals, critical path items and OKRs (if you prefer) on essentially a daily basis has been key. Launching a GIB and managing the time hops across a span of 7-12 times zones has been facilitated by building a strong team trust factor which has proven to be the most important aspect of our virtual company culture.

Our GIB time zone quest has turned out to be beneficial for our virtual approach to drug development across the pond. Our stellar CDO Frazer Morgan is UK-based which allows for real time management and communication with our CDMO and CRO clinical activities. Frazer can conduct AM meetings in the UK and by the time our US-based team is starting our day, we are able to see updates. We in turn can then do our part so when Frazer wakes up day+1, he can react to our input and so on. This is all driven by those key ingredients of trust and openness.

And I’m proud to say, this approach can be and has been successful even as we all struggled through the multiple waves of COVID-19. Since our November 2020 inception, we managed to rapidly advance our lead program to a P1/1b in severe asthma in the clinic that started in Q3 2021. A critical aspect of our success in execution has been the selection and management of CROs for our work. There is no rocket science revelation behind the importance of working with CROs that you know can/will deliver but it’s always worth repeating.

So, as we move towards Q2 2022 and our planned P1/1b data readout, we are planning ahead for the next and more significant challenge of our virtual model: managing a global P2 POC trial starting next year. The good news is we are optimistically reaching that light at the end of the long COVID-19 tunnel such that we can once again consider travel and BOD dinners and BD meetings without so much overarching angst and restrictions.

As we move into Phase 2, we will be moving into the next stage of company growth which will mean additional headcount and just maybe a Kinaset HQ. A place where we can sit across the table from each other and tell stories about the dropped zoom calls, the middle of the night international time zone plays and the unkempt hair/beards that kept us going through the pandemic times at home as we kicked off a new company with an old virtual model.

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