Darkest Before Dawn: A Story Of Biotech Optimism In A Tough Market

Posted November 28th, 2023 by Jeb Keiper, in Bioentrepreneurship, From The Trenches, Leadership, Portfolio news

By Jeb Keiper, CEO of Nimbus Therapeutics, as part of the From The Trenches feature of LifeSciVC. @JebKeiper

Earlier this year, Nimbus closed the sale of our allosteric TYK2 program, which was acquired by Takeda for $4 billion upfront. To say 2023 has been an excellent year for Nimbus would be an understatement and by some standards, the best of our 14-year history (more here).  Yet, it is not lost on us that our success has come against a backdrop of a dismal and discouraging year in biotech more broadly.  By any measure, 2023 so far has seen some of the worst performance in biotech (e.g., the largest net fund outflows from the sector, ever, according to Raymond James/Lipper data).  A year when positive clinical results, often better than expectations, resulted in share price declines (examples too numerous and depressing to list).  Market conditions like this are demoralizing in the worst way.

Navigating the stark contrast between Nimbus’ success and the industry’s challenges has added a layer of complexity to our social interactions at conferences and events. While colleagues genuinely congratulate Nimbus on our achievements, it’s evident that our success stands out as one of the few positive highlights in the industry.

In these moments, leaning in with empathy and honesty is important: Nimbus’ success was not overnight nor guaranteed even through the fall of 2022, but was instead a product of both good fortune and good governance. One can’t always control the former, but the latter is definitely within our power to shape.  Two key attributes of good governance helped prepare  and sustain us through the challenging moments on our journey: active portfolio management and mission-driven decision-making.

At a recent event with another biotech CEO, I was telling her the story that led up to Nimbus’ TYK2 outcome, and how lousy it was immediately before the Takeda partnership.  “It was brutally stressful,” I declared (using more colorful words).  She looked shocked.  Impossible, it seemed, that this story of success has any parallel to the immense pain her team and company are enduring – and thus, her encouragement of me to write this blog.

At JPM 2022, Nimbus emerged from a scathing lawsuit with BMS, a fight over antitrust concerns around TYK2 and contract disputes stemming from the Nimbus-Celgene relationship of the prior decade.  While both sides reached a settlement, the outcome left Nimbus in the lurch, having to pay back all the monies from Celgene it had received 5 years prior, which of course, we had already spent, leading to a significant drain our balance sheet .  In the more bullish times of 2021, Nimbus had launched two large Phase 2B studies for our TYK2 program, and started our second clinical program, an HPK1 inhibitor for advanced solid tumors; our burn rate had jumped. And above all this, there was the operational challenge of keeping our team encouraged.  A focus on our common mission was critical in these trying times: design breakthrough medicines for patients.

At the Board meeting in early 2022, we were scrambling.  We had a significantly limited set of Phase 1B data in psoriasis patients for TYK2 at the time, and we were now free to speak to pharma companies interested in our TYK2 program.  There was some interest at the time, but not resounding.  We were running out of money and out of time.  We had a term sheet from one party that valued the entire program around $500 million, and then got another one, with certain strings attached for $800 million. These weren’t in the range we all believed we were worth, so we strengthened our spines and rebuffed these offers, pausing our BD process.

Furthermore, to make matters even more complicated, that same summer, markets had already turned sour, and the sentiment was darkening by the day.  The biotech equity markets had effectively shut off the idea of an IPO (which was one of several paths we had mapped out).  Further, there was serious doubt from many pundits that the selective allosteric TYK2’s, led by BMS’ deucravacitinib, would be a new class of drugs.  Equity research analysts surveyed that 90% of physicians and investors believed that BMS would get a Black Box Warning by FDA like other JAK family drugs.  As the CEO of Nimbus, I was repeatedly asked what I thought would happen, and on record, again and again, I shared that “based on the data BMS had shown to date, I did not see a reason the FDA would give it a black box, nor did any of the data we’d generated clinically indicate that selective TYK2 inhibition would lead to those concerns”.  Our team kept the faith. We knew our molecule better than anyone and we knew, from all the genetic, biological, and clinical data generated to date, our approach to selectively inhibiting TYK2 would be the best outcome for patients. Our clinical and commercial teams kept pointing out that none of the approved JAK products ever had the exquisite selectivity of the allosteric TYK2s like deucravacitinib or our own NDI-034858 (now TAK-279). At times like this, I was proud to see how as a collective organization, when the news of the markets and doubters every day was growing, our team found strength in one other.

Despite having a chance at an early exit, given the said term sheets, we made the difficult decision to do a down-round of financing.  Yes, we did a down-round after rejecting several less interesting offers. Kudos to Bain, SV Health, Atlas and our other insiders for having the resolve to step-up and invest in Nimbus last summer.  They obviously made a terrific return, but at the time, they were going against the pack.  Most investors had no interest.  “TYK2 was just going to be another JAK” and “you are two years behind BMS” and “your Phase 1 data don’t look differentiated” and “we are concerned about safety”.  Yep.  All of it.  All true based on public data at the time.  So we took the hit, took the dilution, hung our heads, and gritted our teeth. But the team did not waiver in its conviction. In fact, we invested in CMC, made preparations for Phase 3, began two-year carcinogenicity studies, and began work on further indication expansions.  We kept our pipeline moving full bore, stomached the burn rate, closed our eyes, held hands, and prayed to the statisticians and data managers.

What happened over the 10 weeks following Labor Day was nothing short of incredible.  It started late Friday night, September 9th, after close of business on the East Coast, news from BMS and FDA declared that deucravacitinib was approved as SOTYKTU with no black box warning.  Stunned.  The Nimbus phones lit up. A big win – for patients, for our molecule, for our believers. Investors looking to see if we would raise more money or flip public, and pharmaceutical BD groups were eager to re-engage after we took a hiatus from partnering (a sign to the external world that we believe in our molecule so much, we would want to see the full data set rather than take the earlier terms that were offered). At the time, clinical conduct of our 260-patient psoriasis Phase 2B was complete, and the Nimbus team was feverishly working to clean and lock the data with the highest possible quality. The fully blinded data set had emerged encouraging, but many a management team’s hopes could be dashed when the blinds came off. We kept potential suitors engaged, and made Plans A, B, and C for how to proceed, depending on the data. It was Thanksgiving 2022 when the first headline data came out.  The data blew past our highest hopes (full data set shared publicly at AAD in March of this year).  Within two weeks from the unblinded data, we had a handful of multi-billion-dollar term sheets to consider, and everyone knows the conclusion.  Takeda has simply been an outstanding home for our TYK2 program, aggressively pushing toward in multiple immunology indications.

The transformation from zero to hero was so quick, one needed physical therapy for whiplash.  In less than four months, we went from very challenged financing to highly celebrated acquisition.  Our industry is in a tough spot right now, one of the toughest since the financial crisis of ’08-’09 (when Nimbus was founded, incidentally).  Despite this pressure, a few truths stood out then as they do today: pull together as a team, focus on the fundamental science, put the patients need first, remain strong, and figure out a way to fund it.  Play the long game and believe in your mission: – for those that do, despite the crowd saying otherwise, I say to you: grit your teeth, keep calm, and science on.



Many thanks for the contributions and editorial advice from Abbas Kazimi (longtime Nimbi and chief business officer who led the transaction with Takeda), Bruce Booth (Nimbus founder, chair and famous biotech blogger), Cindy Fung (Nimbus head of corporate affairs), and Eli de los Pinos (CEO of Aura, who, along with other colleagues, served as inspiration to write this part of the story).

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