By Mike Cloonan, CEO of Sionna Therapeutics, as part of the From The Trenches feature of LifeSciVC
An insightful piece on this blog following the JPM healthcare conference noted the “refreshing burst of enthusiasm” in the biotech sector. It’s true that venture funds raised significant capital despite numerous challenges over the past two years. And many are looking for the right investments now. We are turning a corner, and optimistically that means more private companies will be able to secure the resources they need to advance groundbreaking research through critical value inflection points.
Just a few weeks removed from closing our Series C round at Sionna, it seems like a good moment to reflect on the process. What resonated? What does it mean for our industry moving forward?
A few key things really stood out in this environment. The quality of science – and the ability to distinguish it from other approaches – was the entry ticket to serious engagement. The strength of relationships, those built consistently over time and not just pursued for financing. And the experience of those around you, including Board members and internal investors.
The science presents an opportunity and a challenge for us at Sionna. We are confident that there is room for improvement over existing cystic fibrosis (CF) therapies because we have not yet achieved fully normalized function of the cystic fibrosis transmembrane conductance regulator (CFTR) protein. In fact, two-thirds of CF patients on the standard-of-care do not achieve normal CFTR function, which clearly highlights the level of unmet need. Sionna’s approach is to target a specific domain of that protein – NBD1 – which may hold the key to unlocking fully normalized CFTR function. For years, NBD1 was considered “undruggable”, but Sionna could be on the verge of a breakthrough with four programs in or entering the clinic this year leveraging years of experience and knowledge to crack the code on NBD1.
We experienced strong enthusiasm for small molecule research in the investor community. We were able to highlight the long history of NBD1 research that goes back more than a decade to the days of Genzyme, coupled with extensive preclinical data, to demonstrate that this is a well understood target that represents a significant breakthrough in CF. This also sets us apart from the current standard-of-care, and we can take multiple shots at the target with three NBD1-directed compounds and complementary molecules in development.
That science resonates with investors. They see the quality, the differentiation of the first-in-class assets and understand the potential. Of course, that is only after a few detailed conversations and an important learning curve. Which leads to the next key – the strength of the relationships.
Our engagement with investors started well before our launch out of stealth and the Series B in 2022. We established the company three years prior and were already making the rounds telling our story. Bringing investors along on the journey with updates, even when not in fundraising mode, builds trust and credibility that is critical to a successful financing. The key is also to ensure our message is well understood while continuing to check-in with progress. That way, when it’s time to raise capital, you will already have a good sense for the investors who are interested and what key questions they may have about the science. These are relationships that need to be nurtured over time, not just initiated during a roadshow or at a time of need. Appreciation for the capabilities of the management team is also a critical component to raising capital, and there is no substitute for sustained engagement to build that familiarity. As an example of the continued engagement, we headed to the TD Cowen healthcare conference in early March before the ink was dry on the Series C closing. We have milestones on the horizon, and we want investors to stay close to the Sionna story even if we don’t need capital until 2026.
The last takeaway is just how much the experience around us made a difference. Like many companies in our space, we are fortunate to have a strong Board with tremendously relevant experience in biotech and capital raises. It is important to tap into that knowledge base and those networks. Our Board and internal investors help strengthen our narrative and the corporate strategy to ensure our science and strategy will resonate with new investors. We test drove our messages with our Board to ensure we understood the investor perspective before we kicked off the Series C financing and to ensure we didn’t come across as ‘drinking the Kool-Ad.’ The insights from these internal discussions refined our messaging and helped demonstrate the compelling opportunity we have to advance a truly groundbreaking clinical development program.
We hope that the strong interest in our Series C is validation that the biotech industry has turned a corner and expect there will be more successes announced this year. Many of us are searching for the financial flexibility to execute clinical development plans that can deliver real results for the patients we serve. Every milestone, including a financing, creates opportunities for lessons learned to be applied to the future. This was a great learning opportunity for our company reflecting on what went well and what could be improved next time. The Series C financing did reinforce that by focusing on quality science, building strong, sustained relationships, and leveraging the expertise around us we can all confidently increase the probability of success to raise capital to fund through critical inflections and advance into the next phases of development. We are optimistic that the biotech prospects for 2024 are improving and will enable sustained funding for many biotech companies focused on quality science that can impact the lives of patients and families.
