Jonathan MacQuitty, PhD, of Lightspeed Ventures Partners, often bumps into tech investors who say things like, “We were really good at making credit cards, so how bad could tackling cancer really be?”
“The answer is: cancer is much more complicated than credit cards,” said MacQuitty. “It turns out that biology is really, really complicated.”
In this age where gizmos and gadgets have infiltrated seemingly every market sector and where artificial chatbots are all the rage, MacQuitty says that lots of people investing in life science want to see more tech-enabled solutions. But the perspective that MacQuitty has shaped as the Sector Head for Life Sciences and Venture Partner at Lightspeedis that, artificial intelligence (AI), machine learning, and all that tech is very powerful. But in the final analysis, the AI-generated drug is put on the same starting line as drugs made using conventional methods.
“There’s no a priori for a drug,” said MacQuitty. “You may have used AI to find a drug candidate more efficiently and less expensively but it’s not automatically going to be better. We see technology as a tool that allows us to be more thoughtful about it. Our philosophy isn’t that 100% of our deals have to be tech enabled. Somewhere between 15–20% of Lightspeed’s fund goes into healthcare, whether health tech or biotech. Healthcare represents almost 20% of the GDP and is an area where big innovative solutions could really change things.”
Within healthcare, MacQuitty says, no area is off the table for the American venture capital firm headquartered in Menlo Park, California. Founded in 1999, the $7-billion fund does not entertain small deals across its portfolio of consumer, enterprise, and healthcare sectors. “If you’ve got a single asset or are running a very small clinical study, you’re going to raise maybe $20 million and then sell the asset to a big pharma that’s going to be worth a few hundred million,” said MacQuitty. “Unless we’re going to make a big impact and are creating billions of dollars of value, it doesn’t really fit with us.”
The cell and gene therapy illusion
Cell and gene therapies have been proposed as the next panacea of medicine. But MacQuitty said that this isn’t the first time we’ve seen such a craze. “Go back in time to monoclonal antibodies: it’s the 1980s and the investment community is convinced that these are silver bullets,” said MacQuitty. “Do we have any reason it won’t work everywhere? Well, how do we know it’s going to work anywhere? You had these different perspectives where clinicians were saying, ‘We have no data,’ and the ambassadors said, ‘We have no negative data.’”
Over time, people realized that antibodies don’t work everywhere, but they do work in a number of different places. “They’re a very useful modality—not for everything, but for a lot of things,” said MacQuitty.
And that’s exactly where he thinks we are today with cell and gene therapy. “People initially thought, ‘Gosh, this will work everywhere,’ and that it’s going to make other therapies completely obsolete,” said MacQuitty. “I think that’s not true. It will not make lots of therapies obsolete. Other therapies will and still are very effective. I think people don’t realize there could be problems with cell therapy; you can get off-target effects. And people die from gene therapy studies. People just get a little carried away when there’s no data.”
Now, the data is coming in and it is far from perfect. Graphite Bio has halted a phase I/II gene editing trial for sickle cell disease due to a “serious adverse event in the first patient dosed” and has cut half its staff—including two executives—after a review of the business. Magenta Therapeutics stopped a clinical trial in its early stages after a patient died. Investigators are currently studying the case to determine if there is a potential link with drug MGTA-117.
And MacQuitty isn’t all that surprised. “If you think about the cell therapy that’s been used longest, it has been bone marrow transplants where 30% of the patients are going to die,” said MacQuitty. “They’re going to die from graft-versus-host issues, where the cells being transferred are too aggressive and start attacking the patient or you transfer them and they’re not aggressive enough and the cancer comes back.”
Funnel of light
MacQuitty has funneled some of Lightspeed’s money into a portfolio company called Orca Bio—a clinical-stage biotechnology company developing purified, high-precision cell therapies for the treatment of cancer, autoimmune diseases and genetic blood disorders. Their investigational therapies are designed to deliver better survival rates with dramatically fewer risks than standard allogeneic stem cell transplants, such as graft-versus-host disease and other debilitating transplant-related toxicities.
“Their idea is to pick the right cells to attack the cancer and avoid the cells that are going to cause problems with the graft-versus-host. If you’re clever about how you do that, you can shift those parameters fairly significantly,” said MacQuitty. “They’re currently in a registrational trial to get their system approved by the FDA.”
Sometimes, there are alternative therapies that are more suitable than the newest and flashiest. MacQuitty uses the example of bispecific antibodies. “If you are doing a CAR T [therapy], you have to wait for several weeks to make the CAR T from the patient’s cells, and it’s very expensive manufacturing, whereas bispecific antibodies are much less expensive—maybe one third of the costs—and you can use it that day,” said MacQuitty. “We’ve seen in blood cancers and hematological disorders that the performance you get from bispecific antibodies is increasingly as good as that you can get from CAR T.”
MacQuitty doesn’t understand why patients are so keen to get CAR T. He thinks that only patients with fairly serious cancers with no other treatment options should be getting CAR T therapy.
“The serious cancer centers love to persuade patients to drive several hundred miles to come to them and not stay at their local community place, where they can get a bispecific off the shelf,” said MacQuitty. “There are slight marginal performance improvements specific to CAR T, but I think bispecifics are going to be pretty powerful in a lot of those applications. Not all of them, but in a lot of cases.”
Electronic health records of tomorrow
To implement new technologies, MacQuitty thinks that financial problems are just as big a hurdle as technical problems. “There are so many different things that we can’t do right now, not because they’re technical problems but because they’re financial problems,” said MacQuitty. “People started with 23-gene panels, then 100-gene panels, then 500-gene panels. Now exomes and whole genomes are coming. If it costs $100 a genome, there are a lot more things that we will know about patients and what we can do.”
As the cost of sequencing falls, the value of sequencing information rises. “The value we get from more genomic information is way more than we thought it would be,” said MacQuitty. “There’s enormous complexity in biology and the difference between having a whole genome and an exome turns out to be an enormous amount of information in the whole genome that you’re missing. If you even get that information, researchers, clinicians, and physicians are all going to want it. The pressure to get more information is very strong. And if it’s combined with the cost coming down, we’re just going to see more and more applications and more and more data collected to help with diagnosing and treating diseases.”
Genomics will have a huge influence on the future of electronic health records. MacQuitty thinks that genomics will have major implications for cancer patients. “In oncology, there’s mutational frequency and you have to know where are the mutations that cause resistance to therapy or resistance in the immune system?” said MacQuitty. “We now know that buried in those hills is an enormous amount of information. We can’t figure out what to treat the patient with next if we don’t have that information. We need that information.”
Crystal ball 2023
MacQuitty said that the latest data suggests that overall, the economy is doing well. “Consumers are happy and people are going back to work after COVID, so the economy is not slowing,” he said.
But this isn’t the ideal situation for everyone. Although consumers are buying stuff, the Federal Reserve System isn’t going to be happy. “This annoys the Fed, and so they will either have discussions about increasing interest rates still further but also keeping the interest rates high until the middle of 2024, which means the bonds are going to be earning big money.”
To MacQuitty, that means that 2023 is going to be difficult (and that was before the Silicon Valley Bank collapse). On the one hand, late-stage crossover investors are enjoying a feeding frenzy in the public markets because that’s where the huge opportunity is. “There are several hundred companies now worth less than their cash value, and so they’re going to hang out there for an extended period of time, which means if you were a late-stage private company relying on a crossover round in 2023, this is not going to be fun,” said MacQuitty. “You’re going to have a party, and no one will come.”
This means that the later-stage companies will be going to the venture capitalists and, reluctantly but inevitably, changing their valuations to be a little more consistent with the public mind. “What that’s doing is offering venture capital firms tremendous value,” said MacQuitty. “You can get a company that’s raising a Series D, except they’re raising it as a Series B or a Series A price, which means the companies that would normally raise the Series A are running into competition that’s way bigger and way more advanced that’s already in the clinic or about to get in the clinic. And suddenly all of these companies are getting crowded out. So if you are trying to raise an A or B round right now, 2023 is not going to be a fun year.”
MacQuitty said that every venture capitalist he’s met recently is aware of this, and they are exacerbating the problem because they have their own mouths to feed. said MacQuitty. “So now it’s not only being crowded out; the people who normally invest in A and B rounds don’t want to invest. They’ve got their own mouths to feed. It’s going to be very hard for A and B round financing this year.”