Sunset Over San Francisco Bridge
Credit: Ilya Grigorik, CC BY-SA 3.0 , via Wikimedia Commons

Rain can symbolize many things: unhappiness, rebirth, foreboding, determination, the breaking of a drought, and a pause for introspection. And Day 2 at the 2023 J.P. Morgan Healthcare Conference saw a downpour—literally and metaphorically.

With the rain and wind coming in sideways, executives in mostly blue and gray suits scrambled to take cover between hotel entrances. As I left my first meeting of the day with Alto Neuroscience en route to another interview at the Westin St. Francis San Francisco on Union Square, I was stopped at the door for not having a badge. As I pulled out my phone to find some identification, soaked attendees huddling under an awning debated a possible move for the conference to a more spacious, warmer location.

Act I: Lumen Biosciences

Brian Finrow
Brian Finrow

Once retrieved at the door by Brian Finrow, CEO and founder at Lumen Bioscience, I was stopped several more times by security for not having a badge before finally getting to the dated Oak Room for some overpriced coffee and a tardy but informative chat.

Finrow told me that 2022 started with tremendous optimism—COVID would no longer be an issue and markets would normalize with a potential huge round of funding brewing. Lumen had the clinical and regulatory path all figured out with a GMP plant humming. All they needed, Finrow told me, were “coins to put in the machine to make it run.”

Then Russia invaded Ukraine, which led to skyrocketing oil prices that sent investors into “skedaddle-mode,” which has continued to the present day. Finrow feared that it could be the end of Lumen.

But not only were they able to hang on, but they were also more successful than most in getting funding. Lumen closed an equity round of $43 million last June and received non-dilutive funding totaling $20 million from Biomedical Advanced Research and Development Authority (BARDA), Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARBX), The Bill & Melinda Gates Foundation, and U.S. Army Medical Research and Development Command and Medical Technology Enterprise Consortium (USAMRD/MTEC).

In addition to supporting their existing programs for the prevention of C. difficile infection and a biologic cocktail for treatment of inflammatory bowel disease (IBD), they grew programs in traveler’s diarrhea, COVID-19, and antibiotic-resistant bacterial infections as well as an intranasal malaria vaccine.

“Knock on wood, we’ve got four clinical trials we’re going to kick off this year. We’re hiring like crazy, and we built out a second GMP plant last year,” said Finrow. “We took the rest of our building in the Fremont neighborhood, so that more than doubles our lab and office square footage.”

Finrow attributes a change in course during 2022 to simply trying to break even. “In software, there’s this thing where they pivot to break even—we’re going to slow down the spending and try harder and we’re going to break even,” said Finrow. “I said, ‘This is not how it’s done in biotech, but what if we just did that. We would need to work a little harder for the grant funding from the foundations and the federal agencies, and we’d have to hustle more on the business development.’ We did some loose modeling on it and it looked like it could work.”

Act II: Eligo Biosciences

Xavier Duportet
Xavier Duportet

My next meeting was moved from the locked-down Westin St. Francis to a Marriott lobby a few blocks away. All of the seats were taken and being watched by people standing in the hope of snagging an opening. Eligo co-founder, CEO, and chairman Xavier Duportet, PhD, and chief business Officer Aurélie Grienenberger, PhD, joined me on a dash to find a lobby with some empty seats. We ended up at the historic Beacon Grand Union Square Hotel, where Duportet and Grienenberger squeezed onto an already crowded couch, and I propped myself up on an ottoman.

The reason Duportet and Grienenberger attended J.P. Morgan this year was to find new sources of investment to take their programs to the clinic. Typically, that would be a bit easier given a couple of recent announcements on patents. The first set of patents dealt with in-situ microbiome editing.

The second has to do with delivering CRISPR using a topical ointment to treat acne. “We’re delivering CRISPR into the microbiome of the [patient’s] face,” said Duportet. “The CRISPR is specifically programmed to target the pro-inflammatory genes that are expressed by these bacteria and that drive the inflammation in the hair follicle. The whole point is to precisely remove the cause of acne, which stems from the microbiome.”

Eligo plans to advance a program on acne by themselves. “The beauty is that with a single Phase Ib/IIa [trial], we can have first-line efficacy in patients,” said Duportet. “Our first trial will already be in patients and, because we’re using a topical, we don’t need too many patients. The amount of cash required to get to this inflection point is actually is about $10-12 million. Regarding the inflection point, it will be a question of whether or not to partner. For now, we’re pushing it ourselves.”

Duportet says that Eligo hopes to get two years’ worth of funding and to generate clinical data by 2024. “This will really be the big value inflection we’re all looking for.”

Act III: Khosla Ventures

Samir Kaul
Samir Kaul

My last interview of the day took me up to a penthouse suite in the Grand Hyatt San Francisco to meet Samir Kaul, founding partner and managing director at Khosla Ventures. Kaul gave me a window into his strategy for venture capitalism in the current economic climate.

Kaul thinks that the private markets have yet to correct but will probably start to do so in Q2 or Q3 of this year, which, he says, is a great opportunity for funds like Khosla.

“I think way too many entrepreneurs got ahead of their skis and shot the moon on valuation, and they’re going to be in a tough spot,” Kaul told me. “The good entrepreneurs will just take their medicine and make sure they do what they need to do to retain their key team members and just say, ‘It is what it is. Let’s move on.’ That’s the advice I give my entrepreneurs.”

Given the current market climate, Kaul thinks there will be a real separation between those that know what they’re doing and those who don’t across many fields. The key for an entrepreneur, according to Kaul, is to make the move once they’ve hit the critical milestone—get a drug approved, get a product launched or get profitable. “You just make sure you bring on the right partners, hire the right people, stay frugal and disciplined, and hit your milestones.”

But it’s all for nothing if the ship can’t stay afloat. “You have to stay alive long enough to get lucky because that’s the game,” Kaul told me. “Every successful company in tech has had those moments of luck. I’ve seen a lot of companies that deserve to survive, not survive. They didn’t survive long enough to get that luck—whether it’s a customer, key hire, acquisition, a competitor falls on their face, who knows.”

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