DUBLIN – Versant Ventures was one of a handful of investors to profit from Passage Bio Inc.’s recent upsized IPO. The Philadelphia-based gene therapy firm planned to raise $125 million initially but eventually hauled in $216 million by issuing 12 million shares, which it priced at $18 per share on Feb. 27. The IPO price valued Versant’s holding at $89 million. As well as participating in the IPO – the actual amount involved has not been disclosed – it invested $35 million across three private rounds, between September 2018 and August 2019, according to SEC filings.
Its involvement as founding investor with oncology firm Black Diamond Therapeutics Inc. was even more lucrative. Its stake, which it built up by investing $57.8 million over a three-year period as well as by participating in the IPO, was worth $190 million when Cambridge, Mass.-based Black Diamond priced its $201 million offering at $19 per share on Jan. 29. (The exercise of the underwriters’ option further swelled the offering to $231.3 million). Versant’s position is even more valuable now, given that the stock (NASDAQ:BDTX), which at one point reached $41.79, is currently trading well above its IPO price.
In all, Versant has achieved an average return multiple of 5.2x in 16 transactions over the past five years, with an internal rate of return of more than 100%. Almost half of those exits came from its own company creation efforts, and those yielded an average return multiple of 7.1x.
Versant, which has $3.2 billion under management, is one of the few biotechnology venture capital funds to pursue an international operational and investment model, and it is currently building up its team in multiple locations. Its European arm has now matured to the point where Ridgeline has become a key node in its discovery offering to startups, which helps to bridge the gap between an initial idea and a fully fledged industrial development effort. Its first success was in the initial development of Black Diamond’s tumor-agnostic small molecules directed against undrugged cancer mutations. Ridgeline is currently supporting the initial development of two more fledgling firms, Monte Rosa Therapeutics Inc., which is developing cancer drugs that modulate protein degradation pathways, and Bright Peak Therapeutics AG, which is developing engineered cytokines for immuno-oncology indications.
Managing partner Tom Woiwode, who built up Versant’s European presence, is returning to the West Coast, where he will divide his time between Versant’s San Francisco and San Diego bases. Woiwode had originally only planned to stay for “a couple of years” in Basel. “It’s been so much more fruitful than that,” he told BioWorld. A couple of years became 10, during which time he backed companies like Cambridge, Mass.-based gene editing pioneer Crispr Therapeutics Inc., which is now worth almost $3 billion, and rare disease drug developer Therachon AG, which New-York-based Pfizer Inc. scooped up last year in a deal worth up to $810 million.
Alex Mayweg, who built up the Ridgeline operation – while also putting in a stint as interim chief scientific officer at Black Diamond – has been promoted to managing partner and will lead Versant’s operations in Europe. “Alex is a natural successor to that role,” Versant’s chairman and managing director, Brad Bolzon, told BioWorld. He already had extensive experience as a drug hunter prior to joining Versant, having been global head of medicinal chemistry at Basel-based Roche Holding AG. Ridgeline has grown significantly since its formation three years ago. The Basel center currently employs 40 of the 70 scientists working across Versant’s four discovery engines – the others are located in San Diego, Vancouver and Montreal and operate collectively under the Inception Sciences banner. Ridgeline plans to add 20 more people over the next two years.
Tapping scientific leaders
The engines operate, in part, under a fee-for-service model. Ridgeline, for example, received $950,000 per month from Black Diamond, according to the latter’s IPO prospectus, and the actual expenses incurred were reconciled every quarter. Its proximity to Roche and to Novartis AG provides it with a ready source of big pharma experience and expertise. Versant also has incubators in New York and Toronto, Highline Therapeutics and Blueline Bioscience, respectively, but neither has developed to the same extent. “Both Highline and Blueline never evolved to a full discovery engine,” Bolzon said.
Joining Mayweg in Basel is Markus Enzelberger, who was chief scientific officer (CSO) at Martinsried, Germany-based Morphosys AG until the end of February, and who will now focus on Bright Peak. “We’ve been able to identify scientific leaders who’ve been able to add real accomplishment in areas that are important to us,” Bolzon said. Bright Peak’s platform is based on the work of Jeffery Bode’s lab at the Swiss Federal Institute of Technology in Zurich (ETH Zurich). Another recent recruit, venture partner Markus Warmuth, previously entrepreneur-in-residence at Third Rock Ventures, is heading up Monte Rosa Therapeutics, which is based on the work of Rajesh Chopra, at the London-based Institute for Cancer Research, and Nico Thomä, of the Friedrich Miescher Institute for Biomedical Research in Basel.
The company – and Warmuth – will be located in Boston, where Versant has recently established a presence. “I think we will be sourcing more opportunities out of Boston,” Bolzon said. Historically, Versant has largely steered clear of the area, which is a very crowded space for investors, although it has located companies there in order to tap into its rich pool of scientific talent. Crispr Therapeutics, which was originally founded in Basel, was an early example. The need to hire 100 scientists quickly motivated the move. “We knew that we were in a horse race,” Bolzon said.
Versant has two further early stage startups, Ventus Therapeutics Inc. and Lycia Therapeutics Inc., which are currently maturing in Montreal and San Diego, respectively. Ventus, which is led by CEO Marcelo Bigal, former CSO at Teva Pharmaceutical Industries Ltd., is building on the work of Hao Wu at Harvard University, who has conducted structural biology studies on innate immune system targets, including the NLRP3 inflammasome. Lycia is based on the work of Carolyn Bertozzi, of Stanford University, who has developed a novel targeted degradation technology for secreted and membrane proteins. Former Novartis scientist Richard Glynne was recently named CSO of Inception’s San Diego facility and will play a key role in the development of Lycia and other Inception-supported startups.
Not every firm goes all the way to a successful exit, of course. Recent casualties include Kyras Therapeutics Inc., of New York, which had been working on Ras inhibition, and Quentis Therapeutics, Inc., which raised a $48 million series A round to develop cancer drugs that modulate endoplasmic reticulum stress response pathways in the tumor microenvironment. Versant’s rate attrition has fallen from about 30% of a fund’s outlay to less than 20%. “We’re doing it earlier and cheaper,” said Bolzon.
What Versant invests in is, Bolzon said, not hugely different from what other venture capital firms focus on. “How we do it and where we do it are probably the really differentiated features of our model.” Cell and gene therapy, gene editing and targeted protein degradation are currently ripe for investment. The microbiome is not yet sufficiently mature. “We’re in a watch-and-wait mode,” he said. But if it does move, it could do so from any number of locations.