Oncomed Partners Up

Oncomed Pharmaceuticals signed a strategic partnership earlier this week with GlaxoSmithKline, which could be worth up to $1.4 billion. Longtime readers might remember Oncomed as the cancer “stem cell” company I profiled back when it raised its first round of VC funding (it’s now got more than $60m in the bank). Still perhaps the most intriguing company I’ve ever covered, so I’ve reposted that original column below. Things have certainly evolved at Oncomed (new CEO, for example), but the basic premise remains the same. If successful, this will be a massive homerun for VCs who first invested at a pre-money valuation of $3 million. It also will save countless lives.

The Big One
September 8, 2005

I have a biotech bias. If given the opportunity to cover one of two startups of equal financial wherewithal and innovation, I’ll typically choose the one trying to cure cancer over the one trying to speed up my Internet connection. Of course, I’ve never actually written about a company trying to cure cancer… until today.

That company is OncoMed Pharmaceuticals Inc., which yesterday announced that it had raised $13.9 million in Series A funding from Laterell Venture Partners (lead), U.S. Venture Partners, Morgenthaler Ventures and The Vertical Group. It actually secured around $18 million in Series A commitments last year, held an initial close on $5.88 million and called down about $8 million more in the past couple of weeks. But back to the matter of curing cancer…

For decades, oncologists have hypothesized that cancer contained some sort of cellular growth mechanism (a.k.a. “germ cell”), but it had never been identified until some Stanford University researchers discovered some self-renewing cells in leukemia a few years back. They called them “cancer stem cells,” because a very small number can renew indefinitely in order to create something new (albeit cancer instead of blood or an organ). This research was followed up by a pair of University of Michigan scientists who also found cancer stem cells in solid tumors, and learned that they were largely resistant to traditional chemotherapy. In other words, they figured out why someone can have breast cancer, get chemo, seem cancer-free and then have the same cancer again two years later.

OncoMed is based on the University of Michigan research, which also includes proprietary technology has helped identify that could let it identify and target the actual cancer stem cells. To date, the company has identified 50 cell surface antigens over-expressed on the cancer stem cells, and soon will begin work on both antibodies and small molecule drugs to target/kill the cells. If successful, you might literally be able to take a pill to stop the growth of breast cancer or brain cancer (with corresponding chemotherapy or surgery to remove the existing tumor). It won’t quite be like picking up some Tylenol Stomach Cancer at Walgreens, but nonetheless could be an enormous therapeutic breakthrough in oncology.

There are, however, some caveats. First, the company would likely be horrified to hear me publicly suggest that it could cure cancer (such big expectations come with that Holy Grail sort of phrase). Moreover, this is a very long-term process. An oncologist working with stem cells tells me that a best-case scenario for R&D and commercialization of such a drug would be at least five years, and that the drug would only target one type of cancer. Jim Woody, CEO of OncoMed, seems to concur, suggesting that the company’s lead candidates wouldn’t be ready to enter Phase II clinical trials for at least two years, after which there would be Phase III trials, FDA approvals, etc. And, again, this is best-case scenario, which would have to include a big pharma partner.

The main problems with such waiting are (A) Could someone else beat them to the punch; and (B) How long can VC backers afford to stick around? I’m not so concerned about A, since any big pharma very interested in this technology likely would just try to buy OncoMed. Question B, however, could be a bit dicier if the best-case scenario doesn’t work out. All of the VCs currently are gung-ho and very excited, but there obviously are huge timing risks with an early-stage drug discovery company, based on the 10-year lifecycle of most VC funds. If a fund comes up on year nine and there still isn’t a product…

Nonetheless, this may just be the most exciting company I’ve come across in five years of covering startups and the investors who love them. And, if it’s successful, it will be the most important as well.

9/12/05 Addendum: While lauding OncoMed Pharmaceuticals last Thursday, I probably should have mentioned the failure of another VC-backed drug company hoping to identify cancer stem cell targets: Xerion Pharmaceuticals AG. The German company had raised VC funding from such firms as 3i Group and Burrill & Co., but filed for insolvency in late 2004 before going out of business earlier this year. There are tons of differences between the two companies (location, technology, exclusive focus, etc.), so one’s failure clearly does not predetermine another’s. I only bring it up to underscore how difficult a journey OncoMed is embarking on. But, again, if successful, it could save untold numbers of lives.