Silk, the fiber that comes from cocoons and is woven into cloth, threads one entrepreneur’s path from working with the United Nations in Cambodia to studying at Harvard University to launching a life sciences company.
Livio Valenti, the co-founder and vice president of policy and strategy at Vaxess Technologies, could never have guessed that working with farmers on a new way to diversify away from rice might ultimately lead him to start a company whose technology leverages that same commodity. Shortly after he started a public policy program at the Harvard Kennedy School of Government, he met David Kaplan, a Tufts University researcher who has long focused on silk and recently published a paper on how it might be converted into a nanoscale bubble wrap that entraps the molecules in vaccines so they do not need to be refrigerated. Valenti and Kaplan took a trip together to Southeast Asia, then returned to launch Vaxess Technologies, a company that is taking what might have otherwise remained in an academic journal and turning it into what the team describes as the next generation of biomedical innovations for the developing world.
Last month, at the Emerging Markets Venture Forum hosted by the International Finance Corporation, the private sector lending arm of the World Bank Group, in Napa Valley, California, Valenti pitched Vaxess Technologies to investors. His talk, “Eradicating Polio & Enabling a Novel Vaccine Microneedle Platform,” focused on his team’s recent work to develop MIMIX, a silk patch roughly the size of a postage stamp that goes on the skin for minutes but delivers the vaccine for weeks. What stood out from his presentation was not just the technology, but how it was financed: Vaxess Technologies has built a pipeline of 7 products worth more than $4 billion dollars, with $4.6 million in equity and $9 million from non-dilutive sources.
Devex spoke with Valenti and others about the reasons for this trend of for-profit companies in the global health space seeking out venture capital and grant capital to fund their work.
“Creating a combination of investors is really key,” he told Devex of his decision to launch Vaxess Technologies as a for profit company.
A study published Monday put a $371 billion a year price tag for most countries to reach the targets for Sustainable Development Goal 3, healthy lives and well-being. When it comes to which organizations will do the most good with the funds they raise, some argue that for-profit drug companies will not focus on the needs of the poor, and say that there is room for more nonprofit drug companies. But Valenti said he would encourage entrepreneurs working on global health challenges to consider whatever business model enables them to tap into the sources of capital that will set them up for success.
“If we are successful, more vaccines will be distributed, so we don’t really have to think about: Are we a social enterprise? Are we a for profit? Are we a not for profit?” he said. “I think the for-profit model gives you the most flexibility.”
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At Harvard, Valenti connected with his team: Michael Schrader, who graduated with an MBA from Harvard Business School, Kathryn Kosuda, who was serving as a postdoctoral fellow in chemistry, and Patrick Ho, who graduated from Harvard Law School after pursuing his undergraduate degree in physics. They knew the public sector would be interested in supporting an organization working to make vaccines accessible and available, but they decided they needed a model that would allow them to pursue financial returns, while also benefiting from grant capital that would not dilute them of ownership nor fill their board with outsiders.
“What we got from being a VC funded company is playing in the NFL,” he said, laughing as he cut his analogy short because, hailing from Italy, he said he is more familiar with soccer than the National Football League. “We really get to play in the premier league.”
After attracting venture capital, Vaxess Technologies went from four friends pursuing a big idea to a VC series A company, improving its chances to draw grants, Valenti said.
“They were working on a tough issue in global health that I had firsthand knowledge of and seemed to have a unique way to address the problem,” Jeffrey Walker, an angel investor who advised Vaxess Technologies in their early days and invested in them as part of their Series A round of financing led by Norwich Ventures, a specialized venture capital firm focused on early stage medical technology. “Early financing, and their tenacity, led them to develop their idea sufficiently so that they could develop partnerships with drug companies and enough credibility to win grants.”
The Bill & Melinda Gates Foundation is supporting Vaxess Technologies to develop MIMIX, the technology Valenti presented on in Napa last month. This is one example of how grant capital can help companies derisk their technology for investors seeking a financial return on their investment, Valenti said. The Gates Foundation was first introduced to the company through one of its Global Grand Challenges seeking innovations in vaccine manufacturing platforms.
“This is part of the foundation’s broader immunization strategy to look for easier and lower cost methods of getting vaccines to people everywhere,” Shanda Boyle, program officer for polio at the foundation, told Devex.
Most developing countries are unable to make the switch from the inactivated polio vaccine to the oral polio vaccine because IPV can cost more than 10 times the cost of OPV, Valenti said in his presentation. MIMIX was inspired by research demonstrating how sustained vaccine delivery can be more effective because it mimics natural infections. And by removing the need for a costly trained vaccinator, and reducing the amount of antigen required by 10 times, the microneedle slow-release patch further drives costs down.
Vaxess Technologies is drawing on a combination of Small Business Innovation Grants from the National Institute of Health, support from the Gates Foundation, and in kind help from Centers for Disease Control and Prevention. Valenti emphasized the value of financial resources, but also of knowledge and networks from these institutions. But while success builds on success, the Vaxess Technologies team has not been able to attract financing from certain institutions, including the IFC, because they do not yet have a product.
“These international organizations are still not ready to make that leap of faith investing in real science,” Valenti said.
He explained how so many of the ideas developed at top universities remain in journals because they do not go down the kind of entrepreneurship and investment path that Vaxess Technologies is on.
Investment in translational science is key to make innovation such as heat stable vaccines accessible to the world’s poorest, Valenti said. The Gates Foundation plans to open a nonprofit medical research institute focused on translational science, which it defines as “the process that translates promising scientific discoveries into potential medical products.” It points to one major distinction between those funders that focus on global health and more traditional investors that are beginning to enter the space: The prioritization of diseases that disproportionately impact the poor.
Valenti added that a recent talk at the United Nations, where member states including Zambia and Ethiopia expressed their interest in the model, convinced him there should be a mechanism by which countries that could benefit from these technologies might invest in the companies working to develop them.
Grant capital can help Vaxess Technologies reduce its dependence on venture funds, said Mark A. McKinlay, director of the Center for Vaccine Equity at the Task Force for Global Health.
“But like any important new breakthrough technology, the financial resources required to reach the market are substantial and are best supplied by VCs,” he said. “The potential return on investment makes the investment quite attractive. The limits can be VCs who want to have an undue influence on managing the company, but I have not observed this to be the case with Vaxess.”
No matter the mix of financing, he added, the biggest challenge Vaxess Technologies will face is the same challenge that comes with any new technology: Defining and negotiating the regulatory pathway to approval.
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