Each year some 250,000 patients develop a type of cancer because of faulty communication between cells. This malfunction occurs in what is known as the NOTCH signal path. There are currently no effective treatments – but this is set to change. Cellestia Biotech AG is developing an innovative drug against this type of cancer by using a novel active ingredient that selectively attacks the malfunctioning cell communication. The drug could be used to treat leukaemia, lymphomas and solid tumours such as breast cancer.
In 2014 Professor Freddy Radtke and Dr Rajwinder Lehal, who had dealt with this subject in his dissertation, founded the company Cellestia Biotech AG. In 2015, an experienced team of pharmacology and oncology development specialists led by Michael Bauer came on board, investing in Cellestia as co-founders. Bauer and his team had previously spent several years examining various projects in an effort to help shape the development of such a start-up company. We spoke with him about the risks and implications of founding a company.
Mr Bauer, how long did you have to look before you found a project you wanted to invest?
Over the course of many years and alongside my regular jobs, I and my colleagues examined, evaluated and rejected a number of projects – sometimes more intensively, sometimes less. Some of the projects were great, some being unbelievably innovative. However, something always led us not to pursue a project in the end.
The search did not just cost you a lot of time, but also a lot of money as you have to conduct due diligence every time.
We of course had to put effort into the search. You could say that we identified, examined and evaluated projects acting similar to a small venture fund. Thanks to the make-up of our team, we were able to undertake many of the tasks ourselves, at times bringing in experts. There were many instances when specialists from our network assisted us. There was a considerable amount of good will. To some extent we footed the bill ourselves.
Why did this not work out before Cellestia?
A number of conditions have to be met. The basis is of course excellent, innovative research results protected by patents. Also important are ownership rights to the inventions and reasonable licencing terms. Finally, there has to be agreement on the expectations of the people involved in the project. We have experienced pretty much everything. Many times it emerged over the course of the investigation that, for example, the research data was not quite so convincing as had initially been presented. Or the expectations with respect to the licencing conditions were too far apart. In one project, they wanted to sell us patents that had expired. It often happens that the scientists have unrealistic ideas about the value of their project. One retired professor who had tried in vain for many years to finance his company expected us to try for five per cent of the shares. This is of course not the basis for a partnership.
Juggling research and entrepreneurship is a big challenge, isn’t it?
It is necessary to develop an understanding of the relations and contributions of the various partners involved in such a project, each of who have very different personal risks. On the one hand, there is some 20 years of basic research behind Cellestia, 11 of which were at the EPFL. Rajwinder Lehal has been working concretely on this project for the past nine years, initially as part of his dissertation, then as a post-doc and since 2014 as Chief Scientific Officer. We respect this history from the management team and are happy to have access to the resulting knowledge. At the same time, the inventor’s side has to have regard for the entire expenditure: some five million of public funds were invested over the years at the EPFL. However, it could take hundreds of millions until a product comes onto the market. Moreover, the path from the first successful experiment in lab animals until a drug is approved for human use is long. Altogether, the cost of research could be marginal in comparison to the development and marketing, amounting to only a few per cent. And the development costs are paid for by the investors, who need the investment to pay off. All of these factors have to be considered and respected in a partnership. This worked with our team.
You have many years of industrial experience. What attracted you to the entrepreneurship?
The challenge of turning ground breaking inventions into products attracted me. I consider myself a product developer and had wanted to start a company even as a student. Looking back, I have to say that I am lucky to have gained nearly 20 years of professional experience in product development as it is important to be able to understand and appreciate just how complex the challenges are in product development in life sciences and pharma. This wealth of experience also helps you understand where your own knowledge ends and when experts have to be brought on board to be able to successfully advance a project or a company.
What was the incubation from first contact until you joined as co-founder at Cellestia like?
The current Chief Scientific Officer, Rajwinder Lehal, and I had been in regular contact with each other for a number of years. At that time, however, the project was not advanced enough to establish a company. Initially, Professor Radtke, Rajwinder Lehal and Maximilien Murone founded Cellestia in 2014. We met a few times in summer 2015 with the Lausanne research and founder team at i-net, the predecessor of BaselArea.swiss. Things moved quickly from there. In just a few meetings, we were able to evaluate the project and develop a good personal understanding, which for me and my partners was very important if we were to invest in Cellestia. We could agree on matters quickly, more or less by handshake. Then came the necessary contracts and in November we were already listed in the commercial register. Our lawyer and co-founder Ralf Rosenow saw to the formalities. We decided to move the headquarters from Lausanne to Basel but to leave the research activities in Lausanne, resulting in a sort of transcantonal partnership.
Why move the headquarters to Basel?
For us, the most important argument in favour of Basel was access to talent and resources for product development, resulting from the proximity to leading pharmaceutical companies such as Novartis, Roche, Actelion and many others. Such access to experienced development specialists is more difficult in Lausanne. In addition, our co-founder Roger Meier and other colleagues already have an active investor network in Basel with an affinity to the sector and Basel itself. We did not have such access in Zurich or Geneva at the beginning. I personally also like the quality of work and life in Switzerland, Basel. The city is of a manageable size yet international, with diverse cultural offerings. Furthermore, the Basel airport has excellent connections – you are in the middle of Europe and in just one to two hours you’re practically anywhere Europe, be it London, Berlin or Barcelona. Lausanne, on the other hand, has in its favour the outstanding academic environment with the EPFL and the Swiss Institute for Experimental Cancer Research. Here, too, there is an excellent environment for start-ups, but in our opinion more toward engineering and technical disciplines or medicine technology. Many companies are founded each year at the EPFL and the innovation potential is enormous, but Cellestia is the first company founded at the EPFL that seeks to bring a drug to clinical development. We are happy to be able to combine the positive elements of both regions via what is now an established approach with two locations.
Which pre-conditions were decisive enough that you ended up collaborating and founding the company?
Actually, everything was right from the very beginning. First of all, the personal atmosphere between the people involved has to be right. This was also the basis in coming to a fair agreement for all co-founders with respect to understanding the evaluation and allocating the respective shares in the company at the time it was founded. On the other hand, it was of course crucial that the substantive examination of the project – as concerns both the scientific basis and the quality of the data – and the examination of the patent as well as license conditions of the EPFL were positive. Also important to us was that the risk profile is manageable, i.e. there is a good balance between innovation and reference to the research already carried out.
How will Cellestia develop further operationally?
Cellestia already has a long history, starting with the research activities at the EPFL. When the management team was expanded in 2015, other co-founders joined at the same time that I did: Dirk Weber as Chief Medical Officer, as well as the already mentioned co-founders Ralf Rosenow and Roger Meier. Cellestia now has six employees. Then there are the numerous service and consulting mandates, which complement our internal resources as needed. If you take into consideration external services, I reckon there are now well over 100 people involved in Cellestia. We expect that we will continue to grow in the direction of clinical development as our first project progresses and further expand the team. Moreover, we would like to develop additional products in our pipeline as soon as possible. This will definitely require additional financial resources. The Board of Directors will also develop further, expanding and adapting with each financing round in order to properly represent new investors. Research work is increasingly being carried out by external services providers, and at the same time continuing in the laboratory of Professor Freddy Radtke at the EPFL. We are currently setting up new framework agreements with the EPFL concerning the further use of their infrastructure. The flexibility there is very helpful for us.
What are the next milestones?
A key milestone is the treatment of the first cancer patients. We hope to be able to treat the first patients in October.
How are the clinical studies organised?
The course of a clinical trial for new drugs is strictly regulated. In the Phase I study, the compatibility of the active ingredient is first examined. This is when we treat patients who are suffering from a form of cancer in which NOTCH most likely plays a role. In the following Phase II study, the efficacy of our drug is researched in different types of cancer. This is when we select patients in whom activation of the NOTCH signal path is detected with a Cellestia diagnostic method. The therapeutic benefit for these patients is therefore very likely.
Have there been any surprises so far?
No, not really, because we have considered everything. Or yes, but pleasant surprises: due to the considerable amount of preparatory work, we were already quite certain with respect to the effect mechanism. It has now finally been possible to detect the precise binding mechanism of the drug, which confirmed all former studies. This is also the basis for significantly expanding the programme. We can now build a new platform on whose basis we can generate new drugs for new indications. In addition, it was not that easy to manufacture the drug in large quantities and in a high quality. Innovative steps were needed, which ultimately leads to a patent.
What do you have in mind for the next five years?
We are very optimistic about Cellestia’s prospects for success and are planning the next couple of years in detail. We of course also have a plan for the overall development over the next five years, but as experience shows, such plans always change with the results obtained. This is also the fascination and challenge in medication development – it does not allow you to plan everything in detail, and you have to respond flexibly to new results. This also applies to possible setbacks, of course. It is important to have sufficient reserves to deal with these and resolve them. Thanks to the successful financing rounds that we could close in January 2017, we are in a position to begin with Phase I while at the same time pursue further financing.
Who has invested in Cellestia so far?
The first investors after the deposit of the initial capital were predominantly many of our advisors, i.e. experts who are familiar with the sector as well as private people involved in life sciences and the pharma sector as investors. Around one-third of the shareholders are experts from the pharma and life sciences setting. Over the course of the Series A, B and C financing rounds, larger investments from family offices also came. The first institutional investor, the PPF Group, invested after its own, extensive due diligence that was conducted by experts from Sotio. So far, we’ve been able to mobilise a total of CHF 8 million to drive product development at Cellestia. In preparation of the next financing round, we are in talks with private investors, venture funds and pharmaceutical companies. We are confident that we will be able to win good partners for Cellestia’s next phase. The right combination of partnerships and financing is important. We need strong partners on board to give patients access to our medications quickly.
Michael Bauer (born 1966) has been CEO at Cellestia since November 2015. He studied chemistry at the University of Hamburg and completed his doctoral in biotechology from 1994 to 1997 at the Hamburg-Harburg University of Technology. After working in metabolic research at Zeneca in England, he moved to Syngenta in Basel in 2001 where he worked as Global Regulatory Affairs Manager in project and portfolio management. From 2007 to 2009 he was a project leader at Arpida, a biotech firm in the field of antibiotics development. 2009 to 2012 he was a Global Program Manager at Novartis where he led global development projects in the field of oncology and brought a range of products to clinical development. From 2012 to 2015 he was the Head of Clinical Development at Polyphor.
Watch Michael Bauer at the Labiotech.eu meetup in Basel