The strange world of early-stage biotech companies

The reason to invest in early stage biotech companies is . . . “hope.” These companies hold the promise of discovering a new cure for disease, a new therapy for illness, or a new intervention to make the world better. And to make shareholders rich.

A wise adage of investing is that “hope is not a strategy.” Fortunately for many small biotech companies, lots of investors ignore this sound advice.

Most products in early stage development fail. Usually early stage products have some reasonable scientific rationale. They remain high risk, but there is some supportive science. On occasion, there are clearly-flawed (if not absurd) interventions that none-the-less have generated investor enthusiasm. Indeed, I’ve observed that sometimes the more ludicrous a concept, the more investors are willing to believe it. It’s almost as if investors think to themselves “there’s no way a company would pursue such a thing if it weren’t for real.”

Having said this, my thoughts turn to Coronado Biosciences. This young company is looking to develop a therapy to treat a range of diseases from inflammatory bowel disease (Crohn’s and ulcerative colitis) to multiple sclerosis to psoriasis to autism. They have one product that they believe could work in all these indications and more. What is this miracle product? It’s “Trichuris suis.” You haven’t heard of it? It’s a pig whipworm (basically like a tapeworm), an intestinal parasite that grows in and infects pigs. The company calls it “TSO” (short for Trichuris suis ova; ‘ova’ means ‘eggs’).

TSO does not infect humans. If you swallow TSO (which, again, is basically akin to tapeworm larvae), the worms grow in your intestine for a few days, then die. Indeed, this is the desired effect the company wants. To repeat it for emphasis, the company’s miracle drug is live intestinal pig parasites for people to consume. The idea is that people in Western society are too civilized and gentrified. . . we don’t get enough exposure to dirt in our clean, pristine society, so our immune system gets bored and causes disease. Give the immune system something to do and our diseases will be cured.

I am not making this up.

There are some smart people associated with the company, so while I may not be a believer, there are certainly believers around. To that point, investors think this concept is worth $300 million (that’s roughly the current value of the company).

There’s a quote I like by former NY senator Pat Moynihan. “People are entitled to their own opinions, but they are not entitled to their own facts.” The company is running two mid stage clinical trials in inflammatory bowel disease. Results are due in the second half of this year. We shall see then what the facts really are.

The company, looking ahead, describes how they will be protected from the potential threat of generics. The FDA follows strict guidelines to approve a generic drug version of any drug (such as drawing blood samples from patients and demonstrating that the generic and the original drug show up at the same level). These guidelines, however, were designed to show the equivalence of simple chemicals, which is what most drugs are. Coronado has described that, because their drug is an intestinal parasite that is purified from the feces of infected pigs, it will be hard for another company to meet the FDA standards to develop a generic.  If I were the company, I’d be more worried about the marketing campaign to make this palatable. My suspicion is that they’ll never get the chance to try, but time will tell. We’ll know more once the data emerges later this year.


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