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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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April 11, 2013

A Startup's Post-Mortem

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Posted by Derek

Here's an excellent look back by venture capitalist Bruce Booth at one of the companies his firm funded. But this isn't one of those we-exited-with-a-thirtyfold-return stories. On-Q-ity, a diagnostic play, has unfortunately just folded.

There were several reasons for this, but I'd guess that the ones below really, really didn't help:

. . .By mid-2010, only six months after the Series A came together, it was clear that the DNA repair biomarkers were going to be tough, as an early trial failed to reproduce the nice Kaplan-Meyer curves of the original academic work. By late 2010/early 2011, two more larger trials read out negatively so we decided to terminate that effort. But unfortunately those trials and the biomarker lab work required to support them consumed 60%+ of the capital in the Series A round.

Not much had gone into the CTC platform in that first year and so early in 2011 the company refocused exclusively on CTCs and streamlined the team, but the clock was ticking. As we dug in to the status of the CTC platform, it was very clear that lots more work needed to be done – the paper descriptions of what it was supposed to deliver didn’t map to the platform’s actual robustness (or lack thereof) at that time. Antibodies that were supposedly functional turned out not to work, and several other things like this. . .

This looks like yet another example of something that never worked as well in the real world as it did in the publications. Bruce himself has blogged about this problem, which shows you that it's lying in wait for everyone trying to make something out of new discoveries. I recommend the whole post, especially for anyone working at a small startup or thinking about doing so. It shows you some things to stay alert for, and there are many.

Comments (16) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Henry's cat on April 11, 2013 11:18 AM writes...

Glad he's still able to maintain that perfect smile throughout this sorry tale.

Permalink to Comment

2. Hap on April 11, 2013 11:20 AM writes...

I don't know a whole lot about venture capital, investing, or startups, so you can take this with a salt lick, but it seems like the lack of real-world validation of the technologies was the problem. The failure of the first technology wasted a lot of money and its estimated status mandated a different type of management than what was actually needed (which forced the change in management and made the leadership difficult), and the second didn't seem to be as close to prime-time as was advertised, so that lots of the work and money was used in getting the company's technology to where the investors thought it was in the first place.

At some point, people are going to get tired of investing in neat technologies that don't work at anything other than getting glamor papers and tenure.

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3. Yi on April 11, 2013 11:47 AM writes...

I worked in On-Q-ity on the CTC program until the last moment of the company's life. The company spent a lot time to reproduce the results from the original publication but failed. We ended up redo every single aspect of the technology and made it work even better than current market leader. Actually, in the last few months, we were starting to get previously unidentified CTCs in some patient samples. But we couldn't find that $10-15M needed for the clinical trials. Had the company started out solely focused on CTC platform, I believe this would be a different story.

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4. Indazole on April 11, 2013 12:26 PM writes...

Sadly, another example of the Ioannidis corollary (http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0020124) to Sturgeon's Law.

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5. Anonymous on April 11, 2013 4:15 PM writes...

Wow, what a sentence:

"It’s also fair to say the background and experience of some of the team didn’t map well to the high strategic entropy and lack of organizational support common in startup roles."

The next time I'm tempted to say "clusterf__k" in polite company, I'll have to remember that it can be called "strategic entropy".

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6. Anonymous on April 11, 2013 4:17 PM writes...

Wow, what a sentence:

"It’s also fair to say the background and experience of some of the team didn’t map well to the high strategic entropy and lack of organizational support common in startup roles."

The next time I'm tempted to say "clusterf__k" in polite company, I'll have to remember that it can be called "strategic entropy".

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7. bank on April 11, 2013 4:35 PM writes...

The original academic work referred to appears to be this:

Alexander at al., Clin Cancer Res. 2010 Dec 1;16(23):5796-804. DNA repair protein biomarkers associated with time to recurrence in triple-negative breast cancer. (http://www.ncbi.nlm.nih.gov/pubmed/21138871)

Anyone with a sense of how research really progresses would be making a risky bet based on that data. So I think it's unfair of VCs to point the finger at academia when such bets fail.

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8. Anon on April 11, 2013 4:44 PM writes...

Not to attack the investigator that is primarily involved in the technology, but what disincentive exists (beyond the contracts) for them? Though I'm sure the failed company will not have the resources to push back against them maybe the investors will in terms of academic punishments? If not even antibodies can be verified, does that not hint at a long line of untrustworthy data that is being published? Should the investors challenge to have those papers retracted? Should that PI be stripped of grants if they used bad data in their grants?

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9. Chemjobber on April 11, 2013 4:47 PM writes...

@5: Glad I'm not the only one who noticed that sentence.

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10. bank on April 11, 2013 6:13 PM writes...

@ 8.Anon

The abstract of the article clearly states: "DNA repair proteins may be useful as prognostic markers in TNBC. Further study in larger, uniformly treated cohorts with additional clinical parameters is warranted."

From this, it can be deduced that the authors admit that theirs is an innovative study, which potentially would not repeat under different circumstances.

There are numerous uncontrolled variables in any cutting-edge work that may or may not have a significant effect on the conclusions. Independent replication is more important than p-values or the reputation of the scientists involved. Evidently, a research group cannot independently replicate it's own work.

So it surprises me somewhat that a VC firm would invest $$$ when something as simple as an antibody working or not could be such an obstacle to their success. They should have commissioned an independent assessment of some of the key findings before investing.

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11. pgwu on April 11, 2013 9:20 PM writes...

The p values from that paper seem to be good. But digitization and further numeric evaluation of images probably involve quite a few fudge factors. A little bit here and a little bit there,you have a good p-value in the end.

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12. Cellbio on April 11, 2013 9:40 PM writes...

@8. I had the pleasure of helping a start-up with an ab target for breast cancer. The academic group had made a mab and demonstrated inhibition of cell growth in vitro and tumors in vivo. The work was done poorly, but the results were consistent with a sellable story, namely the prospects for therapeutic benefit. Sadly, the follow-up showed a non-specific sticky antibody that when made at small scale and purified from contaminants had no activity. Good people did their best, but it was poor quality work in the end. Is the problem that there is no punishment, or that there is a reward system in the plethora of journals that will publish such work, fueling a reward system of grant dollars for work perceived to be relevant because of the potential for benefit. That benefit is often enrobed in rhetoric of patient suffering and need which hides limitations in aspirations and builds barriers for criticism.

Suffering and need can be clearly articulated. Solutions need to be vetted better technically, with as best as we can, a sober assessment of the technology without influence from need or potential $ gains (not sure recent Alzheimer's regulatory guidance fits this).

Permalink to Comment

13. noname on April 12, 2013 9:49 AM writes...

@6:

That is a great sentence, but I don't interpret it in quite the way you seem to be.

I think the "strategic entropy", far from being a C.F., is the state of rapid re-prioritization and opportunism that is intrinsic to a start-up. Read this way, the sentence says something like: "We hired box-checking dinosaurs from big pharma / big biotech, and they couldn't manage the chaos and churn of a start-up."

Permalink to Comment

14. Hap on April 12, 2013 10:13 AM writes...

10: If so many results in high-end journals hadn't failed, you could chalk this result up to chance and poor vetting. Of course, since Booth's written significantly about it, I guess that he probably knew that too, and looked out for it.

More of the blame ought to adhere to journals and not either to individual authors (who should take heat as well) and investors because this has happened so often. If the results published in journals are often wrong, then there is a problem. While it's not their job to validate the results published in their journals, it is their job to assess not just that something is important and interesting but also that it's self-consistent and sufficiently powered (steps which seem to be lacking in at least some cases).

The "this could be wrong" hedge is useful, but considering the titles and language of many papers, it has the effect of the FDA supplementeer's warning - "we have to say this but it shouldn't be taken as a diminishment of our claims (even though that's precisely what it is)."

Permalink to Comment

15. Hap on April 12, 2013 10:17 AM writes...

10: If so many results in high-end journals hadn't failed, you could chalk this result up to chance and poor vetting. Of course, since Booth's written significantly about it, I guess that he probably knew that too, and looked out for it.

More of the blame ought to adhere to journals and not either to individual authors (who should take heat as well) and investors because this has happened so often. If the results published in journals are often wrong, then there is a problem. While it's not their job to validate the results published in their journals, it is their job to assess not just that something is important and interesting but also that it's self-consistent and sufficiently powered (steps which seem to be lacking in at least some cases).

The "this could be wrong" hedge is useful, but considering the titles and language of many papers, it has the effect of the FDA supplementeer's warning - "we have to say this but it shouldn't be taken as a diminishment of our claims (even though that's precisely what it is)."

Permalink to Comment

16. thiazole on April 12, 2013 10:19 AM writes...

@13 "We hired box-checking dinosaurs from big pharma / big biotech, and they couldn't manage the chaos and churn of a start-up."
Have you worked at a big pharma lately? They're quite good at chaos and churn...

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