Pherecydes seduced 2021 IPO gatekeepers for startups fighting infectious diseases. Here’s what we learned along the way.
By Franck Lescure.
Pherecydes checks all the right boxes: bacterial treatment breakthrough and oversubscribed IPO.
If the COVID pandemic has taught us anything, it’s that we need to seriously invest in healthcare and biotech startups and challenge the current state of medical research investment at both a private and public level. Thankfully at Elaia, we were already one step ahead. Our newest listed company Pherecydes Pharma is addressing the growing medical need to treat antibiotics resistance of bacterial infections by reshaping a technology validated by one century of clinical usage, all while setting records on the stock exchange. The company recently announced the success of its IPO with a historical over subscription and a robust +60% of share price on the first day of quotation.
Nosocomial infections (hospital-acquired infections) represent 750,000 cases per year in France (7% of hospitalized patients), and more than 9,000 cases of deaths. In the US, it represents 2 million people (10% of hospitalized patients) and 88,000 deaths per year. More frightening, sustained worldwide use of antibiotics (A $ 40Bn market with a growth of +65% between 2000 and 2015, and a predicted +200% between 2015 and 2030) has fed the emergence of bacterial infections resistant to multiple antibiotic treatments (called “MDR infections”). More than 800,000 patients per year suffer from MDR infection in the US while there are more than 670,000 per year in Europe, increasing mortality by 2.4x and hospital journeys by 9 to 13 days on average, for an additional healthcare cost of $20k to $80k per patient. In 2014, we estimated that it represented 700,000 deaths worldwide. Multi-resistant bacterial infections are predicted to become the number one cause of death in 2050, with one death every three seconds (O’Neil report)! It’s high time that we challenge the way we invest and pave the way for life science startups dealing with infectious diseases. Here are some insights that we’ve gathered throughout our journey with Pherecydes:
Phages — a tale as old as time
It all started fifteen years ago, with a book, a Russian book to be precise, showing curves of patients treated by natural phages, by which Franck Lescure, partner at Elaia, was introduced to phage therapy. While western medicine busied itself with a chemically focused approach, several eastern countries continued to explore phage therapy as a viable treatment. For years, Franck kept on thinking back to phage treatment and how to bring it to the forefront so when he was introduced to Pherecydes, he knew that the time had finally come.
Humanity has recently discovered that one suitable weapon against living threats may very well be life itself. The return to grace of phage therapy is one illustration of this trend: progress in biological technologies have provided the ability to work with natural organisms, to master their production and to build profitable business from this technological approach.
To make a long and complicated story short, back in the 1920s, this side of the fight against infectious diseases started at the Paris Pasteur Institute when phage therapy was invented, based on the very simple idea of using natural predators to fight against bacterial infectious diseases. Bacteriophages, or phages, are natural killers of bacteria, and they became our best allies. One century later, the successful IPO of Pherecydes represents a cornerstone step towards a wide medical use of natural bacteriophages. The company targets three bacterial infections representing near to 70% of nosocomial MDR infections.
“With Pherecydes, we experienced very emotional results on the clinical side with some of the compassionate cases that the company has dealt with”, remembers Franck. “Among the early cases was an overweight woman whose hip prosthesis had been contaminated by both a Staphylococcus aureus and a Pseudomonas aeruginosa which were resisting all antibiotic treatment. In late 2017, she was treated with phages from Pherecydes with the desperate goal to survive until the next Spring. At present, the patient has not only survived, but she also walks.”
France as a leading country
The French invention reached this milestone on the Paris stock exchange after a century of never-ending international wandering, from France to Canada, Georgia, Eastern Europe, United States, Australia and finally back to France, which has always been a world leader in Infectiology. France has understood that scientific knowledge is not a burden but a strength which it can capitalize on. Another interesting observation from this successful step is that France has been able to generate solid biotech managers. Guy-Charles de la Horie as CEO, and Philippe Rousseau as CFO/COO, are both seasoned entrepreneurs who had already IPOed prior to Pherecydes. Together, they have built a strong team around the project and kept the company on the right track and their hard work paid off as shown through Pherecydes successful IPO. Franck knew Guy-Charles and Philippe from their past entrepreneurial experiences. He eventually acted as an investor in one of Philippe’s ventures. “Our discussions are very fluid and direct because we know each other. The decision to push for an IPO had been quickly taken during one of our regular calls together.”
A question of quality
The emergence of MDR infections pointed out a major weakness of chemistry in the face of living systems, especially infectious agents: Life is always evolving and shows varying faces to us and there is no simple chemical component that allows a generic answer to this intrinsic nature. As a result, living systems themselves appear as potential answers and many current biotech startups based their disruptive innovation on this ascertainment. The challenge is then to be able to reach the same grade of quality of products that has been brought by chemistry engineering.
The Pherecydes story is also illustrative of this trend: to master biomanufacturing technologies has become a key strategic asset for modern biotechnologies.
In the 1970s, the emergence of biotherapeutic proteins was the first step towards development of living therapeutics, with leaders like Genentech, Amgen or Genzyme. These successful biotechs paved their success by using living organisms to produce complex biotherapeutic components, like enzymes or antibodies. Since then, bioproduction expertise and bioengineering have strengthened and a whole new sector has emerged, the white biotechnologies, regrouping any use of living systems as an alternative to classical chemistry. This evolution has brought innovative methods to prepare bacteriophages for a therapeutic use, with a level of quality compatible with regulatory constraints of industrialized countries. This patented technological ability motivated our initial investment in Pherecydes, because after one century of medical use, the challenge was no longer therapeutic efficacy or absence of toxicity, but to reach the necessary manufacturing quality to be allowed for clinical usage.
What does the future hold?
Finally, the world has learnt that we will probably encounter other viral pandemics in the future. There might be variants of SARS-CoV-2, other coronaviruses, bird/porcine Flu, Ebola/Lassa-kind of viruses or Crimea-Congo Fever virus. With some of these viral threats, the percentage of death among infected people will reach astronomical rates. In this context, the growing incidence of MDR infections draws an apocalyptic landscape, as they classically develop as opportunistic diseases in weakened patient bodies.
Surprisingly, companies like Pherecydes are facing an investor Death-Valley as early as at Series A stage, and many of these projects are not going through despite huge potential and a very supportive environment at seed stage. This gap between medical necessity and financial attractiveness may represent a concern for the coming years, especially when a proper campaign for the development of new therapeutics usually takes ten to twenty years. Pherecydes was the exception to this rule. The company succeeded in its IPO campaign after its Series B, instead of raising money in a predicted difficult Series C round. This begs the question, is this the pathway to success for infectiology startups? The antibiotic market is a declining market, where it is currently very difficult to ensure a healthy return and which has been deserted by the Big Pharmas, hence depriving small biotech from natural exits through licencing and/or M&A. A whole new wave on how to finance antibiotics is emerging and the market needs disruption, both in the business model and in the scientific approach as low-hanging fruits have already pruned. Whatever the financial case may be, startups like Pherecydes need to become the rule and no longer the exception.
It’s only just the beginning
That being said, there is an overall beauty to the success of Pherecydes, as phage therapy may also be considered as a simple use of a gift from Mother Nature. We are all progressively becoming conscious about the threat that humanity poses on our planet, as it has developed. The time has come to change our overall industrial approach and Pherecydes has to be considered as an example: its phages are collected from wastewater, where they are naturally occurring. The company then harvests these natural antibacterial predators at a quality and purity grade that makes them compatible for clinical use. They are so specific that they cannot infect neither bacteria which are not of the specific kind which provokes disease, nor the patient’s cells, making the overall approach respectful to the environment and safe for the patients’ microbiota. As such, Pherecydes is developing a safe, fully natural and eco-friendly shield against dreadful bacterial infections. This is something we at Elaia want to continue to support.
Inspired? Get in touch
At Elaia, we are always searching for startups that truly improve the quality of life and contribute to a better, brighter and greener future for all. Our work with Pherecydes is only the beginning to a healthy and profitable world. If you think your company fits the bill, get in touch, and we’ll help cure the world together, one startup at a time.