How ‘losing’ the headquarters of two promising drug firms could help Indiana

Two drug development firms that formerly listed their headquarters in Indiana are having big success raising money and advancing their experimental treatments for hepatitis and Alzheimer’s disease.

But the fact Assembly Biosciences Inc. and AgeneBio now list New York and Baltimore, respectively, as their headquarters cities doesn’t hurt Indiana, says David Johnson, CEO of BioCrossroads, the Indianapolis-based life sciences business development group.

That’s because drug companies now are as virtual as possible (meaning they outsource everything they possibly can) and rarely grow very big before selling themselves or licensing their technology to a larger drug company, such as Indianapolis-based Eli Lilly and Co.

“The chances of growing the next Lilly in that model, that is less likely,” Johnson said, adding, “What you are looking to build here is an economy that can deliver innovation time and time again.”

That’s what Austin, Texas, and Silicon Valley have in the world of information technology, Johnson added. It’s what Boston and San Diego have in the realm of life sciences.

If Assembly brings a hepatitis drug to market or AgeneBio brings the first disease-altering Alzheimer’s drug to market, their success will enrich their investors here in Indiana, giving them resources to invest in the next round of companies, as well as burnish the reputation of the scientists and entrepreneurs in Indiana, which should help attract more money and talent to the area to start more companies.

Assembly was based in Bloomington, where scientists at Indiana University developed its technology. Then, in May 2014, it engineered a reverse merger with New York-based Ventrus Biosciences, which was based in New York.

That merger has been a boon to Asembly’s fundraising. The company priced a $75 million stock offering last week, which it wants to use to continue development of its treatment for hepatitis B and another drug that would treat the hospital superbug known as C. diff.

Many of the scientists doing research for Assembly work in Indiana, as does Assembly’s CEO Derek Small.

AgeneBio shut down its Indiana office—which was simply the workplace of its Indiana-based CEO—in May 2014, and hired a new CEO, Jerry McLaughlin, who works out of Baltimore. That’s also where AgeneBio’s founder and chief scientist, Michaela Gallagher, is based, at the Johns Hopkins University.

“It just made sense for this stage of company,” McLaughlin said. “We needed to be closer to our founder.”

But much of the $15 million AgeneBio has raised to date has come from investors in Indiana, including $300,000 that BioCrossroads’ Seed Fund gave in 2010.

AgeneBio announced encouraging Phase 2 results from its drug—a low-dose version of an existing drug called levetiracetam—earlier this month. In 54 patients with a pre-Alzheimer’s condition known as mild cognitive impairment, AgeneBio’s drug, which alleviates hyperactivity in the hippocampus portion of the brain, slowed the loss of memory significantly compared with patients that received a placebo.

The company is now looking to raise more than $60 million or sign up a partner—or both—to help it conduct an expensive Phase 3 trial, the last step before market approval. If all goes as planned—a huge if—AgeneBio could have a drug ready to launch by 2020, McLaughlin said.

The first company to launch a drug that successfully slows down the progression of Alzheimer’s disease could reap $5 billion to $10 billion in revenue, according to Wall Street analysts. That’s why Lilly has been pursuing an Alzheimer’s treatment since 1988 and just last week joined a $100 million venture capital fund to get promising Alzheimer’s discoveries into human testing.

“If AgeneBio is successful, then the chances are that those folks [that invested in the company] will be able to invest in the next one,” Johnson said. “You can create a pretty good economy in building startups. If you have more commercially successful scientists, you can help the universities recruit more people like them. Really, that’s how the next generation of this activity is going to be done, through a very distributed model.”