[E1.3] Flagship Pioneering: The moonshot factory that launches biotech ventures like Moderna
How does this relate to "X" to ensure human survival and progress?
Dear Reader,
I’m writing this profile in Product | Strategy | Innovation less than a month after the FDA authorized the emergency use of mRNA-1273 on December 18, 2020 (now named the Moderna COVID-19 Vaccine) for individuals 18 years of age and older in the US.
Four primary topics are presented in this profile:
Review the Moderna COVID-19 Vaccine;
Present Moderna’s founding and creation in Cambridge, MA & eventual IPO;
Highlight Flagship Pioneering as a biotech moonshot factory that creates and funds ventures like Moderna; and
Share how the trifecta of Flagship Pioneering, Moderna and COVID-19 Vaccine offers a proxy for targeted innovation to address humanities biggest challenges and opportunities.
This profile follows and supports [Part 2] of a 3-Part Series on the architecture for a business entity called “X” that aims to accelerate the business interests of Elon Musk by organizing business entities and innovation based on 3 phases: Launch, Growth & Maturity to align resources and drive efficiencies.
Background
The US Department of Health and Human Services (HHS) determination of a public health emergency on February 4th and March 27th declaration that circumstances exist justifying the authorization of emergency use of drugs and biological products during the COVID-19 pandemic set the stage for the recent vaccine emergency use authorizations (EUA) by the Food and Drug Administration (FDA).
The safety and efficacy data of the Moderna COVID-19 Vaccine played a critical role in the FDA’s EUA. This vaccine contains a modified messenger RNA encoding for a prefusion stabilized form of the Spike protein, which was co-developed by Moderna and investigators from the NIAID’s Vaccine Research Center in Bethesda, MD. The vaccine is delivered in 2 doses 1 month apart. The FDA’s review of available safety data in over 30,000 participants 18 years of age and older who were followed for a median of 7 weeks after the second dose did not show any safety concerns.
The FDA’s analysis of the efficacy data from 28,207 participants 18 years of age and older without evidence of SARS-CoV-2 infection prior to dose 1 confirms the vaccine was 94.1% effective in preventing COVID-19 occurring at least 14 days after the second dose (with 11 COVID-19 cases in the vaccine group compared to 185 COVID-19 cases in the placebo group). In this final scheduled analysis participants had been followed for a median of 9 weeks following the second dose.
What is unprecedented is the accelerated development of the mRNA vaccines and clinical trials over just months during a pandemic compared to traditional development and clinical trials over many years. The pandemic certainly helped to recruit human subjects and complete clinical trials, but Moderna’s technology and pre-clinical studies on prior coronaviruses prepared it to respond aggressively to the current public health crisis. But what are the origins of Moderna?
Moderna
Kendall Square is a thriving innovation hub in Cambridge, MA for the pharmaceutical, biotechnology and life science industries. The immediate nearby-area includes the Massachusetts Institute of Technology (MIT), Novartis Institutes for BioMedical Research (NIBR), and Broad Institute in Cambridge with Harvard Medical School just across the Charles River in Boston. Boston University, Boston College, Tufts University, many other universities and colleges and many teaching hospitals in the area also contribute to this Kendall Square ecosystem.
Flagship Pioneering (formerly known as Flagship Ventures) was founded within that ecosystem in 2000 as a venture capital firm by Noubar Afeyan and Edwin Kania. Flagship has raised a reported $3.1B over 8 funds through March 20, 2019. Flagship is different than most VCs in that it has a history of primarily building innovative biotech companies in-house in addition to making investments in external ventures. Partners typically identify an area of emerging research that is seen as promising for startup innovation. Then they assemble a team around that concept.
The following is a comprehensive interview on how this works with Flagship Pioneering founder and CEO, Noubar Afeyan and HBS Professor and Laboratory for Innovation Science at Harvard (LISH) co-director and founder, Karim Lakhani.
Cambridge, Massachusetts-based Moderna was founded with a mission around discovery and development of messenger RNA (mRNA) therapeutics and vaccines. Other examples of Flagship-backed platform companies, not necessarily incubated in-house, include Editas Medicine (genome editing, now public), Indigo (sustainable agriculture, raised $1.2 billion to date), and Seres Therapeutics (microbiome therapeutics). Since its founding, Flagship has made over 200 investments, per Crunchbase data.
Moderna came out of stealth mode in 2012, under the leadership of founding CEO Stephane Bancel, a longtime biotech executive who also serves as a venture partner at Flagship. Alongside Bancel, Flagship founder Noubar Afeyan serves as chairman of Moderna, with another firm colleague, managing partner Stephen Berenson also on the board.
A key scientific principle in founding Moderna was the gene therapy of the 1980s with protein manufactured as a drug outside the body could be reimagined as an opportunity to deliver the actual “software code” as the drug so the body itself can produce the desired protein.
This TEDx Talk by Moderna founding CEO, Stephane Bancel, provides an overview of gene therapy evolving from manufacturing protein outside the body as a drug into the opportunity of delivering the actual software code as the drug so the body can manufacture the protein on its own.
As a private company, Moderna raised over $2.7 billion in venture and growth funding, with backing eventually from a mixture of venture capital firms and corporate investors. At the time of its IPO in December 2018, Flagship was the largest shareholder, holding 19.5 percent of outstanding shares.
Flagship Pioneering’s Innovation Playbook
Build a deep partner and talent bench that combines clinical, scientific & commercial experience with scientific creativity, technological ingenuity, systematic entrepreneurship, executive leadership and professional capital management.
Expand the Flagship talent bench with a vast network of experts.
Create first-of-their-kind businesses as the principal founders, funders and owners.
Take responsibility for long-term success by providing these companies with all the resources of the Flagship ecosystem.
Process
Begin with seemingly unreasonable propositions and navigate to transformational outcomes.
Explorations
Flagship Lab proposes farfetched hypotheses, exploring the question “What if...?” Entrepreneurial scientists allow hypotheses to evolve through variation and selection, collaborating with external experts to test the weaknesses and strengths of new concepts. Create better and better hypotheses until you can identify something that might be a breakthrough, if only it worked. Flagship calls these imaginative inquiries "explorations,” and conduct 80 to 100 a year.
Prototype Companies
Promising explorations become prototype companies, or “ProtoCos,” and are assigned a number according to their place in the series of Flagship Labs ventures: “FL1,” “FL2,”… “FL63,” etc. Flagship Pioneering founding teams test concepts, and discontinue ProtoCos that cannot, for whatever reason, validate their science in the laboratory. Flagship uses the word "origination" to mean the conception, iteration, and launch of a new company around a distinct breakthrough. Flagship Pioneering originates eight to ten ProtoCos every year.
New Companies
If the founding team can plausibly convert the question “What if…” to the answer, “It turns out...” a ProtoCo becomes a new company, or “NewCo,” with a name and significant capital commitment from Flagship. Each NewCo focuses on developing a proprietary platform that will deliver years of important new products, and recruits a board of directors, CEO, and leadership team. Flagship Pioneering forms six to eight NewCos a year.
Growth Companies
Ultimately, a NewCo is spun out to become a growth company, or “GrowthCo.” A GrowthCo’s leadership team attracts outside investors, forges partnerships, and builds a business that creates extraordinary future value, often operating as public companies. Twenty of Flagship Pioneering’s GrowthCos have completed IPOs since 2013.
Companies
The process described above results in Flagship explorations and prototype businesses potentially advancing through 1 or 2 more stages for an eventual exit or terminate at any stage if they do not meet criteria to continue. The domains for the various companies span human health, sustainability and technology.
People
The depth of Flagships leadership and talent bench have been a key contributor to its success. The Flagship ecosystem employees over 3,000 people in over 1.3M square feet of labs. Their activities and expertise have led to 22 IPOs since 2013.
David Berry MD PhD - General Partner
David joined Flagship in 2005, where he is a General Partner, focusing on conceiving, creating, resourcing, and launching groundbreaking companies. David has co-founded more than 20 companies across life sciences and sustainability, including Valo, where he serves as CEO. Other companies include Joule, Seres Therapeutics (NASDAQ: MCRB), T2 Biosystems (NASDAQ: TTOO), Indigo Agriculture, Evelo Biosciences (NASDAQ: EVLO), Eleven Biotherapeutics (NASDAQ: EBIO), LS9 (acquired by Renewable Energy Group), Axcella Health, and Inari Agriculture. He has served as founding CEO of over 10 companies including Seres, Evelo, and Axcella.
Leda Trivinos - Partner, Intellectual Property
Leda joined Flagship in 2015 as partner, intellectual property. In this role, she helps formulate and manage the intellectual property strategy for Flagship’s innovations and provides counsel across the portfolio.
Previously, Leda was chief patent counsel for Momenta Pharmaceuticals Inc., a leader in the analysis and design of complex pharmaceutical products, where she led the company’s patent strategy to protect its technology and products, and to clear the way for successful product launches through patent enforcement and litigation.
Prior to joining Momenta, she was assistant general counsel for intellectual property at Biogen Idec. Leda received her law degree from the University of California, Berkeley, School of Law and has a Ph.D. in cell and molecular biology from Northwestern University Medical School, where her research focused on motor proteins that drive intracellular transport. She was also a post-doctoral researcher in the lab of Suzanne Pfeffer, Ph.D. at Stanford University’s Biochemistry Department, focusing on Rab proteins involved in membrane traffic in human cells.
Ji Zhang PhD - Senior Partner and Senior Vice President, Enterprise R&D and Operations
Ji is senior partner and senior vice president, Enterprise R&D and Operations at Flagship Pioneering. In this role, Ji is responsible for Flagship Labs operations, and works in collaboration with Flagship’s origination teams to drive R&D processes and operational excellence across Flagship Labs; and as a member of Flagship’s senior leadership team Ji provides expertise, support, and thought leadership to Pioneering Medicines and Flagship ecosystem companies.
Ji joins the firm from Sanofi where he was most recently senior vice president and global head of R&D Operations, where he led large, diverse, interdisciplinary teams of scientific and operations staff in 30+ countries delivering many new medicines with reduced cycle time, strong quality, and financial management, while leveraging flexible business models. Ji also developed Sanofi’s integrated R&D digital strategy and implementation. Prior to joining Sanofi, Ji was senior director of Clinical Biostatistics at Merck Research Laboratories. Over his 30-year biopharmaceutical career he has made significant contributions to the development and successful marketing of medicines in the respiratory, diabetes, cardiovascular, immunology, rare diseases, and oncology therapeutic areas.
Conclusion
Flagship Pioneering has explored many scientific concepts to help identify emerging commercial opportunities in biotechnology to address the human health, sustainability and technology domains. Moderna is just one example of challenging accepted beliefs around gene therapy and what it can do. That allowed Moderna to build and accelerate development of their mRNA platform for multiple coronaviruses. This enabled the company to respond quickly to the pandemic with platform technologies to commercialize the Moderna COVID-19 Vaccine in a fraction of the time compared to conventional vaccine platforms.
Implications for X
This profile concludes our 3-Part Series in Product | Strategy | Innovation where we explore alternative business structures to a parent holding company, relevant proxies and an architecture for a business entity called X. Pioneering is a great analogy for exploration and early innovation where uncertainty dominates until product and market attributes become more clear. There are lessons here to learn from this proxy for X and innovation in general.
Flagship believes their process can be learned with a deep talent bench that leverages their relevant experience to tackle humanities biggest challenges. This serves as a proxy for Elon Musk’s business interests to challenge accepted beliefs for exploration across energy, transportation, aerospace, neurotechnology and other key areas of interest. This can be accomplished by a mission-driven entity called X with Launch and Growth Divisions to provide this staged Flagship innovation process and access to capital.
A key question remains. Would Elon Musk’s various business interests contribute talent, expertise and extended ecosystems to X just as Flagship has done for Flagship Labs (350+ members & 250k sq. ft. space) and Flagship Pioneering Enterprise (4,000+ members & 1.2M sq. ft. space). If the inspiring missions, progress, success and adjacent innovation of Tesla and SpaceX are a proxy, I would say an emphatic yes and then at least an order of magnitude with 3,500+ members and 2.5M sq. ft. space in the earliest stage of innovation, the Launch Division within X. This will only yield more insights, moonshot ideas and create more new ventures while also accelerating innovation and funding milestones.
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