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VelosBio closes $137m Series B

8th July 2020

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Today we announced that VelosBio Inc, one of our six oncology portfolio companies, raised $137m in a Series B investment round, bringing in some of the largest and most successful life sciences investment firms globally. This marks a major inflection point for a company that has been under the radar, but now has the capital and investor base to rapidly scale up its efforts in developing its first-in-class antibody drug conjugate (ADC) against the novel cancer target ROR1.

Arix first invested in Velos in October 2018, where we co-led the $58m Series A with Silicon Valley-based Sofinnova Investments, alongside others including one of our strategic partners, Takeda. Our investment thesis was threefold. Firstly, the Velos founders were serial successful entrepreneurs with a track record of getting multiple drugs through clinical development and onto the market. Their most recent company, Acerta Pharma, developed the drug Calquence for non-Hodgkin’s lymphoma, and was acquired by AstraZeneca for $7bn in 2017. Secondly, despite ADCs’ chequered history, we believed that the accumulation of positive and negative experiences with different molecular constructions meant the timing was right to invest in a novel ADC drug. Finally, the target the team had chosen ,ROR1, made perfect sense for an ADC approach, and despite investing in the company when it was still in a very early preclinical stage, we had strongly believed in its premise. It was one of those rare propositions that felt like a “no brainer”.

Velos’s strategy revolves around developing molecules that target ROR1. This is a protein that sits on the surface of cells and transmits signals to their nuclei. It is involved in the early development of the embryonic nervous system, but is then largely silenced in adult tissues. However, it is re-expressed in many types of blood and solid cancers where it plays a role in cancer metastasis. This differentiated expression between tumour and normal tissue gave us confidence that it could make a safe drug target.

Experience with a straightforward inhibitor of the target has been mixed, but the Velos team noted that the ROR1 protein is readily internalised inside cells, making for a good ADC target. The idea was to couple an antibody that bound ROR1 on the surface of tumour cells, and was then taken into the interior of cells. By coupling the antibody to a potent toxin molecule, what is known as the “warhead”, the ADC specifically homes in on the cancer cell like a laser-guided missile, delivering its deadly payload specifically to the tumour cells.

This process is depicted in the diagram below.

Source: WuXi AppTec

Velos has since taken their lead compound, VLS-101, into a phase 1 trial in patients with late-stage aggressive lymphomas, who have failed on all other available treatments and would typically have just weeks to live. Like all phase 1 trials, the main goals are to assess the safety of the drug, and to identify the maximum tolerated dose to inform the dosage to be taken into larger clinical studies for regulatory approval. Velos have seen some encouraging results in this study, validating ROR1 as a novel target for ADC therapy for cancer. Given ROR1 is expressed on a multitude of solid tumours, including lung, breast, bladder and others, there is enormous potential to expand the utility of the drug and build a pipeline addressing multiple haematological and solid tumours.

This $137m fund raise gives the company the resources to quickly scale-up their pipeline, including clinical testing of a next-generation ROR1-targeting ADCs which have the potential to be even more potent and effective. The company will have multiple clinical studies ongoing with accompanying data readouts and potential for further value inflection. The scarcity of clinically validated novel cancer targets that could be expanded into many disease settings gives Velos large potential value.

The groups supporting this raise include the “who’s who” of US life science investors, , which gives the company a solid shareholder base to provide multiple strategic options for patients in the future.

Interest in ADCs has really heated up in the last two years driven by clinical data and the increasing understanding on how to produce molecules with great efficacy and manageable toxicity. Last March, AstraZeneca signed a deal with Daiichi Sankyo worth up to $6.9bn to license Enhertu, an ADC-targeting the Her2 receptor conjugated to a new toxin called Deruxtecan. The drug showed strong efficacy in Her2-positive breast cancer patients who were insensitive to other Her2-targeting agents, shrinking tumours in over 60% of patients and extending survival. They have since shown benefit in stomach cancer, and have trials underway in other tumour types. This demonstrates the potential of these molecules to be rapidly expanded into many indications, greatly increasing the commercial opportunity with peak sales forecast to reach $2.5bn in 2024. In May this year, in the middle of lockdown, the Swiss ADC company, ADC Therapeutics, which is in phase 2 with a CD19-targeting ADC for lymphoma, raised $267m in an oversubscribed IPO. In the two months since IPO, its share price is up 147% and the company is today valued at $3.3bn. These are just two companies that give us confidence that industry and investor demand for ADC products is strong.

At Arix, we are pleased to be playing an important part in developing the next generation of first-in-class oncology drugs. Our portfolio companies Velos, Autolus, Artios, Harpoon, Aura, and STipe, all have the potential to make major impacts on the lives of cancer patients.

Read more about VelosBio here.