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Andreessen Horowitz's Investment in Tmunity

On October 29th 2019, Andreessen Horowitz announced its series B investment in Tmunity Therapeutics, a UPenn spinout focusing on CAR T cancer therapies. The team at Tmunity is headquartered in Philadelphia and has raised $230 M over 5 rounds from the corporate VC arms of Gilead and Eli Lilly, academic organizations including the Parker Institute for Immunotherapy, the BrightEdge fund, and the Penn Medicine Co-Investment Fund, and finally from large VCs including Kleiner Perkins and a16z.

What are we solving here?

CAR T has quickly become a leading candidate to cure a variety of cancers, starting famously from Emily Whitehead in 2012 who was cured using CAR T from Acute Lymphoblastic Leukemia. CAR T works by extracting T cells from the patient’s body and reprogramming them using various gene therapy vectors (such as the HIV virus machinery) to express chimeric antigen receptors (CARs) which recognize cancer cells and allow T cells to attack them. These CARs are currently in their 4th generation of development and now include the release of pro-inflammatory factors that further attract more T cells to the area to aid cancer killing. Novartis became the first company to be approved for a CAR T therapy with Kymriah in 2017.

While CAR T has demonstrated efficacy for a set of some liquid cancers like Leukemia, the treatment has been less successful to date for solid tumors like prostate cancer. Tmunity hopes to address this gap, with 10 programs in its pipeline for solid tumors with mid phase trials estimated for 2021.

Its PSMA CAR T candidate, currently in Phase 1 trials, aims to treat metastatic castrate resistant prostate cancer (mCRPC). Prostate cancer is the most frequently diagnosed cancer in the U.S. and when caught late, there is no cure. The standard of care is androgen deprivation therapy, which restricts the further growth of prostate cancer cells. However, for those tumors which are castrate resistant, the best therapeutic options increase median survival only 3 months. With a CAR T specifically engineered to target PSMA antigen that is expressed specifically on prostate cancers, hopefully Tmunity can find some effectiveness.

So what does this mean for bio VC?

Tmunity comes as one of a few but growing number of large bio investments from Silicon Valley. Andreessen Horowitz, who typically invests under the thesis “Software is eating the world” has recently dedicated 450M,startingwith450 M, starting with200 M in 2015 and a further bio fund II round raised in 2017, to invest in biology engineering companies. Their first fund came after Marc Andreessen famously said that the firm wouldn’t touch bio and healthcare investments, and this second fund’s investment in Tmunity, a very non-computational non-software company, comes after their focus for the first fund was stated to be in the combination of healthcare and computer science.

Marc’s ideas on this were made clear in a podcast with a16z bio partner Jorge Conde, also Tmunity’s newest board member. He says that historically, two types of companies worked for VC, biotech and IT. Over time, the economics of these sectors diverged. In his words, “You could fund Facebook with $20 million and go to the moon, or you could fund a new pharma effort with a billion dollars, and still probably have to raise another three billion by the time you’re done.”

However, VC biotech funding is on the rise, outpacing general VC spending growth. What is pushing biotech, given the fundamental resource costs that make biotech much more expensive than software? Nowhere is there a 22 year old founder raising a $100 M round in biotech. You’re going to need a team of MDs, PhDs, a boatload of cash, lab space, not to mention regulatory approval.

One explanation is the balance of product versus market fit. For consumer facing companies that are typically software based, their number one battle is whether the consumer will pay money for their product. It usually isn’t a matter of whether the product can be created in the first place, and it mostly is a matter of whether they can beat out the competition and market their product effectively to convince consumers to give them their money. It’s essentially the opposite for biotech. The struggle is much more focused on whether the company can actually build the product and once it’s built and it works, the market will typically have a place for it. Software investment dollars as a proportion of total US VC deal value has declined from 29.1% in 2009 to just 17% in 2019. Perhaps a lack or difficulty of software companies finding market fit is pushing dollars to biotech where fit has been easier to find.

I think this explanation might be too pessimistic. A dog walking company got $300 M from Softbank last January. A more compelling reason for this growth might be the rise of synthetic and programmable biology. Biology as we have known it has been incredibly difficult to understand, hard to control, and almost impossible to predict. For students, it is inaccessible aside from hours pipetting at a lab bench, mixing various chemicals with cells to produce variable results. Compared to work in software development, or the excitement in machine learning and AI, it has been difficult to compete for interest when it requires such a high activation level of understanding. However, recent developments in CRISPR, genomics, and applications in regenerative medicines, CAR T, and protein engineering have transformed our ability to engineer biology and control biological machinery similarly to the early days of microelectronics.

Armed with an ever expanding set of technologies, healthcare is coming under our control unlike it ever has before. The goals are very clear, we just need to build the product. Biology is the next great frontier.