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Thursday, Mar 28, 2024

SPECIAL REPORT: Fresh Crop

Acquisitions took a big bite out of publicly traded health care and biotech companies in the San Fernando Valley region this year, but a new crop of startups is eager to take their place. This month, stockholders of IPC Healthcare Inc., a national physician group based in North Hollywood that provides doctors to hospitals and nursing homes, approved the $1.6 billion acquisition of the company by TeamHealth Holdings Inc., a hospital staffing firm headquartered in Knoxville, Tenn. In addition, Health Net Inc. in Woodland Hills was acquired earlier this year by St. Louis’ Centene Corp. for $6.8 billion in cash and shares. Health Net will be a subsidiary of the Fortune 500 insurance company and will continue to operate from its local offices. Finally, Westlake Village’s Kythera Biopharmaceuticals Inc. was purchased by Dublin, Ireland pharmaceutical company Allergan last month for approximately $2.1 billion in an all-cash deal. Kythera makes the first Food and Drug Administration-approved nonsurgical injection procedure to reduce chin fat. The biotech firm was co-founded in 2005 by scientist and entrepreneur Nathaniel David and former Amgen Inc. executive Keith Leonard. On rise The same factors that gave rise to these publicly traded companies have put wind in the sails of up-and-coming firms. Among this next generation is ImmunoCellular Therapeutics of Calabasas. The clinical stage company, which develops cancer treatments, launched in 2006 after acquiring cellular-based technology from L.A.’s Cedars-Sinai Medical Center. ImmunoCellular went public in 2012. The company was founded by John Yu, an immunotherapy scientist and faculty member at Cedars’ neurosurgery department. The company’s current Chief Executive Andrew Gengos was the former chief exec of Neuraltus Pharmaceuticals Inc., a biopharmaceutical company in Palo Alto. Prior to that, Gengos worked for Amgen for seven years as president of strategy and corporate development. In September, the California Institute for Regenerative Medicine awarded ImmunoCellular a $19.9 million grant to finance its phase 3 clinical trial for ICT-107, a cell-based immunotherapy designed to alert the immune system of existing cancer cells and initiate a tumor-killing response. “We are excited to be close to initiating our phase 3 registration trial,” Gengos said in a statement. “With this important grant of nondilutive capital and our current cash, we are in position to cover the full external cost of conducting the trial and ensure high-quality trial execution.” ImmunoCellular trades on the New York Stock Exchange, and although the stock has spiked above $1, it currently trades for around 50 cents. Shares closed Nov. 24 at 43 cents. Another up-and-comer is Cynvenio Biosystems Inc., co-founded in 2008 by Frederick Gluck, former chief executive of management consulting firm McKinsey & Co. Inc. in Los Angeles, and Alan Heeger, a former Amgen board member and academic scientist who pioneered the field of metallic polymers. Cynvenio created the LiquidBiopsy platform, which takes a blood sample to detect tumor cells and tumor DNA that are shed into the bloodstream from the tumor itself and its satellite sites. “We are a pioneer of the LiquidBiopsy, where we look at mutated tumor cells that may be present in the bloodstream to assess cancer progression and therapy efficacy,” said Cynvenio Chief Executive André de Fusco. “Our technology is based on a platform for tumor cell isolation and special software for sequencing the DNA of these target cells.” The company provides its technology to other labs, and operates its own lab in Westlake Village, where doctors and hospitals can have samples processed. Venture capital is also a part of Cynvenio’s business model. Just this June, it completed a $25.5 million Series B equity financing round led by Livzon Pharmaceutical Group Inc., a diversified health care company in China. Co-founded in 2001 by Warren Hosseinion and Adrian Vazquez, Glendale’s Apollo Medical Holdings Inc. is an integrated health management company. ApolloMed acts as a liaison among hospitals and primary care physicians to reduce avoidable hospital visits, ultimately lowering costs and increasing efficiency. ApolloMed accomplishes this through the implementation of efficiency and technology systems. Most recently, the company partnered with Pasadena data analytics startup Helynx Inc. to launch a learning predictive analytics platform, which uses data to identify high-risk patients who might need extra care. The company reported $11.4 million in revenue for the most recent quarter, its third straight quarter of revenue growth. ApolloMed shares closed at $6.10 on Nov. 24. Incubation One thing many biotech startups in the Conejo Valley have in common is old Amgen hands in top executive roles. Starting in 2007, the biotech giant began to adjust to decreased revenue from anemia drug Aranesp, which at the time accounted for nearly half of the company’s revenue. The decrease in sales stemmed from FDA restrictions placed on the drug because of potential side effects. The company cut more than 2,000 jobs, including nearly 700 at its Thousand Oaks HQ. Some of the scientists, engineers and executives that were out of work began creating opportunities for themselves. Brent Reinke, a corporate attorney at Musick Peeler & Garrett office in Westlake Village, said that in 2005 he began being approached by Amgen employees, who expressed interest in leaving the company to go to new biotech ventures. They wanted him to negotiate their new employment contracts, inspiring the technology lawyer to start the Bio Science Alliance, an organization that offers networking events and support for the life-sciences industry in the region. About four months after founding the alliance in 2007, Amgen announced its first round of layoffs. Soon after, Reinke began looking into creating a wet lab incubator to support local scientists interested in biotech research. “One of the challenges for scientists coming out of Amgen and this area in the region is a lack of wet lab space,” said Reinke. “It’s hard for them to go to standard commercial buildings and then have to go through the process of building out their own wet lab space.” Unfortunately, the 2008 housing bubble halted his plans, but he is now in the process of forming the incubator venture, Gold Coast Bio Center, which he hopes to open next year. Also during the recession, Greg Cauchon, an ex-Amgen research scientist and founder of Amethyst Life Sciences Inc. in Newbury Park, started his own biotech incubator, the Ventura BioCenter. Cauchon has been promoting the idea of a wet lab in the region since the 1990s, but made his dream a reality in 2008 when the weakened economy drove down the price to rent industrial space. “There is no facility like this in Ventura County,” said Cauchon. “I saw a great need for one.” Located in Thousand Oaks, the Ventura BioCenter has 18 labs with approximately a dozen companies renting space there. Cauchon’s other venture, Amethyst Life Sciences, an analytical chemistry and methods firm, manages the incubator, holding the master lease and subletting to tenants. Some of the companies at the space include Analytical Ventura, a division of Amethyst that does analytical testing and methods development; Bio-Spring, a recombinant protein developer that was started by a group of ex-Amgen employees; and T-Cure Bioscience Inc., which develops patient-tailored T-cell receptors. “We want to have a nice, diversified economy,” said Cauchon. “We want to have large companies like Amgen and Baxter, but we also want a strong base of smaller companies that can hire workers as well. Those smaller companies can act as a support system for those larger companies.” Bio Science Alliance’s Reinke said funding used to be a major challenge for tech and life-sciences companies that wanted to establish business in the area. Traditionally, if a company had venture capital interested, the investors put pressure on the startup to relocate to bigger biotech hubs such as San Diego, the Bay Area or Boston. “We are starting to get past that as a major hurdle,” he said. According to Reinke, one of Kythera’s stipulations for receiving its venture capital was that the company would remain in the area. The next generation of companies is getting even more creative when it comes to funding. He cited Asia as a major source of money for these startups, because many of the scientists and engineers building these businesses have connections there. The BioCenter’s Cauchon believes the future is bright for the region in the health and biotech sector. “I see this trend continuing with more and more startups coming,” he said. “I do think that it will emerge as a hub. … You have literally thousands of trained people around here looking for work. There’s a really highly trained workforce here, so this is a great place to start a company.”

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