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Innovation Economy

Firm offers glimpse of life cycle of life sciences sector

Michael Gilman

SUZANNE KREITER/GLOBE STAFF

Biogen Idec acquired Stromedix, which was founded by Michael Gilman (above).

CAMBRIDGE — Sitting in a prime booth at Legal Sea Foods in Kendall Square, Michael Gilman can look across the street to the MIT lab where he worked as an undergrad in the early 1970s. A few tables over at Legal, he was once persuaded to switch employers by a Nobel laureate. Now, Gilman works a block to the north, overseeing several drug development programs at Biogen Idec, one of the nation’s biggest biotech companies. Last year, Biogen Idec acquired Gilman’s start-up company, Stromedix, which had its offices a 15-minute walk away.

Gilman’s 30-year career has played out almost entirely between the MIT campus and Cambridge Street, a testament to the thriving ecosystem of companies, research facilities, money, and talent that has made Kendall Square the undisputed center of the life sciences universe.

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Already dense with start-ups, biotechs, big pharma, and university-affiliated labs, Kendall Square has a gravitational pull that continues to intensify, recently attracting Johnson & Johnson, which is establishing an office to make investments and strike partnerships with local companies.

Meanwhile, 2.5 million square feet of new offices and lab space are going up within a mile of the Kendall Square T stop. It will be filled by companies and academic labs pursuing scientific breakthroughs and new products that could help us stay healthier and live longer.

So what exactly happens in this life sciences community, which can be impenetrable to outsiders? I thought tracing the story of a single company — Gilman’s start-up, Stromedix — could provide better insight into the workings of Kendall Square’s machinery and how it has changed over the past few years.

In 2005, Gilman left a job as a research executive at Biogen Idec, intent on starting his own business. He spent much of 2006 holed up in the Waltham offices of Atlas Venture, an investment firm that puts money into fledgling life sciences businesses. He was focused on a process called fibrosis, which Gilman describes as “wound repair gone bad,” when the body produces excessive scar tissue, which impairs the normal operation of an organ.

Chronic kidney disease involves fibrosis, and so does cirrhosis of the liver and lung disease. There aren’t yet any approved treatments in the United States to stop fibrosis.

Very few life sciences start-ups begin with a blank sheet of paper — or an empty petri dish. So Gilman “went shopping for molecules,” as he puts it, scouring academic labs and corporations for substances that might be effective against fibrosis.

What Gilman landed on was a specially-engineered antibody that his former employer, Biogen Idec, abruptly stopped working on in 2006. In March 2007, Gilman raised $4.4 million from Atlas and other investors and moved Stromedix to the Cambridge Innovation Center, a Kendall Square facility that rents small offices to entrepreneurs. That May, Gilman finalized a deal with Biogen Idec that would give his start-up exclusive rights to continue work on the antibody, which it dubbed STX-100. Biogen Idec would get a small piece of Stromedix and royalties if the product made it to market.

Part of Stromedix’s strategy was picking a spot in the vast spectrum of human disease where it could prove the value of its antibody — without spending hundreds of millions of dollars on clinical trials. The company decided to focus on patients who received kidney transplants, as a sort of “demo app,” Gilman says; if the transplanted organ failed because of fibrosis, or the patient needed dialysis treatment, that cost the health care system a lot of money. His antibody might be able to prevent that.

Stromedix started a Phase 1 clinical trial, intended to prove that a drug is safe in humans. Like many of what are called “virtual” biotech companies, it didn’t have its own scientists producing the antibody or employees managing the minutiae of the clinical trials. All that was outsourced to consultants and a CRO, or contract research organization.

“The company never had its own lab,” says Gilman. “We had a part-time chief financial officer, and part-time human resources people.” At its peak, the company had just nine employees, many of whom Gilman hired from Biogen Idec.

The strategy to focus on kidney transplants hit a dead end when it ran into safety concerns during a series of animal tests. Gilman laid off three people, and Stromedix began to look at a condition called idiopathic pulmonary fibrosis. It affects about 115,000 people in the United States at any given time, Gilman says, and its cause isn’t known.

“The survival time is between three years and five years,” Gilman says. “It impairs the lung’s ability to get oxygen, and people basically suffocate.”

While IPF affects a relatively small group of people, it is a death sentence. Gilman thought his company might be able to charge a fairly high price: $40,000 or $50,000 a year for patients on the drug.

Peter Barrett, a partner at Atlas Venture, the firm bankrolling Stromedix, says the company would have needed to raise more money to run new clinical trials. “The question was, do we fund it ourselves, or do we look for a partner,” he says. At that point, Biogen Idec’s new management, which had changed almost entirely since Gilman departed, began talking to Stromedix about an acquisition.

The deal was announced last February. Stromedix had raised about $38 million, according to Gilman, and Biogen Idec paid $75 million in cash for the company. But the acquisition price could include as much as $487 million more, if drugs based on the Stromedix antibody are approved to treat different kinds of fibrosis. Even though there was still no definitive data showing that the antibody worked, Stromedix had effectively moved the ball by designing an approach to conducting clinical trials that would be relatively fast and cheap

Since Stromedix’s founding, Atlas and several other venture capital firms have moved from the suburbs into Kendall. “You just bump into so many people,” says Barrett, of Atlas Venture. That helps ideas flow from the lab to a start-up and eventually to a bigger company that will help put a product on pharmacy shelves.

In 2011, Biogen Idec announced it would move its headquarters from Weston to Kendall, so people running the business would be closer to the company’s research labs — not to mention potential collaborators in academia and start-ups. After the acquisition of Stromedix last year, Gilman and his five fellow employees moved into a Biogen Idec building along Broadway.

The neighborhood is changing quickly; over lunch at Legal, Gilman reeled off a half-dozen new restaurants that have popped up. There are apartment buildings, cafes, and new boutiques, too. “It feels like the pace is accelerating,” he says.

But when it comes to getting a new drug onto the market, things still move like molasses. Gilman says that it will be 2014 before Biogen Idec has data about whether the Stromedix antibody actually works; 32 patients with IPF are taking it, at hospitals including Massachusetts General and Beth Israel. Another trial will follow.

Gilman says he regularly fields calls from people with months left to live, hoping to be included in the trials. “Talking to them has really made the whole thing much more real,” he says.

The Kendall life sciences cluster combines the rush of discovering something new in the lab with the plodding process of turning it into a pill that patients can pop or an antibody that can be injected. And there is the ever-present possibility of earning a tidy windfall.

“If you do it right in this business, you’re making a difference for people,” says Barrett. “And if the science works the way you hope it will, you might even make money at it.”

A glimpse at the life sciences ecosystem

Within a mile of the Kendall Square T stop are hundreds of university research labs, start-up companies, venture capital firms, and larger biotech and pharmaceutical entities. All are focused on an elusive goal: bringing to market new drugs and treatments that doctors will eventually prescribe for diseases from cancer to Alzheimer’s to obesity. Here’s how the ecosystem works:

1. Researchers in academic labs — such as the Broad Institute — discover new substances that could have potential as drugs, or new ways of enabling a drug to target a disease in the body with limited side effects.

2. Venture capitalists or entrepreneurs — such as Peter Barrett of Atlas Venture — typically working with the original academic researchers, incorporate start-up companies and license the original scientific breakthrough from the university. Venture capitalists provide the money and often incubate fledgling businesses in their offices.

3. Start-ups typically form partnerships with established biopharma companies — making connections at industry events such as BIO — to help fund the long drug development process, including clinical trials. These partnerships also put start-ups on the larger companies’ radar screens as potential acquisitions.

4. Lots of companies run out of money before conducting clinical trials. Those that succeed are usually bought at some point by a larger company — such as Biogen Idec’s acquisition of Stromedix, founded by Michael Gilman. Gilman is now an executive at Biogen Idec, but entrepreneurs and investors often go off to form new companies, based on new academic research.


Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.
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