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Why $120M for Affinivax may reflect a new view of vaccine makers

The coronavirus outbreak has helped remind the world of the importance of vaccine makers, which are speeding faster than ever before to develop preventive treatments for COVID-19. So it’s fitting that, at the height of the pandemic, Affinivax, a Cambridge, Massachusetts, startup that has scratched and clawed for six years without the help of venture firms, has finally gotten their attention.

The $120 million Series B round Affinivax closed Thursday might be typical for biotech startups in flashier fields like oncology, which accounted for $4.4 billion in 2018, or a little more than a third of total U.S. venture investments that year, according to a report from trade group BIO. But it isn’t for the makers of infectious disease medicines, which, by comparison, pulled in $372 million that year. Affinivax’s round, alone, would account for roughly a third of that sum.

What’s more, vaccine developers — particularly startups developing new approaches — face additional challenges. Vaccines are costly and complex to manufacture and test in clinical trials. They also do not command the same high prices as, say, rare disease or cancer drugs.

Taken together, it’s a tough space to start companies and raise money, said Affinivax CEO Steve Brugger, a biotech veteran who’s previously worked at Millennium Pharmaceuticals and Momenta Pharmaceuticals, in an interview. “People would sit back and say, ‘Historically, vaccines have been a difficult area. We see this as a long and expensive road.'”

That’s been true for Affinivax, a company that’s developing a new twist on a known vaccine technology.

The typical route for a venture-backed biotech startup begins with the support of a VC firm specializing in early-stage investments, and continues with the building of a syndicate of “crossover” investors that back both private and publicly held companies. Those steps build toward an initial public offering, when a startup makes the transition to become a publicly traded biotech.

By comparison, Affinivax, which has been around since 2014, has funded itself through grants, seed funding from The Bill & Melinda Gates Foundation and a key partnership with Japanese drugmaker Astellas. Affinivax went that route after being rejected by early stage investors at the start of its journey.

Yet the coronavirus pandemic might change investors’ calculus. The outbreak, which has killed more than 180,000 people worldwide so far as well as disrupted the global economy, has magnified the need for vaccines. Companies like Moderna and BioNTech have seen shares rise to all-time highs due to their efforts to speed coronavirus vaccines forward.

David Altschuler, the former CEO of the Children’s Hospital of Philadelphia and now a managing director with Ziff Capital Partners, a new Affinivax investor, believes it’s all a sign of things to come.

“There’s going to be an explosion of activity in terms developing preventative and therapeutic vaccines,” he said in an interview.

Affinivax is taking a modified approach to what are known as “conjugate” vaccines. Conjugate vaccines strap an antigen — a substance that provokes an immune response — to a protein that helps amplify that response. It’s a magnification tool drugmakers use when an antigen isn’t setting off the type of alarm bells necessary to spark an immune attack against a pathogen. The idea has led to FDA-approved conjugate vaccines for infections like Typhoid and streptococcus.

Affinivax, instead, uses two substances that have high affinity for one another — biotin and rhizavidin — to snap an antigen and protein together “like the strongest Velcro you can imagine,” Brugger said. The idea is to be able to show the immune system either a protein, a bacterial polysaccharide — a sugary coat worn by a bacteria — or both. In the process, Affinivax thinks it can produce a broader, more protective immune response than typical vaccines. Its most advanced candidate, for pneumococcus, for instance, is meant to protect against 24 strains of the bacteria. Pfizer’s Prevnar13 and Merck’s Pneumovax23, as their names suggest, respectively cover 13 and 23 strains.

“The biggest challenge with vaccines is to demonstrate, clinically, that you have a technology,” Brugger said. His company had to rely on small sums of early cash — chiefly some $6.5 million from the Gates Foundation — to get there. It wasn’t until 2017 that Affinivax made enough progress to grab the attention of Astellas, which took rights to its pneumococcus vaccine and cut a research deal to develop another one for pseudomonas klebsiella.

Brugger says that, all told, around $100 million has been put into the company’s technology, which, in turn, has enabled the company to generate early human data on the pneumococcus vaccine, expand work on hospital-acquired infections and finally get the attention of venture investors. Those investors, which include Ziff, Bain Capital Life Sciences and Viking Global Investors, are the type that can support an IPO, though that outcome might be tougher than usual given the current macroeconomic climate. (“We’ve got options,” is all Brugger will say.)