Modifi gets creative on the rocky road to a multibillion-dollar buyout

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Speaker: The BioWorld Insider podcast.

Lynn Yoffee: This is the BioWorld Insider podcast. I’m Lynn Yoffee, BioWorld’s publisher. For a small company, Modifi Biosciences has come a long way very quickly. The company was just acquired by Merck for $30 million upfront. Modifi shareholders could receive milestones of up to $1.3 billion. It all happened in the head-spinning span of a little more than two years’ time. There are currently 27 biopharma M&As worth a billion dollars or more that have closed in 2024. Merck’s buyout of Modifi is among the top five in recent months, according to BioWorld Data. Our guest today is Modifi’s CEO, Ranjit Bindra. He’s here today to talk about how his company went from tiny to nearly extinct at least twice until it was bought for a tremendous amount of money. Welcome, Ranjit.

Ranjit Bindra: Thanks so much for having me.

Lynn Yoffee: Ranjit is here today to chat with Lee Landenberger. He’s a staff writer and the BioWorld Insider podcast host. Over to you.

Lee Landenberger: Thanks, Lynn and Ranjit. Thank you so much for taking the time to chat with me today. We talked when that deal was done with Merck and I thought you had a fascinating story to tell. I think others will find it just as fascinating. Thanks for joining me.

Ranjit Bindra: Really excited to be on this edition.

Lee Landenberger: Talk to me about the company for everybody that doesn’t know. I was just at a conference recently and I just happened to be walking past a couple of people who were talking about this very buyout. It’s an unusual case. Talk to me about Modifi, when you began, and then I’d like to talk a little bit about how that paper that was published in Science in 2021 really put you guys on the map.

Ranjit Bindra: Thanks so much. We’re really excited and we’re still sort of waking up from a dream that continues to be a dream. I think as all entrepreneurs know, having an ending like this, which is still just the beginning with Merck taking over the program, it’s something that we all dream about.

Modifi Bio is based on really some academic discoveries in the laboratories of the Bindra and Herzon groups over at Yale, the medical school and on the main campus. It’s a great example of something that’s been very important in my life as a physician-scientist of looking for problems that need solutions. Clinical problems in search of a solution, and then going to the lab and finding that solution. I think that this company is a great story of that.

We started way back when I see patients about one day a week as a physician-scientist at Yale and my day job is running an academic lab and seeing patients with a specific focus on glioblastomas and other brain tumors. Seeing one particular patient that had developed resistance to an FDA-approved drug that we give to a number of patients called temozolomide or Temodar and realizing that they had acquired another mutation in a different pathway and wondering why we couldn’t make a new version of temozolomide that could address this difficult problem.

We’ll get into this later in the episode, but I was able to take that idea, go back to the basic science lab. I’m a translational cancer biology lab PI and went to my longtime friend and collaborator, synthetic chemist, Seth Herzon and said, “Is there a way we take this molecule and make some changes to it to overcome this resistance mechanism?” Really, that was the beginning of Modifi Bio and really was transformational. We can certainly dig into some deeper aspects of this as we go on.

Lee Landenberger: Yes, go ahead. Talk specifics. One of the reasons I find your company so interesting is that it’s not only a great business story about how close you can come to the edge and then keep going and have a success, but it’s also a really interesting science story. Yes, talk to me about that patient that you saw and how that was a turning point for you.

Ranjit Bindra: For me, it was fascinating because this particular patient was taking this oral chemotherapy pill and it wasn’t working. I was just doing an interview with an MD-PhD trainee for one of our residency programs here. They were asking me about the importance of seeing patients and understand, “How does that inform your research?” Here I was sitting there in the clinic and almost wondering whether the patient was not telling the truth, that they’re actually not taking the drug that they’re supposed to be taking. You look at the pill logs and they actually indeed are taking the drug and the drug is damaging DNA in the tumor cells likely. They’re actual DNA repair gene mutations that are making that drug appear invisible.

It was sort of that aha moment that said, “Geez, there’s biomarkers here that we can still target. This drug is still damaging the DNA. There’s got to be a way here to use science to solve this problem.” Really understanding that, because a lot of times we spend a fair amount of our time insulated and siloed in our laboratory saying, “Oh, this drug that we develop is surely going to work for patients.” Often a lot of folks don’t have that experience to see actually what will and what won’t work. A lot of that comes from actually seeing patients.

Lee Landenberger: You figured this one out and then you decided to write this paper. Roughly what year are we talking about with writing the paper? Then I think with the successful publication comes a decent-sized seed round.

Ranjit Bindra: Yes. It’s funny. It’s a great story also of alignment of the stars. I think for all entrepreneurs, when you read about these stories, it’s a lot like I often say Hollywood movies because often the ending is shot before the beginning and they’ve done the script over about five different times. For this, it was an alignment of the stars, because as we saw this patient, we had an MD-PhD student, an absolutely brilliant young trainee, Kingson Lin. He was the first child in his family to go to college, raised by a single mom. He had done his undergrad at UPenn in a special high-intensity chemistry program.
He’d seen one of my talks at Yale and he said, “Listen, I’m a chemist by training and I make molecules but I was just wondering if you had a cancer biology problem because I want to use my chemistry skills to develop novel therapeutics.” He had come to my lab right when we had seen this patient. I started sort of obsessing him. A very obsessive person, as some of my friends and family know, and was sort of figuring out how am I going to solve this problem.

Not to jump right to the Good to Great book, one of my favorite books for entrepreneurship about, first who, then what. That’s one of the Good to Great principles. With every great idea, you need a team. When we came up with the idea, one of my biggest stresses was, “How do I find the right team to execute on this?” I’d found Seth Herzon, one of the most brilliant chemists I’ve interacted with in my career. We needed a trainee. Kingson Lin came. He was one of the first two trainees. Susan Gable, we’ll get to later, an MD-PhD resident who came to help on the biology side. Kingson came as the chemist in training and was able to jump on this problem.

We spent probably about two years. That was probably about, 2018-ish or so, two years trying to figure out how to make this molecule. A lot of successes that turned out to be failures in the academic lab, a lot of ideas, a lot of rabbit holes we went down. Then eventually we ran into one molecule. There were 100 molecules that he made. The one molecule that worked was called KL-50. KL-50 is Kingson Lin 50. I still remember the day that he called me. I had seen actually another patient in the glioma clinic. He said, ” think I finally found that molecule that you wanted.”

I had very specific constraints. I said, “We need it to work exactly like– This is the problem we need to solve.” Then we spent about a year or so trying to understand the mechanism. We did not understand how it worked. It’s here when you get talented trainees and passionate individuals. He’s digging into the literature from the 1970s and ’80s on chemotherapy drugs because remember temozolomide has been the drug that’s been around for over 20 or 30 years. He made an analogue or a novel version of it and then was digging through the literature to try to understand mechanistically how this could work.

This is one of the hardest things about cancer biology and cancer research. Incredibly difficult to tease out some of these mechanisms if you really, really want to understand what’s going on. Through all those twists and turns, we ultimately identified the mechanism of action. We brought in Susan Gable, again, the MD-PhD radiation oncology resident that I mentioned earlier, who came in and helped with the biology side of things. While Kingson did the chemistry, she did the biology. It was like a– We’ll come to this later, also, rock and roll band. Now we had a great guitar player, great bass player. They were making some music together. We saw an opportunity here to get this story out to a bigger audience. We’re able to get this published in Science, which is just the beginning of Modifi Bio.

Lee Landenberger: That led to a seed round. It was $6.4 million. Does that sound right?

Ranjit Bindra: Yes. It’s interesting. We started with the friends and family round. The idea, the paper was on track to being published. Then, to start this company, in my academic world, often we take FDA-approved drugs that we identify, and we get companies to then run clinical trials with them. Even though that’s a very complex process, take a discovery from an academic lab, get a pharma to give us a drug and then run a clinical trial on patients, here this drug that Kingson and Susan had made with the Herzon laboratory had never been described before. We said, “Well, we’ve always been into bench-to-bedside research and getting this into patients, but how do we do this one?”

We realized we needed to start a company. I’d started two companies before this one. It’s called Cybrexa Therapeutics, that’s still now in phase two clinical trials, and Alphina Therapeutics, which is a company working on NAD metabolism. This is our third company, and here glioblastoma is a very difficult space to raise capital. A lot of failures in the space, a relatively small market. We had to do a friends and family round. I like to call this one of our real friends and family rounds, which is my sister, my college roommate, my cousin, other family members, and high net-worth individuals investing in chunks of $10,000, $50,000, $60,000. That led to an aggregate of about $1.5 million of friends and family.

That allowed us to set up the company, begin to start creating the infrastructure, hire our first employee. Our first employee was Kyle Tarantino, who we pulled from Pfizer, very secure, safe job, but he was passionate about drug discovery and developing novel cancer therapeutics. That friends and family round then allowed us to set up the infrastructure to then go do that first seed round, which was about $6.4 million, as you referenced earlier.

Lee Landenberger: Then you get in, you make a tremendous amount of progress against a lot of odds. Then brain tumor therapies start to go sour on the market. Can you talk a little bit about that and thinking about a Series A at that time too, which is probably what, 2022?

Ranjit Bindra: Yes. Great point. We started the company officially in 2021. We had no money for a C-suite, so I decided to step in as the interim CEO. I thought that was going to be a six-month gig for me, and obviously just for the record as a consulting CEO, because I have a day job as a professor here at Yale and within what I was allowed to do. A lot of evenings and weekends trying to build up the company.
We actually had a lot of hurdles even before the market soured. This company is a real testament to entrepreneurship, passion, drive, and persistence. The Stockdale Paradox, for those that love to read about Good to Great, one of my favorite books again. As we raised that seed round, right after that round closed, the $6.4 million round, we did a series of experiments that made it very clear that the tool compound and related drugs that we were working with were not going to be ideal for the clinic, is what I can say now. Essentially, we needed to start from scratch. We raised some money there in that seed round and then realized that we had a lot more work to do ahead of us.

As we started doing that, we built a wonderful team and love to reference just because these folks don’t get enough mention. We brought in a guy by the name of Mike Dillon, the founding CSO of Ideaya, precision oncology company, came on board. He served as my quasi-CSO because he was a free agent. The two of us led the scientific team, recruited a bunch of folks to come to the company. We started to solve some of the problems, some of the metabolic liabilities associated with the tool compound we published in Science.

As we started to make progress later that year, we were anticipating, “OK, we’ve solved the problems that we need to solve, we’ll go raise a big series A.” Around this time, it was end of ’21, and then we went into the summer of ’22 and that’s when we thought we were ready to do that series A and I think as many people remember, ’22 was a very difficult year for biotech. Then we faced the hurdles of essentially running out of capital, only had about eight months of capital left in the fall of ’22, and suddenly realized that raising a series A, the bar had been raised for what was considered a fundable company.

We struggled. We had to do a lot of creative work. We had to find creative ways to extend our runway, had to reduce costs on all fronts. We had great aspirations to make a big, big pipeline of many different drugs, targeting DNA modifications we developed, but we had to focus very specifically on our lead asset. Kudos to our board and our investors that stuck with us. By the summer of ’23, we literally were essentially out of money, but we had at the same time paradoxically solved all the problems, and we had what we called a development candidate in hand that we believe was ready to begin ID enabling studies, but we actually had about 30 days of capital left.

I very much remember this. I was on a summer vacation with my family for the week and told everyone around me that I was not going to be available for the entire week except for the evenings for dinners and sat in a room and was on the phone calling people to raise another seed round to extend capital by about a year. We’ll get into this in a moment, but it was the venture arms of some of these cancer research foundations. We stated it was the venture arms of these cancer research foundations that participated in the initial seed round, but that also pushed through in the second seed round, and that’s the American Cancer Society, Brightedge, the Sontag Foundation and the National Brain Tumor Society. These folks are impact investors. Then other groups like [unintelligible 00:15:57] Pathway Biosciences, Connecticut Innovations and Highcape, investors that are really, really focused on impact investing and sustaining the entrepreneurs at risk, and these folks came in and saved the day. We were able to close that second seed round by the early fall of ’23, and that gave us another year of runway to try and go and take another shot at raising the series A.

Lee Landenberger: It was the National Brain Tumor Society that sounded the call to bring in the cavalry with Merck. Is that right?

Ranjit Bindra: Yes. As we closed that second seed round in the fall of ’23, it’s funny, as we recount, this is really quite a blur, we went out to go do another series A round of funding, and I love venture capital. They’re the bedrock of biotech investing and whatnot, but it was difficult. The storms had not yet cleared. The term sheets and the deals that were being offered could be better.

As a CEO of a small biotech, I fiduciary responsibility to my shareholders and the board together to get the best return on investment. Obviously, as a physician, first and foremost, we want to get this drug in the clinic. We had two goals that every good CEO would have, which is to raise capital, extend, keep the lights on. The second goal is to get really good drugs into the clinic for patients that need them. Here we were in a situation where we began raising money through a series A but some of the investors we spoke with weren’t so hot on GBM as our primary indication.

I’ve done this before with my other companies where we start looking at glioma and brain tumors, but then we’re sort of forced because of market incentives to pivot. Thankfully, our existing investors understood that this company was really built on developing a whole new way to treat brain tumors. As we began our second round of series A fundraising, we certainly got a lot of traction. We then realized there are pharmaceutical companies out there that for the first time in a while were, in earnest, looking at brain tumor assets and companies that were developing drugs for brain tumors, which used to be thought of as a graveyard for drugs.

Ultimately, National Brain Tumor Society introduced us to Merck. There are some other pharma groups that are on the table, but it was Merck that piqued our interest the most because they have a reputation as being a very science-driven organization, interested in translating the most high-impact science. It was very clear from our initial conversations with the deal team, as well as our diligence conversations, that this group is really committed to translating some of the best science into the clinic for patients. You can’t say that for all groups that are out there.

For us, we were really, really excited to interact with these guys, and we’re very grateful for the National Brain Tumor Society for making that introduction.

Lee Landenberger: When you look back at all of this, success, near failure a few times, and then a huge buyout, is there anything that surprises you, or have you even had time to process it?

Ranjit Bindra: It’s funny you mention that. Even when you and I spoke a couple of weeks ago, I was still recovering from the actual closing the deal. I learned a few things during the process. I’ve started a few companies, as I mentioned earlier. I’ve raised a fair amount of capital in the series A and series B space for my other companies, and very much loved entrepreneurship. I’ve never been involved with a mergers and acquisition deal like this, and in the pilot seat. With my co-founder, Kevin Rakin, and the two of us, we didn’t have a bank to do this deal. We did this all by ourselves. People would actually ask, “Who is your banker that did the M&A deal?” I said, “You’re looking at them. It’s me and Kevin Rakin.” I learned a lot.

First of all, one thing I learned is whenever you read about a company that’s been acquired by another company, no matter what, the up front or the bio bucks or the milestones, that alone is an impressive feat because the sheer complexity of merging one company with another, and kudos to all the teams, the lawyers and the groups that we worked with and Merck themselves are incredibly professional, transparent, phenomenal to work with, but the sheer complexity of executing a deal like this, and we won’t go into all of that today, but I was humbled by the experience, I’ve learned so much of all the facets and all the different things.

Now whenever I read about an acquisition, even if it’s a $5 million up front or a relatively small bio bucks deal, you have deep respect for the folks that do that, that’s one. The second point is, you always hear these stories about people that go out on the line, as I call it. I called my business partner about a couple of weeks before the deal would close and I said, “Geez, Kevin, we only have about 21 days of capital left.” Personally, I was financially a little bit out on the line as well, just because I shut down my life and outsourced everything just to focus on closing the deal. To some degree, you almost have to do that, and that’s what’s fascinating about the biotech world and startup life, is if you’re not doing that, you’re actually not putting your all into it, you almost need to run it right to the edge, because otherwise you get too comfortable.

There’s some people that told me once, if you raise too much capital, if a company raises $180 million in series A, it’s almost too much money. You almost want that runway to be very short so that everyone’s forced to think about the next chess move, you don’t have the luxury to think beyond that. Those are two sets of lessons that I’ve learned that I think I’ll never forget [unintelligible 00:21:50].

Lee Landenberger: You have to introduce a certain level of pain in order to keep everybody going.

Ranjit Bindra: Yes, it’s sort of like– [chuckles] It’s kind of random. I was at a Pearl Jam concert in Fenway Park a couple of months ago, and the Pearl Jam, Eddie Vedder, sort of referenced the bar behind him, behind Fenway Park, and he said, “When we’re playing shows here, no one will listen to us, no one will show up to these shows. We were doing that for so many years, and we had to work really hard, we had to get really good at what we were doing with very limited resources,” he said in his own way.

Here we are at Fenway Park, and obviously, Modifi’s not at Fenway Park per se, you always have to experience that pain to get to the next level. That’s actually something that I love about the startup world, and I’m going to continue to do this as long as people will let me.

Lee Landenberger: Terrific, we want to wish you the best of luck, congratulations on this deal, and all the best to you.

Ranjit Bindra: Great, well, thank you so much for having me.

Lee Landenberger: You’re welcome. Lynn, back to you.

Lynn Yoffee: Thank you, Ranjit, that is a very inspiring story.

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