Can Lighting Strike Twice? SARCode’s Co-Founder Gadek Takes Helm of Promising Dry Eye Start-up

Episode 114

Three-year-old TearSolutions hopes to pen a strong sequel to SARCode’s successful tale of a start-up developing the next new treatment for Dry Eye Disease. Tom Gadek, co-founder of SARCode, developer of lifitegrast (now Shire’s potential blockbuster Xiidra), takes over the company as it begins courting partners and investors.

 

Transcript

Tom Salemi: Hey, everybody, welcome back to the OIS Podcast. This is Tom Salemi. Happy to have you here with us in this beginning of the holiday season. ‘Tis the season to talk about dry eye. I guess every season is the season to talk about dry eye. We cover it a great deal at OIS for a very good reason: it’s an enormous space, once that’s growing, and one that’s really beginning to produce promising treatments, be it Shire’s Xiidra or Allergan’s Oculeve device, which we hope to see some positive news regulatory-wise in the near future. But today, we’re going to go back into the early stages. I had the great pleasure to speak with the principals of TearSolutions, which is a startup that is producing or developing a new potential topical treatment for dry eye based upon a protein discovered at the University of Virginia, called lacritin. Today I spoke with the cofounders, Gordon Laurie and Mark Logan, both at the University of Virginia, and their new CEO and President, Tom Gadek, who of course you all know as the founder and former CEO of SARCode, which would be acquired by Shire, and which developed lifitegrast, which then became Xiidra. So this is sort of a chapter 2 for Tom Gadek, and it’s an opportunity for him to really sort of recreate the SARCode story, but in a much different environment. Dry eye is much more developed; there’s so much more known about the space, and there’s so many more players trying to get a piece of it. So I hope you enjoy this visit with a very, very interesting startup called TearSolutions.

TS: Gordon Laurie, Mark Logan, and Tom Gadek, welcome to the Podcast.

Gordon Laurie, Mark Logan, Tom Gadek: Thank you.

TS: It’s great to have all three of you here. I don’t normally – I’m not blessed with three guests at a time, so we’ll do our best to make sure everyone knows who’s sharing their particular part of this great story. But we want to just bring an update. Tom, you just came aboard as CEO and President, and you and I talked just a few months ago, actually, about your experience at SARCode, so it was nice to reconnect with you. And we want to bring everyone up to date on what TearSolutions is doing. But before we get into where you are and where you’re going, Gordon, I was hoping as a cofounder and sort of the scientific founder of TearSolutions’ discovery, if you can take us way back and tell us how you came to settle on this technology as a potential treatment for a very vexing problem, dry eye.

Gordon Laurie: Yeah. Well, it came out of a screen for a molecule set regulate azoturia, which is a deficiency in dry eye. And it was made possible by a conversation I had with Jack McLaughlin, who was the Director of Extramural Funding at NIH. And he fortunately loved the idea. I was a young assistant professor, and he was very encouraging, and that got us started. So we did this screen in which we allowed Mother Nature to show us what is important in regulating ocular surface geology and noted that we discovered a protein that we named. We called it lacritin, and it turns out to be a regulator of basal tearing, which is a deficiency in dry eye. And it also is important for the health of the surface of the eye. And so it’s a biologic. And a couple of years ago, we discovered that if we just take a small piece of it, a short synthetic peptide, we could get the same activity. And so that’s the drug that is at the basis of the technology for TearSolutions.

TS: So what timeframe are we talking about? When did you discover lacritin, and where did this all take place?

GL: Well, this all took place here at the University of Virginia. So the first grant was in 1992. The first publication was in 2001. So it took us years to – it was pretty tough, screening and doing the biochemistry and so on. But after discovery, I set up a consortium of collaborators doing – with different expertise, people at UCSF, Cornell, Harvard. And they’ve helped move the story ahead. So the company was started in 2013 and that’s when just around that time we discovered that we could use the synthetic peptide of a small portion of lacritin, which we call Lacripep. And it’s our drug for treating dry eye.

TS: So how does lacritin move from an interesting project and discovery to an actual company like TearSolutions? What took place?

GL: Well, I went on the website of the Virginia State Business Development Corporation, and I created an LLC. And a couple weeks later, I emailed Emmett Cunningham because I was off to the ARVO meeting. And he agreed to meet with me. And part of that conversation, he suggested a couple names that I should speak to, and one was Tom Gadek.

TS: Well, that’s terrific. And Mark Logan, you had joined the company sort of as the initial President and CEO. How did you come to become involved with TearSolutions?

ML: Yeah, I’m also here in Charlottesville and associated with the University of Virginia in both the medical school and the Darden Business School. And on occasion, people knowing my background in ophthalmology with Bausch and Lomb and Visx Lasik, they send young entrepreneurs or professors over to me and see what I think, or if I can help them. And this came from the head of the Entrepreneurial Institute at Darden sent Gordon over to me, who was having some difficulty getting some traction in the business end of it. And I listened to his story about lacritin, Lacripep, and I said, this is very interesting. My background in contact lenses and Lasik, I’ve caused a lot of dry eye, and I know it’s a big problem. And if you’ve got what it sounds like you’ve got, I’m very interested. So I said I’ll help you look for a CEO. That was what we started out to do. And we interviewed, oh, probably 7, 8 applicants, and none of them really fit what we wanted to do. And I said, Well, I’ll help you get started. I’ll take the title on and get us a license and do some fund raising – and I guess I was the second investor after Gordon – get us started here. And then we raised a series A, closed that last October. That was the $3 million series A. And we began to add some very good people. It’s a virtual company. None of us have salaries or anything. It’s all equity. So we’re spread out quite a bit, but we’ve added some very good people. And then just recently, Tom became available. He was on our advisory board, and as Gordon mentioned, he met him a number of years ago. But he was on our advisory board, but he became available to fill the President/CEO position. So that was just this month. So we’re pretty excited about him joining.

TS: I would say so. Tom, you’ve obviously had some success and experience in dry eye, one of the best success stories in this space. What did you find appealing about TearSolutions’ story? You were already involved with the company at some point. What potential did you see early on that made you want to become involved?

TG: Yeah. It’s a bit of déjà vu all over again. And dry eye is still a very interesting field, and still a lot to be done. Hardly tapped at all, even with the success of lifitegrast. So what attracted me at the time was I was on the advisory board and had an ongoing dialog with Gordon in particular, and it was more or less technical help and some advice on how to think about the company’s challenges at any point in time. And that was a very good, collegial interaction. Nobody was offending anybody, no threats or anything like that, so it was a good chemistry. Good chemistry between us. And then looking at the preclinical data, particularly efficacy in mice in a model of Sjogren’s disease that have dry eye, and where it’s demonstrated by corneal staining that the corneal epithelium is particularly disrupted and not acting as a barrier anymore, adding either Lacripep or lacritin, the original protein, had an unusual effect in terms of returning the surface to homeostasis, back to normal. And that was pretty interesting. The compound is not anti-inflammatory, per se, or a secretagogue, which are two other approaches that have been used to try and treat dry eye. But this just calms the whole thing down, heals the surface, and then the anti-inflammatory effect comes along with that, and tear quality improves. So it’s really perhaps nature’s way, if you would. And that’s always interesting.

TS: Hey, everybody, Tom here. I just want to let you know we’ll be sending out the content from OIS@AAO. It’s coming out next week. So if you want to receive it sent directly to your inbox, shoot me an email. My email address is tom@healthegy.com. That’s the word health followed by the letters EGY.com. Healthegy produces OIS and this Podcast and the Eye on Innovation Newsletter. So just shoot me an email. We’ll make sure you get the single email that will contain all the content from OIS@AAO. Also, if you want to sign up and haven’t done so already, sign up for the Eye on Innovation Newsletter. Just go to OIS.net, give us your email, and we will make sure you get great content delivered to your inbox each week, including this Podcast, our videos and our original reporting on the ophthalmology sector. Now back to the TearSolutions story.

TS: Gordon, you mentioned early on that all of this started 20 years ago, or a little bit more. Where was lacritin during this time? Was it just something that had been researched, that had been acknowledged as a potentially promising product and put on a shelf somewhere? What transpired between – did you say it was 2001, correct, or 1991 when this first started? I think I’m getting my decades mixed up.

GL: Yeah, 91.

TS: 91, all right. I’m getting up there where I can’t believe time is past. So 91, between 2013. What happened over that time?

GL: Well, that was the – so we published on it in 2001, and then from 2001 to the present it’s all – I mean it’s been about characterization of it. How does it work, what part of the molecule is important? And so to do that, we’ve cut up the molecule into different pieces and tested each piece. And we looked at how it interacts with the surface of cells. So there’s a really neat on-off switch that is involved in activating the cells. And there’s also an interesting way by which it interacts with the nerves in the cornea to trigger basal tearing that ties in with the latest understanding of how tearing is regulated.

TS: And this was all going on at the University of Virginia?

GL: This was going on here at UVA, but also in with collaborators. I collaborate extensively. In some cases, it’s a subcontract from my grant, NIH grant to these other places. Another big collaboration for us is the US Army. So we have over 300 different tear samples from our loyal service people there, which has been essential for us to do biochemistry on tears because lacritin is a tear protein, actually. And in all types of dry eye, it’s downregulate insufficient. So this is like a tear replacement therapy. We’re replacing that deficiency and restoring health.

TS: Is the Army an active partner in other dry eye, tear related projects?

GL: I’m not aware of that.

TS: How did that relationship come to be?

GL: Yeah. Well, it started out with a collaboration with Scott Bower, who is now at Hopkins. He headed up the refractive surgery unit at Walter Reed. And he was looking for a way to speed up healing post refractive surgery, and the contact lenses put on the eye. And he had the idea of embedding lacritin into the contact lens to speed up healing. And it’s taken a while to develop that technology, but we have it now. And that’s something we want to try in a different trial.

TS: Fascinating. And does the DOD provide – did you say grant funding in addition to the samples?

GL: No, they have not provided. We haven’t actually sought grant funding/

TS: OK. I hadn’t heard of that connection before.

GL: The tear samples are much more precious.

TS: Are they hard to come by?

GL: Yes, it is. It’s been very hard to – you know, luckily the kind of experiments that we’ve done are to compare normal and dry eye tears in different assays, take normal tears and remove lacritin from normal tears, and see how that affects cellular function. And then with dry eye tears, we can spike back in lacritin and look at function. We couldn’t do that any other way if we didn’t have that collaboration.

TS: That’s terrific. And Mark, you came aboard and became involved in 2013 and then assisted with that first financing. What was that process like? Obviously anyone who’s attended OIS and, hell, knows anything about ophthalmology knows this space is drawing a lot of interest. Was that first fundraising easier than you had hoped or more difficulty? Can you just characterize it for us?

ML: Yeah. Well, the first money, as I said, Gordon had put some money in, obviously. And I put some in, and I had connections over the years, ophthalmologists who know this is a serious problem and know me. And so we raised a fair amount through those individuals. And then – it was called Medarva. They used to be Richmond Eye and Ear Hospital, and they started a foundation, and they do grants, usually $50,000 grants to university based ophthalmology projects. And they were considering giving us a grant of $50,000, and they came and saw our presentation. They said, Well, you know, we think we’d like to make this part of our investment portfolio. So they came in with a fairly large amount, and then also Santen Pharmaceuticals became an investor. They talked to us sort of for a number, I want to say years it seems like. It was certainly more than one year. And then they said they’d like to invest, be an investor in this, their development venture group. We raised 3 million, and it wasn’t too hard. And that allowed us to do all of our preclinical work, which was pretty easy, actually. All outsourced, of course. Now we’re going for some bigger money to do the human clinical work. So that’s a little bit more challenging. But we’re gonna do it.

TS: And that’s where you come in, Tom? Looking for that next round?

TG: Yeah, absolutely. I can be persistent in the pursuit of some venture people. To a degree, there’s a lot of that in it. Don’t take anything personally, but keep going at them. And I think this is a great story, and it’s – for a venture looking at it as an investment, you know, it’s all of the research is done and we’re transitioning into clinical study that’s going to provide proof of concept. So that’s a good position that they like to be in. They normally don’t like to invest in preclinical assets, but we’re just an inch away from the clinic. So they’re more interested at this point. So hopefully we’ll bring in some series B financing that’ll get us through clinical proof of concept. We should have that data in roughly a year, twelve months from now, and then if, depending on how positive it is, should enable an exit or at least an inflection in the company that will allow us to redefine it as to whether we want to become a larger ophthalmic pharmaceutical company or just sell a single asset at that point in time.

TS: And your development plan, reading this, it says you’d like to be through your phase 2 studies within 3 years and with a potential product launch within 5 to 6 through sort of an outsourcing development plan? Is that still the direction you’d like to go?

TG: So the first study, first in man study will be a phase 1/phase 2, depending on what the data from that shows us. Maybe we do another phase 2. And then into phase 3 studies. You can run those in parallel, hopefully. So maybe you’re talking you could be done with a phase 3 in kind of 3 to 4 years.

TS: And regarding the long term plans, I think you and I talked about this when we talked about SARCode, the sort of decision whether to sell at the time or to go it alone. And back at the time of the sale, the market was a bit different. The IPO market hadn’t quite opened up yet, and kind of has closed since, although it could be found again, I’m sure, by the time this is ready. How do you – who knows?

TG: IT opens and closes.

TS: It opens and closes. So how do you go forward? Do you have to set a path now? We’re going to be on a path to exit this or to partner with someone in 2 to 3 years? Or we’re going to go and be our own independent company? Or is there a way of sort of straddling both paths and ensuring you have lots of options 2 or 3 years from now?

TG: Yeah, it’s more the latter. You don’t close out opportunities at this point because we don’t know what the landscape is going to be at the point in time we’re ready. But you don’t have to spend a lot of time. It’s the same process to get good positive data and value to the company, and then the question of where the company decides to go in terms of an IPO or more internal, private financing to more forward through approval, but to also potentially bring along other programs to fill out a pipeline. All of that can be enabled. You have to be more careful about killing off sprouting things. You don’t want to do that. So you can keep things alive with benign neglect, at least.

TS: So this is an exciting time. When do you anticipate to be out in the market and beginning to harass investors?

TG: We are.

TS: You are.

TG: You know, you always have a dialog going with people that you know. And they’re always willing to hear new things. Certainly the approval of lifitegrast with SARCode’s story got a lot of people’s attention. There were a lot of people who didn’t understand exactly what was going on in terms of ultimately four separate phase 3 trials, two for symptom, two for sign is what the basis of the approval was. But so now the regulatory landscape is much more well defined at this point in time, and we think we can move forward. We think the preclinical data that we have at this point, certainly for corneal staining really gives a strong indication, expectation of efficacy for that endpoint in the clinic. So our thoughts are now much more towards symptoms and how to best address them, elicit them, actually in terms of the data out of the trial. That’s the challenge at this point.

TS: Is the environment markedly different than it was when you were in a similar state with SARCode earlier? And how has it changed? I mean obviously you mentioned the approval of Xiidra, lifitegrast. We’ve seen Oculeve is doing well; there’s a lot more attention in dry eye. But how does that translate down at the startup level?

TG: So at the startup level, at least for a well-conceived startup, I think the process at this point is about the same. It’s trying to convince investors who are normally shy about a preclinical asset, no human data, but the expectation from the preclinical animal data is that this is quite different and potentially could be viewed, and should be viewed as a protein replacement therapy or a natural therapeutic, if you will. So that fits into an investment paradigm that’s been well proven in the past in terms of a number of drugs: growth hormone, insulin, that are purely replacement therapies. So that’s well received. Getting people to step over the line and put some money out there is the next step. I’m not sure 100% that I understand that process, but I know that we’re under consideration at this point, serious consideration. And we’re not trying to seduce anybody into doing something they’re not comfortable with. We want a partner, an investor who’s going to be a partner and help us through the latter stages down the road.

TS: Absolutely. Gordon, this must be an exciting time for you, I mean to be working with this asset for such a long time, and to see it really form into something potentially great.

GL: Yeah, it’s very exciting. And I pinch myself every day, several times a day. And having such quality business people like Tom and Mark helping out, and the others.

TS: Well, this is a great story. I hope it’s one that we’ll hear at an upcoming OIS, and I hope you’ll bring much relief to dry eye sufferers in the future after you get to work on this. This is terrific news.

GL: Thanks very much.

TG: Thanks, Tom.

MG: Thanks, Tom.

TS: Thanks for joining.

TS: Well, that is a wrap. Thank you so much, Tom Gadek, Mark Logan, and Gordon Laurie from TearSolutions for sharing your story. Look forward to tracking your success in the future and seeing you at an upcoming OIS. Thanks to our listeners for joining us today. I hope you enjoyed TearSolutions’ story. If you have a few minutes or a few seconds, even, please consider giving us a rating. If you go to whatever platform you’re listening to this Podcast on and let us know how we’re doing. Give us a rating. Leave a comment and of course tell your friends. If you’ve got a friend who enjoys innovation within ophthalmology and wants to hear from the leading investors and startups and clinicians, I think you would do them a solid by sharing this Podcast with them. So this has been an exciting journey for us coming up on the close of 2016. We’ve been doing this for over two years, which is amazing, and we’d love to keep building on the success. So please do tell your friends, and of course tune in next week for another tale of innovation on the OIS Podcast.

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