Most medications targeting autoimmune disease deplete immune cells and leave patients immunocompromised. This opens the door for opportunistic infections and tumor formation. Octagon Therapeutics has developed two novel B cell targeting approaches which promises to address this shortcoming. One uses small molecules to direct a payload to cells in dysregulated metabolic states, i.e., disease-causing cells. This has led to Octagon’s recently announced partnership with Novo Nordisk, a collaboration aimed at producing a novel NASH treatment. The second—a monoclonal antibody—blocks the binding of a modified plasma protein, which has been found to induce autoimmune diseases, to its receptor on the B cell surface. We had the chance discuss this novel approach with Octagon Therapeutics co-founder and CEO, Isaac Stoner.
Thank you for taking the time to talk with us, Isaac. To start off, can you give us a brief introduction and tell us about your path toward founding Octagon Therapeutics.
My name is Isaac Stoner; I’m co-founder and CEO of Octagon Therapeutics. Octagon is focused on developing drugs for autoimmune diseases using a unique approach which I’ll discuss in more detail shortly. As for my own path, I started out in biomedical engineering as an undergraduate at Brown University. I was in the first class at Brown where that was an accredited degree. I ended up there because I liked math, I liked engineering, but I also liked biology, and as I was completing my pre-med requirements, I found myself getting the requirements done for this new degree that didn’t yet exist. Biomedical engineering also gave me the opportunity to research drug delivery in a lab setting under a polymer nanoencapsulation expert, and I got the bug for lab work from that. I really enjoyed being able to tinker with my hands and to see my ideas come to life. When I graduated, I had no idea what I wanted to do. I ended up homeless as a sailing instructor, until I randomly met an entrepreneur who was starting a company based on an idea he had, which he thought would allow genomes to be sequenced for $1,000. This was in 2006 or 2007, and at the time, that was really in vogue. I ended up joining as the first hire. He had found some investors for a small seed round, and we built out a lab in Providence, Rhode Island with the goal of seeing whether we could prove our initial idea, then scale up and eventually develop a product. That was a lesson in how fast two people can blow through a couple million dollars. 2008 was not far behind, and soon investors stopped returning calls. From that, I learned how fast the funding environment can change for these types of businesses, but I was hooked at that point. I thought this was great fun, this sort of early stage, small, scrappy company based on exciting science. We packed up the IP we had developed and shopped around a bit. Through that, I ended up meeting Jonathan Rothberg in Connecticut, who was a famous entrepreneur at this point. He was in the process of spinning up Ion Torrent, another next generation sequencing company. I spent a couple years working on their instrument, which was the first post-light sequencing instrument based on a semiconductor chip, and we took it from prototype all the way to credible commercial threat. Then we were acquired by Life Technologies around 2010. At about that time, I left to join two former MIT postdocs to start a company called Firefly BioWorks. I was once again the first non-founder. The founders had an interesting technology used for looking at circulating microRNA molecules, and they had the idea that this could be a liquid biopsy approach to inform cancer diagnostics. We found out that that was challenging, and not something the market really wanted. Still, we were able to prove the platform and our approach enough to catch the eye of another large company, and we ended up being acquired in 2014. Around that time, I wanted to continue to derisk myself as a founder. I had been first non-founder twice, and I had been able to study under a couple of strong entrepreneurs. To round out my technical skillset, I picked up an MBA at MIT. The goal was twofold. One, I wanted to give myself two years to walk around basement labs at MIT to meet people who were working on interesting science and technology that was ready for translation. I also wanted to spend some time in venture capital. During my MBA, I met my current co-founder through a class at Harvard Business School that we were both auditing. We built out the case for the company back in 2015 and decided that Octagon was not ready for formation at that time. So, we ended up splitting up. He continued moving the technology forward in the academic setting. I went to work in venture capital, first with one of GlaxoSmithKline’s corporate venture funds called Action Potential, then with a company here in Boston called PureTech, which is much more on the venture creation side. I kept in touch with my co-founder, and we spun up this company at the end of 2017 based on the underlying drug discovery approach that they had developed at Harvard. It was a nonstandard path, not that there is any standard path, but my background is as more of a generalist. I started out on the technology development side, rounded out my business chops, and spent some time on the investor side. Now, I'm a jack of all trades. At least, I hope I am.
That's very interesting. You've had a very unusual path and you’ve gotten exposure to a lot of areas. Could say a bit more about how that hybrid life sciences-investment background has prepared you, and how it's helped drive development and innovation as you’ve founded Octagon Therapeutics?
At this point, in the biotech and life science space, there are very few non-technical founders. You need to be literate, credible, and able to get up to speed in a new scientific domain. So, having that technology development and scientific background was very important. I'm much less of an investor, and I spent very little time as a real professional investor, and much more as an operator. I dabbled in VC and venture creation intentionally to give myself exposure to the decision-making process on that side of the table. How do VCs think about deals? How do they think about areas that are exciting or not exciting? How do they think about de-risking management teams in addition to the technologies, and in addition to market opportunities? I got some exposure to that, but I was never a true professional investor.
We're familiar with your goal of targeting autoimmune and orphan diseases. Could you tell us, at a high level, about the approach that Octagon is taking, and how that distinguishes your company from current approaches either on the market or in development?
A major difficulty is that the cells driving autoimmune diseases contribute to inflammation and tissue damage in diseased states. Genetically, these are effectively indistinguishable from normal immune cells. Unlike cancer, where we find all sorts of messed up oncogenes, missing tumor suppressors and other potential targets, immune cells in patients with autoimmune diseases look very much like healthy cells. In the medicines we use today, the solution is to take an agent—a small molecule or biologic—that indiscriminately depletes normal, healthy immune cells at the same time as those that are contributing to disease. Our approach was to attempt to identify those key functional hallmarks of dysregulation, those key metabolic signatures of immune cells that are distinct to disease state. The approach we took directly made use of clinical blood samples from patients with active disease processes. We were able to show through our metabolic profiling that there are key functional markers and enzymatic activities that are not present in normal, healthy immune responses, but which are present in these dysregulated immune cell subsets. That observation sent us down this path and made us think that there is a way to suppress disease activity without damaging that normal, healthy immune response.
Can you share more about your lead asset and the target, in terms of the molecular mechanism and the disease that the asset is aimed at treating, and your current development status? What do you see as the path towards clinical trials and entering the market?
We have a couple of programs in development right now. The most advanced is a biologic. Using our functional approach, we were able to identify a single plasma protein that is driving disease-causing B cells to enter a dysregulated metabolic state. After identifying this plasma protein, we also characterized the corresponding B cell receptor. Our lead program is a monoclonal antibody which blocks the receptor-ligand interaction that is really driving this subset of B cells towards dysregulation That's currently being studied in animal models. We're doing antibody optimization now. We also have a small molecule approach. In B cells, we’re able to identify one specific functional marker of dysregulation. We can use that to conditionally activate a small molecule inhibitor. This approach, which turns on the immunosuppressive only inside dysregulated B cells, is what has led to our partnership with Novo Nordisk.
Both are targeting B cells in quite different ways. The monoclonal antibody restores cell homeostasis by blocking the ligand-receptor interaction. The small molecule approach inhibits just this dysregulated subset of B cells. Both of those are currently in play, but most of our resources are currently going towards the biologic approach, which is further along.
So, OW177 is the small molecule, correct?
Correct. Right now we are putting more resources towards the biologic approach. We have a couple antibody candidates, and we’ve just finished a panning and optimization effort. We have exciting binders which allow us to very selectively block this interaction, restoring normal tonic B cell homeostasis. For our antibody approach, we’re hoping to have our development candidate in hand by Q2 of next year. From there, we'll do our IND-enabling work and then head to the clinical setting.
Does the receptor-ligand interaction which you’re trying to block exist only on B cells that are causing disease, or does it exist on all B cells?
Since it’s novel, we're being a bit cagey about it. What we have shown is there's an aberrant glycoprotein, or an aberrant glycosylation pattern present on one specific plasma protein. That appears to be driving this pathological activation of a subset of B cells. It's not all B cells, but a specific subset that adopts an antibody secreting phenotype. As the subset expands towards that antibody secreting phenotype, one of the things that expands are these autoreactive clones. As a result, you end up with an abundance of autoreactive antibodies, or autoantibodies, as well. Blocking that process without blocking normal pathogen response allows us to bring this hyperactivity of the immune system back down to normal, healthy levels, and to restore that immune homeostasis without completely blocking or damaging parts of the immune response.
Has Octagon considered taking an antibody-drug conjugate approach?
That’s an interesting question. Normal, healthy B cells have this receptor. It seems to be the defective ligand that is responsible for faulty B cell activation. If we took an ADC approach, it might be highly effective at depleting B cells, but that's what we want to avoid. Avoiding B cell depletion is where our approach is differentiated.
For readers who may not be familiar, the B cell antibody approach that you're taking is still a biologic, and it functions like rituximab, for instance, which targets the CD20 surface protein. Could you clarify how Octagon’s strategy differs from therapeutics such as rituximab?
There are CD19, CD20, and now CD19-targeted CAR-T approaches. In each case, the goal is to get rid of all B cells in order to block production of autoantibodies. That is not at all ideal, and these patients end up immunosuppressed and often without tumor surveillance. Our approach is to take this overactive subset of B cells that we have characterized, and to block that overactivation through expansion and eventual differentiation towards antibody secretion. We want to knock these cells back down into their normal tonic state, rather than depleting them like you'd do with an anti-CD19 or anti-CD20 therapeutic.
Do you see your antibody and small molecule approaches as only B cell-targeting approaches, or do you see them as a tool for targeting T cells and other immune cell types?
There is no such thing as a disease that's only driven by B cells, or that is only driven by T cells. There is interaction between these compartments of the immune system. With that said, we are likely to initial focus our B cell approaches on diseases that are known to have a majority B cell component. In the T cell space, we can take the same discovery approach and begin to look at key metabolic signatures of a subset of T cell of interest. We've looked at some populations of CD4+ and CD8+ T cells, and we have a project coming online aimed at regulatory T cells. We can even apply this to things like macrophages and neutrophils. The functional profiling approach that we use allows us to look at the cells and their metabolic state, comparing the conditions in diseased and healthy patients, and to figure out those key differences. This can inform novel therapeutic approaches, and that is where we're taking our collaboration with Novo Nordisk. Novo had a specific interest in inflammatory disease, and more specifically NASH. We are not a NASH company, so this was interesting to us. Novo had a couple of cell types they think are involved with NASH progression. If we can selectively target those cells based on functional markers, it would be very useful. Starting with the target discovery approach using our platform, we're hoping to move a program forward all the way to a clinical candidate, at which point Novo might even end up picking up the program.
As you mentioned, Octagon Therapeutics recently announced an R&D partnership with Novo Nordisk for the treatment of NASH by targeting different immune cell types. We'd love to know how that partnership was initiated. We’re also interested in hearing about its progression, and most importantly, why NASH? NASH is a very interesting, hard to treat disease, and the approach that you and Novo have taken is an interesting one.
How that came about is very interesting. I have three key roles. One is raising money, the second is making sure the team has everything they need beyond money—space, personnel, hiring, and to some extent, setting strategy, although we also have others who work on that. The third role is business development. In that role, there are 30 to 40 companies who we are constantly updating, and who we have discussions with about their internal priorities, to ensure that everyone knows what we're working on and why it’s important and exciting. Novo was on that list, but because they're not as active in autoimmune diseases, they were not high on the list as a potential partner. When we approached Novo about 14 months ago, they had just set up a Bio Innovation Hub in Boston. They had people who were focused on external innovation stationed here in Kendall Square. Their mandate is to find interesting companies and technologies, and to do exploratory pilots with those companies. Novo came to us with an interest in the NASH space, and we decided to collaborate on what we call a Greenhouse program. Since we’re not a NASH company, we rely on some of their expertise. When we started this very small pilot, we saw interesting biology right off the bat. The Greenhouse project was nice and short, and it has led to our larger collaboration. So, Novo Nordisk came to us with specific expertise in NASH, a disease area where we are not experts, and we were able to see the potential of our technology platform. One of the reasons we're so excited about this collaboration is that it is outside of the core disease areas where we're working, and this allows us to expand our technology into greener pastures, places where we can leverage our partner’s knowledge base and insights. In that respect, it is a true collaboration.
That’s very interesting. Is this project taking the biologic approach, or the small molecule approach?
This collaboration will focus on the small molecule approach. Using conditionally activated small molecules, based on specific metabolic enzymes, and dysregulated enzymatic functions that we’re able to identify, we can now target those cells. That's what Novo would like us to do. We’re attempting to direct a payload to a couple cell populations whose metabolic activity is dysregulated, and we believe that is going to be disease modifying. Novo is additionally informing the animal models that we're going to look at.
In terms of that project’s progression, what do you see as major milestones or targets that you are aiming to hit? What is the target timeline?
It took quite a bit of time to get this deal done because it required alignment on the work that needs to be done, what milestones we need to achieve, the success criteria for each of those milestones, and what price tag would makes it worth it for Octagon. We were able to work all of that out, and it was helpful to have Novo to help us think through the project plan. That is where we were able to leverage Novo’s tremendous knowledge base in drug discovery and development.
So, should we be on the lookout for some news in the near future?
If we see interesting biology, we're going to be pushing ahead, but it is a multi-year collaboration.
Right, and NASH is a very hard to treat disease, so any advancement is substantial and very impactful. I want to go back to something that Octagon is known for, which is receiving the Amgen Golden Ticket. Can you take us back in time and tell us what that looked like, and what, if anything, is happening now with Amgen?
The Golden Ticket was very helpful because, in addition to free bench space at LabCentral for a year, we were also assigned a highly experienced drug developer for our project. As we are moving our project forward, we had someone to help us talk through the state of our data and our future plans. One of the judges for that Golden Ticket was Amgen Ventures, and that dialogue continues. We also received a Golden Ticket from Pfizer, and a third from Agilent. We were shameless about applying to those competitions and using that as a way to build relationships with larger companies. They provided us with lab space for a year and assigned us an internal champion in a formalized way. That's a great way to build credibility within these larger organizations, even though we're still a small eight-person biotech.
Right, it's all about connections and making your way, especially at an early stage.
You may have heard the expression “your network is your net worth.” I'm a believer in that, and I put a lot of effort into trying to know everybody in the Boston biotech ecosystem.
Absolutely. So, you're growing, and you are planning to have an asset for the biologic that you’re pursuing ready for the clinic next year. You are also partnering with Novo Nordisk. You're at a stage where external funding could make sense not just for cash flow, but also for space, for instance for lab space. External funding might also help support development of pipeline drugs as well as anything that you're planning to develop internally, or things that have been put on hold. Is Octagon taking that approach?
We need to raise funds. Our Novo Nordisk collaboration is insufficient to fund our lead program. We are thinking about a modest Series A, or perhaps something more like an institutional seed. But one thing we are good at is being very responsible with risk capital. We believe we can do a lot with a relatively small round. One of the ways that we stay capital-efficient is keeping our headcount small. We don’t anticipate growing beyond 15, or at most 20 people over the next year or two. And as we look at space, we have no intention of taking one of these 5,000 or 10,000 square foot pieces of real estate and building our own lab space. We want to keep the core discovery engine going, and to keep that internal, while the rest of the work is going to be done through CROs. We've had great success using groups like Distributed Bio for the antibody discovery, WuXi AppTec for the small molecule work, and a number of specialized groups for the animal work. We're not going to make any of that internal. As we look at growing up and moving beyond LabCentral, we've been very lucky in that biotech has gone through a downturn, and a lot of companies who were looking at massive leases are no longer doing so. There is now lab space available to companies like ours, whereas there wasn't six or nine months ago. We are now in the process of moving into The Engine, which is a fantastic facility right on Main Street. We'll be moving into the fifth floor in November. That will allow us to expand; they have reserved a significant amount of space for the companies that are moving in to grow within the engine. It's a much larger facility than LabCentral. We're excited about that, and it will give us the opportunity to expand when we are ready. Still, we have no intention of taking some massive chunk of lab space. We're going to keep only our core discovery piece internally, and to outsource everything else.
So, you would use the money from a small venture round or an institutional seed to support the main biologic asset?
That’s exactly right. If we're raising risk capital, that will go towards our lead B cell program. If we want to do additional discovery work and platform optimization—and we do think we have the ability to support one more discovery partnership—that is going to be funded by partner dollars, so that we don't have to put our own risk capital towards that. We're already having some of those additional conversations with groups who are quite excited about the platform approach. We think it makes sense to raise funds for the lead program, and to use partner dollars to do the early-stage work expanding on our approach.
To stay on track toward your goal of entering the clinic next year, when do you expect the venture or seed activity to pick up?
Back in April, we had tremendous momentum towards a Series A, then everything froze. We're not the only group that saw that. From April until now, there has not been a lot going on, but around the end of September, groups who were in touch with us last spring started reaching out again. That is certainly promising. We are hoping to complete that smaller funding round by the end of Q1, and we're in the process now with a few groups, but I would say there's a lot of uncertainty. Although we're optimistic about that timeline, we're prepared to not have it come together. Like us, a lot of other groups are also looking at contingency planning.
What does the future hold for Octagon in the next 5 or 10 years? What are you planning, what are your most pressing short- and long-term goals, and what should we be on the lookout for?
Within the next six months, we should be announcing a second partnership that we've been working hard on. Beyond that, this is a build-to-buy, and what we are good at is the early stage and platform development to find interesting biology, and development of the initial plan moving forward as far as early clinical development. We have no interest in doing the later stage clinical development, and no interest in commercialization. This is something that is redundant to a number of larger partners in the Cambridge area. So, we are looking to prove that our assets are efficacious in the clinic, then find the natural owner of those programs. Having those relationships already in place is how we're going to get those deals done. Whether this turns into one large M&A deal, or license deals, we haven't fully decided which route we’ll go, but both are available to us.
Looking forward for your lead asset, the biologic, what diseases are you planning on targeting? Are you focused on orphan or rare diseases, or autoimmune diseases? Is there a specific disease you are targeting and why?
We have found this protein that seems to be inducing overactivity and differentiation of B cell. What's really interesting about this biology is that we have shown that it is present across a number of diseases. Part of our approach is directly profiling clinical samples from patients with active disease. We've shown this biology to be present in pemphigus, pemphigoid, myasthenia, vasculitis, generally, a number of rarer diseases as well as more common ones like lupus, MS, and rheumatoid arthritis. So, our thinking is that this lead program could be a pipeline in a pill. This one program could have potential clinical utility across a number of indications. Octagon is a bit gun shy about trying to prove this out for a large competitive indication like lupus or MS. We are likely to go into a rare disease for our early clinical work, targeting indications like pemphigoid or potentially vasculitis. We're still pressure testing that plan. With that said, we have had conversations with larger companies who are very enthusiastic about these larger, more heterogeneous disease areas. We could potentially end up splitting our work up per indication, where we partner on some indications with larger companies and then advance the orphan diseases on our own. We're still weighing those strategies, but our current thinking is that we are much more likely to start out in a rare, well defined, homogeneous indication like pemphigus, pemphigoid, or vasculitis. But, again, we're still pressure testing what those early clinical studies would look like.
You have a few big names on your scientific advisory board, such as Gregg Silverman and Shiv Pillai. Can you tell us what role they're playing, and how they have contributed to moving forward with the biologics, or the science in general?
Right, it's been fantastic. We have a balance. We have our B cell experts in Shiv Pillai and Gregg Silverman. Then we have Iain Kilty, who's our card-carrying drug developers with 20-some years of experience at Pfizer where he was a leader of their immunology and inflammation group. We have not used them as a traditional SAB. When we have interesting data, we pick up the phone, rather than scheduling quarterly meetings. Most of what we've been using Gregg and Shiv for is looking at the mechanism as we build out that data package. Since this is a novel mechanism, if we can convince them, we can convince anybody. These are true experts in the field. When it comes to Iain Kilty, who's much more of our drug development expert, he's helping us to pressure test and refine our development plan, and to understand how to get from novel biology to a drug that is ready to go in humans. It's been great working with this group, but we are by no means using them as a traditional SAB, it has been much more fast and furious. It’s really nice to work with smart people, right? I always want to be the dumbest guy in the room, and I’ve been successful, so I think things are going well.
On a personal level, what does the future hold for you? What excites you about the biotech and biopharma fields, about Octagon, or in general?
When we started this company, I wasn't the CEO. We did that deliberately, because I didn't feel like I was ready, and I don't think anyone should ever be making themselves the CEO. When we founded the company, I made myself COO and left the CEO seat open. The goal was to do an initial large venture round and use that to find the right veteran to take the seat. Here we are years into this thing. We haven't done that big venture round, and things are going well. So, I did give myself a promotion a couple years. I like being the CEO and growing into the role. I enjoy figuring out how to lead a team and solve problems, as well as figuring out when I need to be in the room, and when I need to not be in the room. It has helped that I have worked at other small startups and observed great entrepreneurs in that setting. There are certainly lessons there. I want to continue to grow and make myself into a credible biotech leader. That's what I'm focused on. As for biotech in general, we are going through an interesting transition right now where tech-bio groups are emerging and taking a computational, data-first view. Now, there is no “right” way. The biotech firms around town who have done it in a much more traditional, biocentric way have done really well. They've figured out how to make a model work, but there is no wrong model. So, we'll see what happens. Biotech has been punished since mid-2021, when we were flying high. We’ve seen a correction as we’ve come out of COVID. But I think the bottom is behind usI believe we're slowly going to see things come back to a nice, healthy level. There were too many companies going public for a long time, and a lot of garbage got dumped on NASDAQ. You can't do that anymore, and in my opinion, that's a good thing. You should be able to go public when you have clinical proof of concepts, credible investors, and a real functioning board. We had a lot of junk finding its way onto the public markets, but it’s much harder to do that today than it was 18 months ago.
We've seen a bit of activity where VC was investing in platforms, then switched to focus more on assets. What do you think they're doing now? Are they funding platforms, or are they still going after assets?
I'm constantly putting my foot in my mouth on Twitter. I predicted that, as things get bad, we're going to see a switch from platforms to assets. We've been in such a platform-centric world where you need to have a platform that can result in dozens of different therapeutic programs. Very few biotechs will ever survive the failure of their first clinical program, regardless of how beautiful their platform is. If your first program does not work, you’re toast. With this correction in capital markets, my prediction was that we'd have people funding companies more responsibly, and actually just funding a program, instead of writing huge checks to these platforms with 12 preclinical programs in their pipeline, but only one that's relatively advanced. I thought we were going to see things returning to a more asset-centric view of the world. I don't think that has happened, so I've been wrong, but we will see if it is my prediction or its timing that was wrong. I do think that the rise of this platform-centric world never made a tremendous amount of sense. It's good for marketing, but drug development is so expensive, and just advancing one program is costly enough.
Was that caused by COVID?
No, somehow even a couple years before COVID, everything was platform-focused. And then for a little while, VCs would only fund platforms. There's still a lot of that going on, but slowly, we will see a shift. As capital becomes constrained, investors know that companies live or die based on based on their most advanced asset and their lead program.
Great. Isaac, thank you for your time! We will be on the lookout for news from your partnership with Novo Nordisk, as well as the upcoming partnership which you mentioned.