Verge Genomics: AI + Genomics → The Future of Healthcare — A Startup Investment Thesis by Komal Prakash

Verge Genomics is a startup founded in 2015 that is focused on combining AI technologies with genomics to the process of drug discovery. Pharmaceutical companies spend billions of dollars testing various drugs that do not work, and to get am single drug to market, it can take 10–12 years and a couple of billion dollars.

The goal of Verge Genomics is to become, as CEO and Co-Founder, Alice Zhang, says “the first pharmaceutical company that could rapidly develop transformative treatments.” The focus of Verge Genomics is to optimize and automate the process of drug discovery through machine learning methods, and, transform drug discovery into a more calculated and less serendipitous process. Their main focus has been on neurodegenerative diseases that have been harder for many other pharmaceutical companies to tackle, including ALS, Parkinson’s, and Alzheimer’s.

Currently, Verge Genomics has raised a total of $36.1 million dollars in funding. Through the Seed round in 2015, they raised $4 million from IA Ventures. In 2018, they raised $32 million from Series A from five investors, including Agent Capital, ALS Investment Fund, OS Fund, Threshold, and WuXi AppTec. Verge Genomics is based in South San Francisco, California.

Team

Alice Zhang, CEO and Co-Founder

Alice Zhang is the CEO and well as a co-founder of Verge Genomics with Jason Chen. She graduated from Princeton University in 2010 with high honors and a degree in Molecular Biology. In 2008, she worked in the Howard Fine lab at the National Cancer Institute where she conducted machine learning approaches to study clinical data sets and gene pathways. She continued to gain experience in systems biology research through her work at the Lewis Sigler Institute for Integrative Genomics at Princeton followed by her five years working as a Ph.D. Candidate at the Daniel Geschwind lab at UCLA. There she conducted research on targets and small molecules that will accelerate neural regeneration. Alice Zhang has also been involved in five journal publications and in 2017, was a Featured Honoree in the Forbes 30 under 30 for Science.

Jason Chen, Co-Founder and Advisor

Jason Chen is an advisor and co-founder of Verge Genomics. He graduated in 2010 from Duke University summa cum laude with a double major degree in Biomedical Engineering and Chemistry. He has worked in biomedical research at Duke University and continued research at UCLA for five years. There is researched treatment for various neural conditions such as pediatric hydrocephalus and also advanced the genomics for various neurodegenerative diseases such as Alzheimer’s. He is has been a part of over 12 journal publications and is currently a medical student at the David Geffen School of Medicine at UCLA.

I believe the members of the Verge Genomics team seem to share the same drive towards changing the nature of drug discovery. Alice Zhang and Jason Chen have strong backgrounds in systems biology research along with engineering and machine learning experience. Alice Zhang expressed how she was never planning on starting a company, but when she saw what was wrong with the drug discovery process and the power that genomics could have, she decided to start a company to address the issue. Zhang has a strong vision for her company and for what she wants to do for neurodegenerative disease treatments and drug discovery as a whole. With her vision and the impressive backgrounds of her entire team, I believe Verge Genomics can be very successful in the future.

Market

Verge Genomics is currently focused on targeting the neurodegenerative disease drug market and hopes to eventually expand to the global pharmaceutical drug market. A GBI Research Report states that “Global revenues for the neurodegenerative disorders market are forecast to grow at a compound annual growth rate of 7.42%, from $27.2 billion in 2015 to $45 billion in 2022.”

Around 50 million people suffer from neurodegenerative diseases worldwide, and these are the diseases that pose the most challenge to drug developers and researchers. Verge Genomics is focused on using their AI and genomics combination to tackle this widespread group of diseases. The Parkinson’s disease treatment market alone, which is one of the diseases that Verge Genomics is focused on, is expected to grow from $4.02 billion in 2016 to $6.48 billion by 2024 (MaximizeMarketResearch).

The market size for pharmaceutical drugs is enormous and is expected to hit around $1 trillion by 2023. The potential target market for Verge Genomics is rapidly growing, but what gives Verge Genomics an advantage is their implementation of AI technology within their drug discovery process. This will give them a smarter approach to the drug discovery process and address the issue of the immense time and money wasted in screening millions of useless drugs.

Competition

Yumanity Therapeutics

Yumanity Therapeutics is focused on drug discovery for neurodegenerative diseases such as Alzheimer’s disease, Parkinson’s disease, and ALS. Their focus is on developing disease-modifying therapies by focusing on a drug discovery approach that looks at protein misfolding. The company was founded in 2014 by a protein folding expert, Susan Lindquist, Ph.D. and Tony Coles, M.D., and they recently found a potential new target for treating Parkinson’s disease. In 2016, they raised $45 million in Series A funding from Fidelity Management & Research with participation from Redmile Group, Alexandria Venture Investments, Biogen, Sanofi Ventures, and Dolby Family Ventures.

Although Yumanity Therapeutics is focused on the same set of diseases as Verge Genomics, Verge Genomics’s focus on optimization of the drug discovery process through AI technology will provide a leg up in the rapid release of treatments in the future. The main issue with the drug discovery process is the amount of time and money spent on R&D and FDA approval; by focusing on integrating AI into research and genomics, Verge Genomics will ultimately improve the quality and efficiency in the development of transformative treatments.

Alector

Founded in 2013, Alector is a company focused on using antibody technology towards neurodegenerative disease discovery and therapeutics. They are partnered with Adimab, an industry leader in antibody therapeutics, and, as of now, have found four leading targets, two of which they will be takin to pre-clinical development. Alector was founded by Arnon Rosenthal, Asa Abeliovich, and Tillman Gerngross and has received a total of $194.5 million dollars up till their Series E funding with Polaris Venture Partners as their biggest investor. Alector has gone public.

What makes Alector unique is their therapeutic approach that is focused on the immune system as a cause of Alzheimer’s disease rather than a protein buildup. They plan to use the money from the IPO to conduct further brain therapies on humans. Having gone public within the span of six years, Alector does show the success that will make it a big competitor against Verge Genomics. Once again, a large advantage for Verge Genomics is its focus on AI technology at optimizing the drug discovery process as a whole. Their market can potentially expand beyond the neurodegenerative disease market and change the future of drug discovery for everyone.

Product/Service

As Verge Genomics’s founder, Alice Zhang, stated Verge Genomics is focused on creating a “scalable drug discovery engine that automates the discovery of cures across every human disease personalized for each patient.” Their goal is to combine the power of genomics and machine learning to change their approach to drug discovery and make it a more calculated, smarter process.

Unlike other AI startups who focus on creating software that are sold to pharmaceutical companies, Verge Genomics has brought in both machine learning experts and drug discovery experts who can conduct computational and wet lab research under one roof. Thus, computational predictions can quickly be moved into the wet-lab space and new data can quickly be churned out. Another unique aspect of Verge Genomics is its use of human data right from the beginning. Many other pharmaceutical companies spend their time researching their drugs on other animal models and wait until the clinical trials to test the drug on humans. Although their current focus is on neurodegenerative disorders, Verge Genomics envisions applying their transformative drug discovery process to all diseases. Transform how drug discovery is done across the field and across companies.

Metrics

• Raised $120,000 in Seed funding on August 18, 2015 and $4 million in Seed funding on October 29th, 2015 from IA Ventures.

• Raised $32 million in Series A funding on July 17th, 2018 from Agent Capital, ALS Investment Fund, OS Fund, Threshold, and WuXi AppTec.

• The team consists of 18 members with 12 advisors.

• 10 partnerships, including Genomics England, Columbia University, and Massachusetts General Hospital

• Involved in 35 journal publications

Conclusion

In conclusion, I believe the Verge Genomics’s focus on AI technology in combination with genomics will be pivotal in transforming the process of drug discovery. So much money is siphoned into the R&D and FDA approval process of bringing a drug to market, and such methods will allow for a smarter approach to the creation of new treatments. A disadvantage for Verge Genomics is the large number of pharmaceutical companies that exist and money that is already being given out to developing new drugs. However, what I believe will make Verge Genomics unique is that they are not just another pharmaceutical company throwing money at research, but that it has a team of people who are focused on innovating and trying to find a solution to the rigorous drug discovery process that does not seem to be working. Another advantage is their combination of front end machine learning and back end experimental biology that all occur under one roof. This also optimizes the process of data collection and analysis, which further highlights an advantage to Verge Genomics’s approach. Overall, Verge Genomics is a company that I believe consists of a strong team and vision, which includes using the current strides in AI technology towards new, innovative approaches to drug discovery as a whole.

Disclaimer: All information in this report has been aggregated through numerous, public news reports/articles or Verge Genomics’s website itself. Any misrepresentation of the company is purely accidental. BV is more than willing to correct any mistakes.

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