January 23, 2018
Manufacturing Insights

Biostage's science perseveres through dire financial straits

Courtesy
James McGorry, CEO of Biostage.

What's it like to bring a company back to life after near bankruptcy? Jim McGorry, CEO of Holliston biotech Biostage, explains how the company never lost faith in its science after being delisted from NASDAQ, having an investment agreement fall through and laying off almost three quarters of its employees. A $4.1-million investment from a China-based DST Capital Partners and a partnership with a Connecticut children's hospital help put the company back on its feet.

You called the company's status after the investment agreement fell through a near death experience. What were the alternatives if not for the investment from DST Capital?

I would rather not think about the alternatives. We worked hard to preserve the technology and know-how. Following a difficult time, one seems to focus on what is important. We are delighted our advisors see promise and hope in the technology to eventually help children. If the technology did not translate because there was an issue with the biology, that is one thing. It was unacceptable for us to let this company go into bankruptcy when there was not a technology issue. We picked our selves up, and we are moving forward with a smaller, focused and more agile company.

What's the runway on the $4.2 million, and what does the company have planned to keep it going after that?

Our Chinese investors are very dedicated to seeing our technology helps kids and address the large problem of esophageal cancer in China.

It looks like Biostage is now entering the Asian market, since DST Capital is based in China. What was the company's global reach prior to the investment?

Prior to the investment, the company was focused on the U.S. market. It did not take us too long to see the large unmet need in China. The incidences of esophageal cancer in China are 10 times than the United States. China represents half of the world's population of esophageal cancer. It is a very big problem.

The company scored a $100,000 investment from the Connecticut Children's Medical Center for the development of esophageal devices. Does that kind of partnership help validate the company's work?

Absolutely! It is a very rare thing for a hospital to invest in an early stage biotech company. Improving the care for pediatric atresia patients is a major focus of Dr. Christine Finck, surgeon in chief at CCMC. We will be working closely with Dr. Finck and her team.

Is the company making a shift to devices to help pediatric patients?

Improving the surgical treatment of esophageal atresia will be the primary focus on Biostage. We will be partnering with Dr. Finck and having our scientific advisory board play a more active role.

Will the funding allow the company to hire more personnel, and possibly rehire those who were laid off late last year?

At one time Biostage was almost a 30-person company. It was during our difficult period we came to the conclusion we must think differently to run a more streamlined business. It was a heroic effort to preserve all the data and technology. Thanks to our investors for extending the runway for Biostage, we have now hired nine people back to Biostage. Essentially, we are back in business and are better and more focused on scientific validation and our regulatory approval process.

Aside from investors, what helped carry the company forward during those uncertain times?

Let me credit a former and now a newly hired employee Shunfu Hu. When the company was on the ropes, Shunfu contacted investors he met in 2015. He informed the investors of the financial difficulty of Biostage. From there, we spent over a month on comprehensive due diligence. The result was strong support for management and our collaborators and a saving investment for Biostage.

This investment is a pretty clear indicator there's true value in what Biostage does. Did the company's scientific work and confidence in it help keep things afloat?

When we stepped back from a funding problem, one saw quickly we did not have a issue with the technology. Biostage had a balance sheet issue and not a issue with our science. To date, we have conducted literally hundreds of experiments. Our preclinical body of work is in almost 40 large animals. In each case the regeneration is consistent and predictable.

Yes, this is hard work but the science and progress is meaningful. With our investors and collaborators, we will continue the development focused on kids with esophageal atresia and the large market in China with esophageal cancer.

This interview was conducted and edited for clarity by Zachary Comeau.

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