After forced sale, PatientsLikeMe founder frets that U.S. policy could chill collaboration in biotech
Jamie Heywood is a live wire of a man, a thin, energetic mechanical engineer who entered the biotech world after his brother was diagnosed with amyotrophic lateral sclerosis in 1998. Seeing the state of basic science around the disease, he started the world’s first nonprofit biotechnology company, ALS TDI, with his family. From that moment, he was never one to mince words.
So he made his frustration clear when he spoke for the first time publicly about what has been happening to his second company, PatientsLikeMe, which is being forced by a shadowy U.S. regulatory body to unwind an investment by China-based iCarbonX. At the conference where Heywood appeared recently, the Convergence Forum on Cape Cod, the room took on the tenor of a wake as he spoke about the government order.
“The financial side is going to be devastating both for us and iCarbonX, but I think I’m going to be able to continue the program,” Heywood said. “What I struggle with is … if we can’t collaborate to improve human health with people who have done so credibly and well, well, I don’t know what we’re going to do as a world.”
PatientsLikeMe was another outgrowth of Heywood’s experience watching his brother suffer from ALS. What might be possible, he wondered, if patients more openly discussed their symptoms? This would benefit patients, yes, but also could be a source of data for improving medicine. Traditionally, diseases have been studied by doctors creating a list of symptoms and asking patients if they had them. But perhaps the data could be drawn directly from what patients are saying about their own conditions.
The result was an online health-tracking site, including a forum, that offered not just a new place for patients to communicate, but a source of scientific studies. In the past few years, PatientsLikeMe data have been used to run a study that indicated a soy-derived supplement did not benefit ALS patients, that financial hurdles made it difficult for patients with multiple sclerosis to access new medicine, and that being on a plane does not make it more likely that a person will cry during a movie. For drug companies, the database provided both scientific and health economic research; arrangements with industry made PatientsLikeMe money.
But Heywood had always envisioned it being more. His idea was to take this data about patients’ symptoms and experiences and pair it with insights into what was going on inside their bodies. Machine learning algorithms would then find patterns that would lead to a new understanding of biology.
That’s what led him to take on Shenzhen-based iCarbonX as an investor. The company had been founded by Jun Wang, a leading genomics researcher in China. In 2016, it raised $200 million, according to Pitchbook.
Wang and Heywood met and decided to use iCarbonX’s machine learning and genomics capabilities with PatientsLikeMe’s data. Instead of just using data reported by patients, they would go back to specific PatientsLikeMe users and ask for blood samples, from which they could get genetic and other biologic data. In 2017, iCarbonX and Invus Group, a New York firm, invested $100 million in PatientsLikeMe, substantially more money than the company had raised in its history.
Early signs were that this new approach was working, Heywood said. They had taken thousands of blood samples from 2,200 patients, and the results looked to be a new way to get information not just about patient experience, but biology. “I’ve been working in biotech for 20 years,” Heywood said. “This is the most amazing thing I’ve ever invented.”
But then it all started to fall apart.
The offices of iCarbonX. (Michael Kappeler/picture-alliance/dpa/AP)
The disruptive factor was the Committee on Foreign Investment in the U.S., a federal interagency group that can block deals deemed to pose a threat to national security. The nominal concerns from the agency, known as CFIUS, appeared to center on Chinese investors having access to U.S. patient data, albeit anonymized.
Heywood didn’t want to talk too much about the specifics of what happened, and said he didn’t want to “delegitimize” the U.S. government’s concerns.
But he said he was dealing with different people from multiple agencies — CFIUS is composed of nine U.S. departments and offices, including the departments of treasury, justice, and homeland security — and that it wasn’t clear exactly what needed to be done to safeguard data. It was unclear how the balance between risks and benefits was being drawn, and it seemed that the company was being asked to prove the unprovable: that there were no conceivable risks to national security to the effort at all.
In the end, Heywood said, the only solution was for iCarbonX to sell its PatientsLikeMe stake in a fire sale. In the search for a buyer, he said, he is not even considering companies that are not based in the U.S., because it would drag out the process too much.
“I’ve gone from having capital to realize one of the most important problems on the planet — figuring out human health itself at the diagnostic level — to now we have to separate that out,” he said.
Indeed, the worries about CFIUS have stretched beyond China to all companies with foreign investment. Late last year, Switzerland-based Novartis bought Endocyte, a West Lafayette, Ind., pharma company that makes drugs that use radiation to treat cancer, for $2.1 billion. Filings with the Securities and Exchange Commission showed that the company had gone through the CFIUS process. At the end, CFIUS told the companies it “cannot conclude action.”
At the Convergence Forum panel, Bart Dzikowski, head of transactions and legal at Novartis’ venture fund, said that this left Novartis feeling it could proceed at its own risk, as it did. For the first time, though, he said, he has concerns when his Swiss employer makes investments in U.S.-based companies.
Already, panelists said, it appears that Chinese investment in U.S. companies has plummeted. But the bigger fear is that the anxieties will halt or prevent collaborations that would lead to more innovation. The biggest problem is not just the existence of CFIUS, but the uncertainty it creates because, unlike the SEC or the Food and Drug Administration, it is not giving clear guidance on what companies need to do to not run afoul of new policy.
“CFIUS is a five-alarm fire for private biotech companies and their investors, ” wrote Steven Dickman, the head of CBT Advisors, a boutique consultancy, and the Convergence panel’s organizer, via email. “It is affecting nearly every biotech venture fund and nearly every financing round.” He said the big worry is that the restrictions could remain no matter which political party holds power.
Some investors have been taking concerns about CFIUS lightly. As Michael Gilman, the chief executive of startup Arrakis Therapeutics and longtime biotech entrepreneur, suggested on Twitter, it may only be a matter of time before they have reason to take the concerns more seriously: “Trade-related policies like CFIUS are deeply impacting the industry’s seed corn by discouraging foreign investment in startups. And, of course, that capital WILL go elsewhere. US shooting itself in both feet. As usual.”
