CEO Podcast: David Esposito, ONL Therapeutics

Paul Krutko: Welcome to Ann Arbor SPARK’s CEO Podcast…Conversations on Economic Opportunity. My name is Paul Krutko, and I’m the President and CEO of Ann Arbor SPARK.

I’m joined today by David Esposito, President and CEO of ONL Therapeutics — a clinical-stage biopharmaceutical company committed to protecting and improving the vision of patients with diseases of the retina. David brings a wealth of experience as a healthcare executive, with a strong track record of leading innovative companies to successful exits. Prior to ONL, David served as CEO of Armune BioScience, where he led the development of a groundbreaking blood-based test for prostate cancer, ultimately guiding the company through its acquisition in 2017. He also served as president of Phadia US, a leader in allergy and autoimmune diagnostics, and helped lead that company’s acquisition.

David began his career at Merck, holding a range of leadership roles in sales and commercial strategy. He is also a combat veteran (very impressive – my son was a career military officer, 101st Airborne Division during the Gulf War) where David was awarded the Bronze Star for his service. He’s a graduate of West Point with a degree in civil engineering, and he earned his MBA from Syracuse University.

So we’re really excited to talk about ONL today because this is an example of a company that we’ve worked with since their early days as a startup, it sort of demonstrates our approach to long engagement with early-stage companies. We believe that some technologies, some therapeutics, some drugs aren’t something that you can show revenue in three months, which is what certain programs like to try to do. 

So with that, I’m just excited to learn about it and honestly, my sister just went through retina surgery, so I’m surprised. Went to the doctor, and Hey, we need to do this right now. So I’m really interested in hearing about the product, the Retinal Disease Therapeutics, and then we’re going to talk a little bit about your experience in scaling a life science company, because I think that’s something that our audience needs to understand. 

So let’s start. Tell me about how ONL started, what inspired the formation of the company and what unmet need were you trying to address?

David Esposito: Sure. No, Paul, thanks for having us and telling the story, and for the journey that we’ve been on and the support that Ann Arbor SPARK has provided. It’s been a great story. So very similar. First off, sorry for the story you just told. That happens, though, quite a bit. And so it really, that unique moment, very much gave birth to the company. 

So our company was founded by Dr. David Zachs, a retina specialist at the University of Michigan. It was David’s initial work in his clinic with patients just like you described, that said, with a condition of retinal detachment or dry age-related macular degeneration. ‘I’m sorry, but there’s nothing more I can do for you.’ And that impact and that engagement of a patient really for David as a clinician to not have any more tools in his toolbox, so to speak, and people are on a slow path to losing lines of vision, is what inspired David, gave birth to the company. David is a clinician scientist, so in his research work, he discovered the relevance of a receptor on retinal cells that if you could block that receptor, you could protect those retinal cells regardless of the disease or stress they were under. And so that inspiration of wanting to do more is what gave birth to the company. And now we are 14 plus years in, in a number of clinical diseases, but ultimately developing a drug that can block that receptor and block the damaging effects of those diseases, gave birth to the company.

Paul: So this part of the thing that we always love to share about our work here relative to what happens at the university. I think one of the things that’s really important for the audience to know about the University of Michigan is that there is a desire across all kinds of fields to bring things forward, to make people’s lives better. And then collectively, us and innovation partnerships, are trying to turn those ideas into companies that can have that kind of impact. 

So you’ve been a part of the ecosystem here with us, ONL has, since 2011. Can you talk a little bit about some of the early support that you received and how that shaped your path forward?

David: Certainly, and I think it’s a critical foundational element to companies, early-stage companies like ONL. I mean, many times it’s very practical operationally, how do you really build a plan? It’s great you have scientific discovery, but how do you actually build a plan around that, an investment plan? So all of the workshops, the comradery amongst other entrepreneurs, is like a great engine that SPARK provided the company early on. The practical side, too, of connections to investors in the community who are willing, whether it’s Angels or seed, A-round venture folks, those connections are vital. 

And I think the other piece that somewhat of an intangible, Paul, what I think is really critical is that it’s lonely, hard work building companies and innovation, and SPARK and the team, whether it was Phil Santer, Mike Flanagan and so many others on your team that organize a lot of the events ,and just being a shoulder to lean on is a tremendous support for, to you mention the company now, 14 years throughout that journey has been really helpful. It’s not just about the science. There’s all those other practical things.

Paul: Yeah, I think one of the things to share just with the audience is that one of the aspects of SPARK’s work is that we have resources that we’re able to provide that kind of environment for companies. And I think it’s a part of what is funded through an entity called the Local Development Finance Authority. Its resources that come from the economic growth of the community. The State makes an investment commiserate to that. And at any given time, we may have 250 companies at different stages, as you described, in our portfolio. And there’s a team here at SPARK that is, that’s what they do every day is working with the company, helping them. And then we do, as you probably know and benefited from, we can from time to time, make some dollars available to you for critical steps, whether it’s getting a patent attorney or it’s getting somebody to help you with setting up an accounting system or anything like that.

So it been over, we’ve been doing this now for nearly 18 years with that program and it really has paid off. And like you said, we now have this sort of serial entrepreneurial environment where folks can find the help they need to move forward. 

Well, I’m going to move in a little different direction. You’ve led companies through multiple successful exits. Can you talk a little bit what’s different about scaling a biopharma company compared to diagnostics and what lessons have you learned over time? Because you’ve now done this multiple times, what are some key lessons you’ve learned from that and what are the differences?

David: Sure. Paul, I’ve had a couple good journeys or positive exits that you said. Also taken a few companies over the cliff. When you get in the early stage, you skin your knees a couple of times, learn from them too. But certainly there are some differences and I think similarities between a real biotech company like ONL and some diagnostics. I mean, first off, the real difference on a biotech journey, it is a long journey to commercialization. You touched on it earlier. I mean, it’s a good 10 years in development to ultimately get near approval for a product in the marketplace. So it is a different psyche that the team has to really calibrate for the long-term on therapeutics. And the science is very complicated from that standpoint. On the diagnostic side, the exciting thing, I grew up as a commercial, started out as a sales rep. So my kind of brain starts from commercially up early is that on the diagnostics business, you can get to market relatively early. If a couple things go well in a year or two, you could have a product on the market, kind of similar to what we did at Armune Bioscience. And so that brings its own separate challenges. How do you commercialize and scale to secure additional investment? But I think the similarities across those are that whether it’s biotech or diagnostics, you’re always going to hit a couple major bumps. The plan never goes smooth. But I think keeping the eye on the long-term, like in ONL right now, we have a vision of helping patients see the future. That’s the long-term goal. That view of that helps overcome these kind of bumps. So whether it’s diagnostics or therapeutics, you still need to rally the team and encourage ’em to keep going. Those are some of the kind of learnings I’ve tried to tie between both of ’em.

Paul: Yeah, it is a good perspective. So the growth has been significant for ONL. You’ve navigated clinical development and achieved some regulatory milestones. What have been some of the key inflection points in your journey so far?

David: Sure. I think we are a drug development and ultimately you want to get that in patients to advance the development. So I really think if I was say, what are the real milestones for the company? It was our first, matter of fact, I’m drinking a glass that we commemorate our first time we ever dosed a human being. So similar to the patient case you described in the beginning, it’s an injection in the eye. And that first time doing that was huge. It was October 21st, 2019, I think, if I have it right, in Australia. So that was a huge milestone in a condition called retinal detachment. And I can describe it to you. We have it on the wall in the office. The first patient we ever dosed in geographic atrophy, the first patient we ever dosed in open-angle glaucoma. Those were huge milestones to the company and the development of the program.

And then I’d say the other big one, principally, is a lot of my job is fundraising. It’s not easy closing financing. And when we closed a series B and a C, and then this most recently last fall, a series D round that J&J led, those are big culminating moments that are a team effort to bring data forward to convince somebody to write a really big check. It was really huge. And I think the only piece I’d add, just given the influence of SPARK and the Ann Arbor community, is that we’ve had angel investors that have participated in those milestones right along the way. So many times, Paul, you know it in your journey as well, you’re shaking hands with somebody and collecting a $25,000 check on some of these things. It’s inspiring to see that happen over the years. But those are big milestones too. It’s not all about the money, but the money helps the development go forward and they’re big.

Paul: Yeah, I mean, I think that’s one of the things that we know in terms of our work. I mean, we are not venture capital, and that’s something I always like to communicate to audiences that listen in on this. You might not be familiar. Our area is very early. We have created a number of angel funds. Part of that idea was that on the coast, there is a lot of folks with high net worth that know how to do angel investment. We have a lot of high-net-worth individuals in Michigan, but they don’t know how to be angel investors. So we created the opportunity for them to buy a unit in a fund and be in a number of transactions. And what actually happened is they got so familiar with it, they started putting more money in as an angel in that same deal, much more than what we had in terms of the fund.

And then we’re well known that for a number of years we have operated a pre-seed fund here and successfully started by Skip Simms, who’s now since retired here. Mike Flanagan runs that for us now. And in the future podcast, I’m going to bring Mike on and let him talk more in-depth about that work. But what we see is really important and been encouraging the State is we need more of that kind of capital, that early capital. And in particular, as you described in the sort of industry cluster that you’re working in, it has to be patient, early money to allow the work that needs to be done to come to fruition. We’re talking about your company today, but one of the recent ones that happened in the community, HistoSonics, they have been on the same kind of a journey for a decade. And like I said, sticking with it because you see what potential is to better people’s lives isn’t something that you’re going to see a return from tomorrow, right? And so we’re really pleased to be able to play that role and encouraging the State to do more in that. 

So how important is sort of the wraparound services for companies? I mean, I think we might’ve helped maybe placing interns with you or providing some mentors or things like that. So that’s different than money, I guess, and that’s different from some of the other things we do. How important was that for you?

David: It is massive, and massively important and critical to drive innovation forward. The guidance, the direction, the mentorship, you mentioned interns, all of that’s critical. The practical reality I’ve realized is that people in communities build companies, and SPARK is really the glue and the foundational element for community building around business and innovation. So it’s really critical. As you mentioned, and I said earlier, the dollars are critical. These journeys are long. They’re capital-intensive, but it is that community effort that SPARK provides. And that’s just, I’d say foundationally critical to companies. It’s really important. People read a lot about big funds being raised and money, but you know what, the work gets done in the community with people who are builders. And your team’s done a great job with that.

Paul: Well, I appreciate you saying that, and we’re happy to have the opportunity to do that. One of the things I say often here is this is all critical work, but we enjoy doing it. This is building this ecosystem here over the last 20 years has been something that this team really feels proud about and is really happy to continue to do and looking forward to doing more in the future. So again, maybe just closing out, so you’re moving along. What excites you right now about where ONL is in terms of its pipeline in the future?

David: Sure. No, I think we’re excited about the next steps in the development. We’re getting ready to start a phase two study of 340-some odd patients, US and Europe, and a condition called geographic atrophy, dry AMD. We’re excited about what David originally founded the company on, that he could potentially say, ‘I’ve got another tool in the toolbox to help patients see for the future.’ So that’s really what’s exciting to us. And also, as a team, it’s exciting where we are in moving the development forward, but we also, to the point we were discussing earlier, I think it is also good for us to give back. There are companies not at our stage now. We just raised a large round of financing, but those seed and angel folks to say, Hey, we know it’s not easy, but we could be that encouraging support that the SPARK team provided us early on. So I think when I think about the future of that, we’ve got a nice, hopefully exciting journey forward with ONL. It’s always unpredictable in drug development, but we’re excited on the path, but also hopefully we can share a little bit of those experiences to spur further innovation in the community.

Paul: Well, you don’t have to worry. We’ll definitely ask you to do that. So that’s okay. We’re not shy about that. You’re right. It’s really important. I thought what you said earlier in the conversation, as we close out ours today, is about it can be a lonely endeavor and it’s not loneliness, I guess. I mean when we talk about as individual, but your team, you’re working very hard on doing something specific and giving you and others who are in that stage or multiple stages in the timeline, Hey, sit down with some other folks that are doing the same thing. It gives you, reinforces your sense. And I think the other thing we like about being here is we’re here. So the fact that when that team needs a little bit of help or encouragement, we’ve helped others. We’ve gotten them to past a milestone or a different point. So we can give them that sense. Yeah, it’ll work. We will be there for you. 

But as you said too, we also know the experience that not everything works out, but what happens is that many times people with your entrepreneurial gene, if you want to describe it, that’s not discouraging. Hey, what’s the next thing? How can I get back in the game? And so we really appreciate how we’ve been able to be a part of building that ecosystem. 

So again, thanks for talking with me today. Exciting technology. Glad to hear about the progress you’re making and the funds that you’ve been able to raise.

David: Awesome, Paul, thanks for having me. It’s great telling this story, and thanks for your support again.

Paul: You’re welcome. So as we close out, I want to thank our audience for listening and learning more about those leaders and organizations working hard to create the Ann Arbor Region’s economic future. These conversations are brought to you by Ann Arbor SPARK. For more information about Ann Arbor SPARK, you can find us on the web at annarborusa.org. We’re also on Facebook, Instagram, and LinkedIn.