Q&A with founder of Omega Funds, the reclusive VC firm behind Juno, Gossamer Bio, and Editas

Up until now, Omega Funds has remained firmly in the shadows. Founded in 2004, the company invests in biopharma and medical devices startups in the U.S. and Europe and has been behind the likes of Juno Therapeutics (that recently got bought by Celgene for $9 billion ); Micromet (that got bought by Amgen) Replimune, and Editas Genome.

Now, coinciding with its investment in Gossamer Bio, a new biotech startup that raised $100 million in January, the founder of the Omega — Otello Stampacchia — figured it was time to venture out of the firm’s protective shell. The fund has raised more than $700 million over its lifetime, he said, including the fifth $300 million fund out of which investments are being made. As Stampacchia put it: “It’s really becoming a little counterproductive to be discreet.”

So he made time for a phone interview where he discussed everything from the name of the Boston company, it’s investment focus to whether too much money is being invested in oncology. What follows is a slightly edited version of the Q&A:

MedCity News: Why are you choosing to be public now?
Stampacchia: Gossamer was a very visible transaction with an incredible management team [The company is run by two former executive team members at Receptos, which Celgene bought for $7.2 billion]. We actually acquired a product that is very late to the clinic from a European company and brought it to the U.S. So it became very complicated to maintain a low-profile attitude. a

We were very early investors in MicroMet, in Juno, in BioVex (which Amgen acquired for nearly $1 billion). It’s time to get a little bit out of the shadows. This will make it easier for the junior team in establishing connections.

MedCity: What is your investment focus?

Stampacchia: We are pretty agnostic but there are things we like more than others. Certainly, therapeutics in certain indications are very much a focus area and has been quite successful for us. Oncology, I would say, represents a meaningful part of what we do; inflammatory diseases, autoimmune diseases. We’ve done a lot of work historically in antibiotics. We still think that’s an unmet medical need that is vastly underestimated by healthcare systems. So those are different therapeutic areas.

We have also done a lot of work in technology, drug discovery and development platforms that would lead to therapeutics. Micromet was a good example. It was a bispecific antibody platform that got sold to Amgen for $1.2 billion. So we were very large investors for a long time and I was on the board there. And again that was a product that was one of the first immune-activated drugs in the cancer-immunotherapy space because it did activate T-cells. Then we went into the Juno investment – the CAR-T gene therapy space.

On the nonbiotech nontherapeutic side of things, we have done, not necessarily super successfully, a few medtech deals historically. I would say the core medtech expertise within the team is in Geneva. But I do think we are pretty agnostic about location. In fact, the latest medtech investment we made is in Spain of all places. But we are very happy to make medtech investments in California if it makes sense.

MedCity: Does stage of the company matter?

Stampacchia: People get very worked up about, ‘Do you do seed investments? Do you do late-stage investments, do you do crossover investments?’

We are talking about what is the unmet need, what is the need at the patient the level, what is happening with the current standard of care. Is this solution, is this project that this company or management team has, going to address that, and then if it does, let’s work our way backward in terms of how much money you need, how much resources we can get you and what kind of team you need to build.

As an aside, it maybe makes sense to understand why we picked the name Omega. [From the fund’s website:

We chose the last letter of the Greek alphabet “?” as our brand: we start our investment process by focusing on the impactful, value-creating inflection points we hope will be achieved by the companies we invest in. These inflection points are usually achieved by addressing severe, unmet medical needs with novel therapeutics, devices, or platform technologies. We are less interested in incremental innovation, as historically this has resulted in a lesser impact on diseases and, subsequently, on patients’ lives.

Once we identify these endpoints, we work our way backwards to identify the intermediate execution steps required. We then work in partnership with our companies’ founders, management teams and fellow co-investors to provide the necessary resources: domain knowledge and perspective, network connectivity, and capital.

MedCity: How do you invest?
Stampacchia: We are quite agnostic about the instrument. We can occasionally start companies ourselves. Gossamer is a perfect example. We worked on the project for two years, we bought a company in Europe and put together this product with this great management team in the U.S. and co-led the Series A and put almost $45-$50 million dollars into it.

The last example before Gossamer was Replimune, an oncolytic virus platform that we incubated in our offices with a management team. This was a management team that did very well because they sold BioVex for almost $1 billion. They caught the only product approved in the market in the oncolytic virus space. We are not going to do 10 of those a year, but selectively we will do a few of those.

The other activity is traditional co-investments with our brethren in the venture capital space. These could be early-stage rounds, late stage, it really depends on where the company has been, what the product is and what needs the company has.

We have the capacity of doing PIPEs – private investment in a public entity. We’ve done a few but we like the flexibility of doing those depending on market conditions and how much we like the company and the products.

The other thing that we do — less so now than before — is follow-on investment. So if there are existing investors or strategics or even individuals that have been investing for a number of years and cannot follow through for whatever reason, we try to provide those investors with some liquidity but always with the support of the rest of the syndicate and the management team.

MedCity: There is a plethora of capital in the marketplace. Why should entrepreneurs come to Omega if they can go to OrbiMed or some other big, biotech fund?

Stampacchia: Those are great funds. We worked with OrbiMed. Jonathan [Silverstein] is a personal friend. All the established venture firms in the space are people we know and appreciate. By the way, they are not mutually exclusive. A number of these funds work together.

First of all, I would say if you are a well-established entrepreneur in the business, and you haven’t heard of us, I would say that we’ve done something wrong because while we haven’t been very public with what we do, we actually spend a disproportionate amount of time getting in front of the people that we think matter in our industry and try to explain what we do.

But how are we different from the OrbiMeds, the Atlas-es? Geographically there is a difference. If you want to have some angle on what is happening in Europe, we are probably different from all those guys. If you want to have a certain overview certain therapeutic areas, I do think we are much more systematic than most people, out there.

MedCity: Omega invests a lot in oncology and data on early-stage investments show that this therapeutic area is getting the lion’s share of capital. Is too much money going into oncology?

Stampacchia:  We actually have a continuous internal debate about are we allocating too much capital to the space. I don’t make decisions for the entire industry. I can only help make decisions for our firm but I do know that other VCs were kind of pulling back. At the same time, I wanted to provide some counterfactuals.

I think there is also a counterbalancing argument that the majority of M&A happens in oncology both by dollars and number of deals. So, in essence, there is an exit for the fund, not just an entrance. Until that ends, I think that capital will continue to flow.

It is true that the field is becoming more and more complex. We are on the cusp of really a fundamental understanding of biology. There’s a fundamental understanding of the mechanism by which tumors grow and kill. We finally have the tools to really understand and dissect the pathways. That kind of understanding of the biology always leads to a better understanding of the products you should develop. These understandings wouldn’t have happened if capital hadn’t been flowing into the space.

Also, you need multiple pieces of the puzzle — you need PD1, you might need an oncolytic virus and so on. So if every meaningful player in the oncology space — and I am talking about large biotech and pharma — needs to have all the pieces of the puzzle , then there’s room for multiple players within each modality and if you take a systematic perspective of the space then it’s ultimately our job to back the right company.

I do think that the negotiation dynamics in terms of the buyers versus the demand and supply of good products in oncology is still favorable. Is it still going to be the case five-to-10 years from now? I don’t know.

MedCity: Is there anything you wish to add?

Stampacchia: We are extremely proud of the culture and the team we have assembled. We really don’t work in silos. People work together on similar deals even if they are on both sides of the Atlantic. We really try to work as a team on every single transaction. That’s very healthy and also creates a fabulous debate when we talk about disease areas, products and so on.

CORRECTION: Due to incorrect information provided, an earlier version wrongly stated that the amount of money the fund has raised. Omega has raised $700 million since its founding. Also, the fund doesn’t have a European office, rather a relationship with a fund named NeoMed that has European expertise.