GSK and Verily announce Galvani Bioelectronics, developing mini implanted nerve modulation to treat chronic disease, including diabetes; into clinic by 2019, up to $713 million investment – August 2, 2016

GSK and Verily announced yesterday the formation of Galvani Bioelectronics, a new jointly owned company to commercialize bioelectronic medicines to treat chronic diseases, including type 2 diabetes, arthritis, and asthma. Notably, obesity and cancer are also mentioned in the incisive video created by the organization. We had a chance this morning to speak with the very highly regarded Dr. Kris Famm, GSK’s Vice President of Bioelectronics R&D, who has just been appointed President of Galvani. Notably, he and his team had a late-breaker abstract at the ADA this year – very stealth! – we just found it here after learning about it on our call. We include various themes and additional details from our conversation below.

Timing: Bioelectronic medicines (specifics below) have been in development at GSK since 2012, and the goal is to move them from preclinical models to clinical proof of concept over the next three years. The companies hope to commercialize the first product in the next seven years, diabetes is clearly a big priority.  

Deal Details: The companies will jointly invest up to £540 million ($713 million) in Galvani over the next seven years – a huge bet on an early-stage but exciting field. GSK will hold a 55% equity interest in the new jointly owned company and Verily will hold 45%. Galvani will be fully consolidated in GSK's financial statements. Notably, in addition to Dr. Famm, Verily CEO Dr. Andy Conrad will serve on Galvani’s board, a big deal and major signal of Verily’s commitment. In a phone conversation with us, Dr. Famm characterized Dr. Conrad as “passionate, impatient, and a driven believer.”

What is bioelectronic medicine? Watch GSK’s three-minute video here for excellent background on this emerging field of bioelectronic medicine. The idea is to implant miniaturized devices, attach them to individual nerves (pictures below), and precisely control the electrical signals firing between the nervous system and a specific organ. These signals become distorted in many chronic diseases like diabetes, and GSK believes it is possible to interpret this electrical conversation, correct the irregular patterns, and impact a range of chronic diseases very specifically at the organ level. Impacting disease through the peripheral nervous system would represent a new therapeutic modality alongside traditional medicines and vaccines. This is very exciting if it works as expected: greater therapeutic benefit with fewer side effects (more targeted). Dr. Famm pointed out that as a new modality, bioelectronic medicine could also be readily combined with traditional therapies. Plus, it could drive better adherence (implanted, no daily interaction). 

How will bioelectronic medicine work in diabetes? Dr. Famm noted several mechanisms of action for type 2 diabetes: interacting with the pancreas directly to protect the beta cells or coax them to secrete more insulin; impacting insulin sensitivity in muscle and adipose tissue; changing the firing pattern in the nerves to the gut; modulating the liver; and impacting the vagus nerve. The company published an under-the-radar poster at ADA demonstrating the effectiveness of this neuromodulation technology in an animal model of type 2 diabetes: nine weeks of electrical modulation of the carotid sinus nerve restored glucose tolerance and insulin sensitivity to normal levels.  

While it’s too early to know the odds of success here, we are hopeful that diabetes is high on the priority list for this joint venture (it seems to be based on our conversation with Dr. Famm). A big question is whether the “promising” preclinical results will translate into humans, and if so, what spectrum of patients this could help (e.g., early vs. late-stage type 2). The focus seems to be on type 2 diabetes, though perhaps some spillover into type 1 is possible. Biologics and small molecule drugs have clearly not solved all the field’s problems, and we are always excited to see a radically new approach to treating the many biological facets of diabetes.

The rationale for this deal is similar to Verily’s existing diabetes partnerships with Dexcom, Novartis, and Sanofi – combine an established player’s biological and therapeutic expertise (GSK) with Verily’s expertise miniaturizing low power electronics and building great software and data analytics. Today’s announcement, however, has a notably distinct structure: GSK and Verily will create a jointly owned company (Galvani Bioelectronics) that takes on R&D and commercialization, rather than an established player like Dexcom, Novartis, and Sanofi commercializing by leveraging Verily’s R&D expertise. This gives both GSK and Verily skin in the game, though we wonder if it will make consensus more challenging. It’s becoming a bigger deal to have a Verily partnership.

See below for more background on the technology behind bioelectronic medicines; deal details; Close Concerns questions; and a summary of Verily’s diabetes partnerships.

GSK’s Bioelectronic Medicine Technology

• The principle underlying bioelectronic technology is corrective modulation of the peripheral nervous system (PNS) – the neurons outside the brain innervating the body’s muscles and organs.  It is hypothesized that chronic diseases such as asthma, rheumatoid arthritis, and, of course, diabetes, may involve abnormalities in PNS activity. Bioelectronic technology hopes to address this using implantable devices attached to nerves. GSK envisions that such devices will have the ability to both “read” the diseased nerve’s firing patterns with one electrode and “write” corrected firing patterns, delivering them through a second electrode.
• GSK has seen encouraging “proof of principles in animal models in a range of diseases” – presumably strong enough to warrant the major investment in this partnership. We’d note that a successful transition into the clinic is always an unknown, particularly in diabetes. Management shared with us that it is pursuing several mechanisms of action in diabetes, which will help diversify the risk.
  
  • GSK just had published a late breaker poster at ADA 2016 demonstrating that electrical modulation of the carotid sinus nerve (CSN) restored glucose tolerance and insulin sensitivity in animal models of diabetes. The electric treatment involved the delivery of a high frequency alternating current to the CSN over nine weeks. The treatment caused no damage to the nerve and was completely reversible; glucose intolerance and insulin resistance returned shortly after the electrical modulation was stopped. This study provides proof-of-concept that reversible, non-destructive neuromodulation techniques are a viable therapeutic strategy in type 2 diabetes.
  • How much technical risk is there relative to typical drug development? Will the preclinical results translate to humans? Galvani President Dr. Kris Famm told us there are two distinct risks with this project: biology (mechanism of action) and engineering work. GSK is obviously quite familiar with the first, and the ability to pursue multiple neural modulation mechanisms with this project is a clear asset. On the engineering risk, Verily is certainly highly qualified to make progress on this front, though we wonder how challenging it will be to make a commercial product with a completely implanted, miniaturized form factor. Presumably several generations will emerge, each smaller and better than the last.
  • The GSK team published a comment paper on bioelectronic medicine in Nature in 2013: Drug discovery: A jump-start for electroceuticals. The article has been cited 63 times, viewed nearly 22,000 times, and ranks in the 98^th percentile for online attention relative to tracked articles of a similar age in all journals.
  • The bioelectronics program originated at GSK in 2012, and the company has a media resource center on the topic here. GSK has created a global network of ~50 research collaborations and invested $50 million in a dedicated bioelectronics venture capital fund.
• GSK’s three-minute video shows several pictures of what the bioelectronic devices might look like attached to nerves. The video highlights three potential avenues for these miniaturized devices to change nerve signaling: (i) electrical; (ii) optical; or (iii) electromagnetic/ultrasonic. We show a picture of each below.
• The attached device itself could be electrical, perhaps taking the form of conductive polymers, wires, or nanotubes. These could be inserted into the fascicles to trigger the activity of specific axons
• The video also mentions electromagnetic or ultrasonic options, where the device wraps around the fascicles, reads action potential, and writes code. 
• While pacemakers and bladder stimulators (which both use electrical impulses to control the body’s organs) have been around for decades, they target large areas of the body indiscriminately. The bioelectronic devices in this partnership will work more precisely on specific circuits within the nervous system. GSK also notes the ability to adapt and recalibrate as the body responds to signals. The companies expect the bioelectronic medicines to be more effective, less invasive, and bring fewer side effects than other types of neuromodulation.

Deal Details

• The deal details show major commitment by both organizations. GSK and Verily will jointly invest up to £540 million ($713 million) over the next seven years in the newly created company, Galvani Bioelectronics. GSK will hold a 55% equity interest in the new company and Verily will hold 45%. The new company will be fully consolidated in GSK's financial statements. We’re not sure how the companies will share R&D or how the investment will be allocated over time. The deal is expected to close before the end of 2016, and is subject to customary closing transactions.
  
  • The deal structure – creating a new, jointly owned company – is different from the Dexcom, Novartis, and Sanofi collaboration/ licensing deals. This has pros and cons for both sides. On the plus side, both companies have a stake in the entire value chain (from R&D to commercialization), ensuring the project takes the long view and both companies remain committed. On the other hand, a jointly owned company often has a harder time achieving consensus on priorities, strategy, commercialization, etc. – though not always! That said, we imagine both sides wanted ownership, early-stage though it is. With the Dexcom, Novartis, and Sanofi deals, Verily supplies its expertise in electronics and software, but the established players are responsible for commercialization (as far as we know). 
• Galvani Bioelectronics will be headquartered within GSK’s global R&D center at Stevenage in the UK, with, excitingly, a second research hub at Verily’s facilities in South San Francisco (more expansion at Verily in areas related to diabetes). Galvani will initially employ around 30 expert scientists, engineers, and clinicians – a pretty big number! – and will fund and integrate a broad range of collaborations with both GSK and Verily, academia, and other R&D companies.
• Dr. Kris Famm, GSK’s Vice President of Bioelectronics R&D, has been appointed President of Galvani. Dr. Famm has pioneered work in both large and small molecule drug discovery and worked for a decade developing and delivering R&D strategy with a recurring focus on emerging technologies. He has co-designed and led GSK’s exploration of bioelectronics, dating back to 2012. Notably, he is the first author on the 2013 Nature paper “Drug discovery: A jump-start for electroceuticals”. Before a number of senior-level positions in R&D at GSK over seven years, he worked as an engagement manager at McKinsey.
• Moncef Slaoui, GSK’s Chairman of Global Vaccines, who was instrumental in establishing GSK’s investments in the field of bioelectronics, will chair Galvani’s board. He is the second author on the 2013 Nature paper. More good news is that the seven-member board will also include the very highly regarded Andrew Conrad, CEO of Verily. From what we can tell, the other board members have not yet been specified (or perhaps they have just not been disclosed – we believe they will come from both sides of the companies and presumably some will be independent). We saw Mr. Conrad speak last November in Texas and were extremely impressed – see that report here. It’s a great sign from our view that he will be so closely involved at Galvani – he’s one of the hardest people to get to speak to in healthcare today at any level from what we can tell and from what we know about how sought after his opinion is at Verily and in public health more broadly.
• The press release notes: “Galvani Bioelectronics is named after Luigi Aloisio Galvani, an 18th century Italian scientist, physician and philosopher, who was one of the first to explore the field of bioelectricity. In 1780, he made the pivotal discovery that the muscles of a frog’s legs twitched when he touched the sciatic nerve with two pieces of metal, leading him to propose the theory of bioelectricity. Galvani’s discovery, while disputed by many of his peers, paved the way for the modern study of electrophysiology and neuroscience – two fields that are key to the development of bioelectronic medicines.”

Verily's Diabetes Partnerships

• At this stage, the next-gen CGM partnership with Dexcom seems the most advanced and most likely to launch first, with a first-gen product on schedule for 2018. The glucose sensing contact lens with Novartis has not had a timing update since a WSJ article last August, and more recently, had no airtime on Novartis’ 2Q16 call; we’re not sure if it will enter clinical trials this year. The Sanofi partnership has never shared timing or specifics since it was announced last August.​

Close Concerns Questions

Q: How will diabetes and obesity be prioritized relative to the other therapeutic areas? Is diabetes the most promising of all the therapeutic areas? Is diabetes the easiest or the hardest area, given the number of possible mechanisms of action? What are the unique challenges and opportunities in diabetes relative to other areas?

Q: How much do we currently understand about how peripheral nervous system signaling underlies chronic disease, especially diabetes and obesity?

Q: How will GSK and Verily ensure that there are no side effects in nerves nearby or downstream of the targeted one? Will the approach really have fewer side effects than traditional therapies?

Q: How many devices will need to be implanted for the average person with diabetes? Will it vary by person? Will one device fit all? Will it apply across the spectrum of type 2 diabetes?

Q: How expensive and effective will bioelectronic medicine be relative to traditional therapies available in seven years?

Q: Does this have any application to type 1 diabetes?

Q: According to the press release, bioelectronic technology will require collaborations between neurosurgeons, engineers, biologists, computer scientists, physicians. Of all these collaborating fields in the development of bioelectronic technology, which has the hardest task, or the most challenges to overcome? Where is the bottleneck?

-- by Adam Brown, Abigail Dove, and Kelly Close