Perlara CEO Ethan Perlstein on reviving a biotech and building a ‘Y Combinator of rare diseases’

Ethan Perlstein resembles the people he works with — wearing Birkenstocks and aviator sunglasses as he chats on a phone outside a coffee shop nearby his home and his children’s preschool in the San Francisco Bay Area.

He’s intense, self-deprecating and eager to talk about repurposing drugs for new treatment uses. Perlstein speaks a mile a minute, the same kind of energy he’s applied to his work at Perlara, the biotechnology company he founded in 2014 focusing on rare diseases.

Perlstein launched Perlara as biotech’s first public benefit corporation, a for-profit company designed for social good that commits to accountability and transparency. The decision made Perlstein an outlier in biotech, a sector filled with more secretive venture-backed companies.

Typically, biotech startups are seeded and grown as “C corporations,” “S corporations” or “limited liability companies,” entities whose main purpose is to maximize shareholder value. A public benefit corporation, by contrast, must balance stockholder interests with its company mission.

That quest has proven difficult. Though Perlara got a spot in the startup accelerator Y Combinator, formed a research partnership with Novartis in 2016 and raised about $10 million over five years, it couldn’t secure enough financing to keep going.

After winding down Perlara in 2019, Perlstein moved to the Christopher & Dana Reeve Foundation as its chief scientific officer, where he was set to manage its research and investments.

But his job was cut short by COVID-19. Like many others, Perlstein had a pandemic realization and he saw his work with Perlara wasn’t finished.

Now, together with a family from Michigan, he has spun out a startup called Maggie’s Pearl. Perlstein hopes to launch a handful more over the next year, all partnered with Perlara and aiming to repurpose existing drugs for use as rare disease treatments. Maggie’s Pearl, for instance, is evaluating whether a drug approved in Japan can effectively treat a rare genetic condition called congenital disorder of glycosylation Type 1a.

“Ultimately, the only way to make this repeatable is to prove that I can get into the clinic multiple times with multiple modalities,” he said in an interview with BioPharma Dive.

The following conversation has been lightly edited and condensed for clarity.

BIOPHARMA DIVE: What is your goal in reviving Perlara?

ETHAN PERLSTEIN: I’m trying to build Perlara to be the Y Combinator of rare [diseases], where we’re looking for those families that are founders in the sense of someone who’s going to be like, “I’m going to make a medicine myself,” whatever their background was. I’ve realized after eight years that to really achieve our public benefit mission, you can’t actually work with everybody. You’ve got to focus.

It’s usually one family or one parent in the driver’s seat. We built a decentralized biotech that can hopefully scale, but I have to increasingly focus my time on getting new medicines into the clinic. I want to spend the rest of 2022 committing to a small subset of clients. Right now we have 30-plus.

Why did you choose this route?

I want to help us hack the Food and Drug Administration in a Silicon Valley way. Can we figure out hacks where we can, working within the system, to create these victories on the “n of few” side, or create pathways for going from “n of few” to a commercial [company] sponsored trial?

In 2019, you posted about how heartbroken you were to wind down Perlara. How did it end up where it is today?

I ended up taking a break from rare [diseases] and went to the Christopher & Dana Reeve Foundation to try out being their chief science officer and starting a new scientific chapter in spinal cord injuries, regenerative medicine and the brain. The pandemic cut that short.

I then moved over to another nonprofit, because I thought, “Let me get a break from Perlara and just see what else is out there.” I worked for a different nonprofit which was in stealth — now it’s known as the N=1 Collaborative — with some of the key founders on the precursor to that from May 2020 to the end of 2020.

Two years after clinical winding down for Perlara, I thought maybe this is the universe saying I need to go back to rare [diseases] and do it now.

We’re almost approaching the one-year anniversary of the reboot. A year in, the company is very close to a proper breakeven. I’m pretty proud of going from basically no revenue to [August], when we’ll be at about $150,000 in revenue.

What’s changed to get there?

About half of that is us now managing research on behalf of families. When we started, [our revenue] was about $15,000 the first month and that was us managing a few projects virtually as consultants. And starting this month, we’ve phased in our decentralized lab.

A decentralized lab means we have “cure guides” who show up at a physical lab space and perform fractional bits of experiments. And we have now a team of three managing a set of yeast projects in coordination with [others] doing it remotely.

That part of the business is what I really want to double down — for Perlara serving as a distributed research team, which will be a blend of virtual and experimental scientists working out of pop-up spaces.

What is the “drug repurposing” model you’re chasing?

For drug repurposing to realize its full potential, families are going to have to take control and find doctors who are more proactive, more like Dr. House. They are more willing to think from first clinical principles and have a hypothesis on why this drug should be tested, who don’t wait for a disease model to be made. It’s just a doctor’s intuition.

A few families have pushed for off-label [use]. Off-label has a slightly negative connotation when it shouldn’t. It should just simply be a second-label, or next label. Because a drug’s first label should not be seen as its platonic ideal. It’s just the first purpose that was found for that medicine.

Think about how many quality of life-adjusted years and how many dollars the system saves, if you integrate over a five to 50% improvement per patient, per disease, on average. Let’s not pretend they’re cures — they’re just down payments on cures, and then they’re acting as cure subsidies, because they’re making patients more receptive to what will end up being the cure.

What other Perlara spinouts are coming?

We have three families that can start with three different repurposed drugs. Two of them are based in the Bay Area and coordinate with a clinician to help lead those “n of one” [trials], and then there’s one based in Canada.

Those three are hopefully really imminent, and could launch in the next three to six months. There could be a fourth, fifth or sixth if data in experiments we’re running right now or in the next couple of weeks have results.

Biotech companies are often founded by venture capitalists. What you’re doing is founder-led. What lessons have you learned?

Most families are very deferential to researchers and drug developers, saying to them “please notice me.” It’s very passive. The group that I’m working with, the founder-led … they’re not looking for permission. They’re not waiting for this to have no risk associated. They’re just going to go ahead first. That’s what a founder does.

What advice do you have for younger companies?

There are now plenty of examples of “founder-led bio” that are going that high-risk, high-reward, big-platform, big-vision, big-sell route. Look at Jake [Becraft] from Strand [Therapeutics]. Look at Celine [Halioua] from Loyal. The market will always in early stages look for those. Even in a climate like the market we’re in now, which is uncertain.

Back in my day, it felt like there was just one way to tell a VC story. Now, we’re in a place where you can choose your own adventure.

Correction: A previous version of this story mistakenly named the hometown of the family that co-founded Maggie’s Pearl.

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