Xilis Case Study

TLDR:

• 🎓 Xilis was founded by three academic researchers, Xiling Shen, David Hsu, and Hans Clevers, who came from three different disciplines, but who were able to build off of one another’s expertise to make a transformative, paradigm-shifting discovery.
• 🧬 Working together, the team realized they could grow 3D cultures of cancer cells in a laboratory to create “mini tumors,” or organoids, that could then be used as, essentially, a real time test that could guide oncological patient care.
• 🍐 As exciting as this discovery was, the founding team quickly realized they needed the support of PearX to ultimately turn their research into a widely-used tool that could benefit patients around the world.
• 💵 They participated in the PearX program and successfully raised a $3M seed round, and less than 18 months later, a $70M Series A round.

Forming the founding team

Xiling Shen and David Hsu first met when Xiling interviewed at Duke for a faculty position in the Department of Biomedical Engineering. David, a professor at Duke’s Medical Center, and Xiling, then a professor at Cornell, hit it off, and bonded over their shared research interests.

“As an academic junior faculty, you’re focused on publishing papers. But when I was talking to David, he asked, ‘How do you think about how to help patients?’ and that suddenly opened a door—that’s where you really make an impact. 10 or 20 years down the road, do you really want to be remembered for how you published this many papers that probably no one reads anymore?”

Xiling relocated from New York to Durham, NC and the two immediately began a research partnership, focusing on how to use patient-derived models of cancer as a potential diagnostic tool.

Testing and learning

While the two were making great progress on their research, they weren’t immediately as successful in finding a way to turn this into a useful tool for on-the-ground clinicians and providers.

“Patient-derived models of cancer are great for research or discovering new tools for discovering new drugs. The problem is, they weren’t very useful in a clinical setting,” says David. “The main reason is that a lot of these models take too long to make, so I could never use them in real time to guide patient care. I don’t have time to grow these models, to do all this testing.”

Eventually, however, they realized they could solve this dilemma by incorporating the ground-breaking work of their third co-founder, Hans Clevers, a professor of Molecular Genetics at Utrecht University in The Netherlands. Hans had discovered that 3D cultures of cancer cells can be grown in a laboratory from real human samples, allowing for the creation of “mini tumors,” or organoids. These organoids could be grown rapidly and with greater success rates than cell lines or mouse models. And perhaps most importantly, they’re also able to replicate the original native cancer, making precision medicine possible. It represents the culmination of a long-time dream of precision medicine, powered by big data.

Building off of Hans’ discovery, David and Xiling worked to develop “micro-organosphere technology,” a microfluidic-based method of growing miniature organoids. David saw that this new technology had the potential to be used as a diagnostic assay — essentially a real time test that could guide patient care.

“Until we started making these droplet organoids, I never felt that there was going to be a patient-derived model of cancer that I could potentially use clinically as a diagnostic tool, but finally we had this breakthrough,” says David.

Turning academic research into a business

At this point, David and Xiling realized they were approaching a crossroads with where to go next: they could either double down on their academic trajectories or try to create a new company around this new technology. The first question they had to ask themselves was what were they optimizing for: research novelty and journal publications? Or getting their organoid model so dialed in that it could work 100% of the time?

The next question was whether they were willing to commit to this fully, with a sense of urgency needed in the business world, or whether they would keep going with their myriad of other research projects, with less concern about the pace of new developments and getting their organoids into the hands of clinicians.

Around this time, Xiling was back in Palo Alto and was able to catch up with Mar Hershenson, Pear’s Founding Managing Partner, who had hired him back in 1999 as her first intern at her first start-up, Barcelona Design. Xiling was trying to figure out how to turn the technology into a start-up. He was about to sign a very unfavorable financing deal with a foreign investor when Mar convinced him to pitch to her partners. The pitch was really an academic presentation, not an investor presentation, but it was enough for Pear to understand that the team’s new breakthrough with organoids had the potential not only to be commercialized, but also to lead to a category-defining company.

And so the partnership between Xilis and Pear began.

Joining PearX 

The Pear team worked side by side with Xiling and David to first come up with a viable business strategy that maximized long-term value, and then to effectively communicate the strategy and market opportunity to investors. Pear was fortunate to have previously worked with the team at Guardant and could use a lot of that know-how to support Xilis. 

Mar worked closely with Xiling and David for hours to grow their mindset from academic only to academic + business. The Pear team believes that academic founders, when exposed to the right information, mentorship, and connections, can become great CEOs and business leaders. 

During PearX, the focus shifted from being technology-development focused to market-development focused. The company had the opportunity to be a platform not only for precision diagnostics, but also for drug development.

Perhaps most importantly, the team was able to come up with a crisp business proposal and include crucial details on their go-to-market strategy. As Xiling put it, “Pear provided an opportunity to hammer out 80% of the questions we got from investors. We were not even thinking about a lot of those questions.”

Presenting at Pear Demo Day and Fundraising

Xiling and David spent countless hours practicing their investor pitch for Demo Day. It is no easy task for an academic to present to hundreds of early stage investors. They nailed their presentation, and right after Pear’s Demo Day, investor interest immediately started to flood in. The team returned to Duke after Demo Day with term sheets in hand. 

They successfully raised a $3M seed round. With this new capital in hand, David and Xiling turned to scaling their company and building their team. They used the funds to fill key hires. 

As Xiling says, “We are kind of a unique company in terms of being very interdisciplinary. Engineering, biology, clinical, and of course then adding business people, software, hardware… so we’re really focused on building a team that has complementary skills. Right now, the next hiring priority is continuing to hire the right business expertise. You want to have a team that has the right business experience in the intended market, so that investors feel the investment is more de-risked. I think that’s probably the biggest challenge for most academic teams. It’s often the piece that would increase their attractiveness significantly.”

The team raised a $70M Series A round less than 18 months after the conclusion of PearX. Xilis is continuing to work on bringing their product to market, focusing currently on conducting clinical trials to validate the platform’s efficacy in predicting drug responses in cancer patients, and on establishing pharma partnerships for a host of drug development applications. 

And Pear continues to work closely with Xilis. In his role as a Board observer, Eddie Eltoukhy, Pear’s biotech partner, is leveraging his previous operating and business development experience to guide Xilis’ management team on company strategy, partnering, and fundraising. We’re confident the best is yet to come for this team.