It is an understatement to say that the COVID-19 pandemic is one of the most impactful crises of this generation. Economic risks are significant to say the least. Over 700,000 worldwide have died, and the virus will likely rage on for several months. Virtually everyone on Earth has been affected in some way by COVID-19. 

Our primary hope for ending this massive disruption of modern life is a trustworthy vaccine. However, there are many questions as to the ultimate effectiveness of a preventative shot. Dr. Fauci warns that a vaccine may not be wholly effective. It’s also unclear how much the drug would cost and deciding who receives the vaccine first is thorny. 

Several companies are hustling to develop a vaccine. The Gates Foundation (among other large donors) has earmarked huge sums to incubate vaccine concepts. Still, as of early August 2020, no therapy has been approved for human use. The race is on: who will produce the coronavirus vaccine?

Stark Therapeutics is a brand-new gene therapy company tackling two challenges simultaneously: developing a vaccine for COVID-19 and producing a gene therapy technique to combat type II diabetes. Just this summer, Stark set up a lab and produced 1,000 doses of a pilot COVID-19 vaccine via pilot scale manufacturing. The company has initiated a preclinical study to evaluate the vaccine. Stark is prepared to scale to over 100,000 doses if the therapy is proven successful. 

The company is using innovative methods to develop both the vaccine and diabetes therapy. For the vaccine, Stark plans to use a protein from the SARS virus to train the body to fight COVID-19. Stark suggests that the effectiveness of this approach in SARS vaccination is a promising signal of success for a COVID vaccine. 

Stark’s diabetes therapy uses adeno-associated viruses and gene-inhibiting technology (interference RNA) to target two regulators of cell growth and metabolism, treating and reversing type II diabetes. This approach would supposedly reduce side effects of traditional diabetes therapies. It would also remain effective for ten or more years following a single administration.  

Stark Therapeutics raised $50,000 from the “Fight the Virus” challenge. That grant allowed the company to rapidly develop a lab and preclinical COVID vaccine. On the diabetes side of the business, Stark has received support from Michigan State University to launch an exploratory study on their genetic therapy. 

Stark Therapeutics has not yet generated any revenue. 

Stark Therapeutics has only one team member, founder and CEO Anthony Stark. Stark provides very little detail about his background. His LinkedIn page is blank with the exception of a degree in Human/Medical Genetics from the University of Wisconsin-Madison. 

Stark shares that the company will likely require tens of millions of dollars in funding to fully scale its gene therapies and to generate revenue. The company estimates that the COVID vaccine will likely take six months or more before revenue generation. The diabetes therapy will take anywhere from two to four years. 

After the therapies are approved, Stark Therapeutics is hopeful that the vaccine could generate hundreds of millions in annual revenue. It projects that the diabetes treatment could generate billions based on the total market size of diabetes care. These figures are very rough estimates based on limited evidence of clinical effectiveness for both the vaccine and diabetes therapy. 

After careful consideration of the company’s areas of opportunity and seeming weaknesses, Stark Therapeutics has been ranked as an Underweight deal. Investors should consider three critical uncertainties when evaluating this opportunity: 

• Founder inexperience: CEO Anthony Stark apparently has no background experience in genetic therapy or biotech entrepreneurship beyond a recent undergraduate degree in genetics. While Stark might be a brilliant scientist with the unique ability to develop a COVID vaccine on his own, it is more likely that he is ill-equipped to single-handedly develop lifesaving genetic therapies with little support or funding.  

• Zero proof of concept in the preclinical phase: It is difficult for a non-scientist to evaluate the unique value proposition of a biotech company’s intellectual property. Most investors would hope for confirmation from clinical studies or regulatory agencies that the drugs being developed are effective. Unfortunately, Stark Therapeutics’ solutions are preclinical, so investors cannot fully evaluate the veracity of the company’s claims.

• Crowded space for COVID vaccines: Virtually all major pharmaceutical companies are devoting significant resources toward the development of a COVID-19 vaccine. It is difficult for any startup company — particularly one with an inexperienced founder and limited resources — to compete with the likes of Merck and Johnson & Johnson as those giants work around the clock with thousands of scientists and billions of dollars to develop a therapy. 

Stark Therapeutics is simply too early-stage to adequately evaluate whether its genetic therapies will prove effective. This lack of proof in combination with other concerning signals (an inexperienced founder and the extent of competition in the COVID vaccine vertical) make Stark Therapeutics an Underweight deal.