"There are only a handful of IPOs in Michigan. We are fortunate to be one of them," said Sooch. "Our IPO has been fantastic. ... We had a couple of us two years ago. Now we have 16 employees."
Sooch said Gemphire was able to sell its IPO in two years because "we have a late stage drug (gemcabene) that we licensed from Pfizer in 2011 that is in stage 2 trials."
Gemcabene is an oral once-daily drug developed to treat the large unmet medical need of patients with high cardiovascular and pancreatitis risk who are unable to reach optimal LDL cholesterol or triglyceride levels with statins or other therapies.
But Sooch said young pharma companies usually start out with federal and state grants to hire staff and start research on their products.
"Unless you have a rich uncle," Sooch said, most pharma companies use a mix of grants and private investments from angel investors or venture capital funds to get going.
"There are lots of types of grant funding. You can get maybe $200,000 to $1 million, but then you need larger capital" to begin a clinical trial, she said.
"You can get one or two rounds of venture capital, then you go the IPO route because it is very expensive to fund phase 2 and 3 drug trials," she said. "You look to the public market. Biotech is well received if you have a really exciting drug. It is risk-reward for many companies."
But Sooch said there is a right time and a wrong time to do an IPO.
"It is all about timing. Are you prepared from accounting procedures, do you have executive management to build conviction on the street and with analysts? Do you have operational talent?" Sooch said.
Investors in Michigan participate in bioscience companies in a number of ways besides just providing funding. "They take a seat on the board of directors. They know many are startups and they participate in ways to turn companies into successes," she said.
When companies are acquired by larger firms or sell IPOs, Brosnan says investors cash out. "We call them exits, when they are sold to big companies or IPOs," she said. "On average it takes 10 years. They know they need to be patient."
In Southeast Michigan, venture capital investors helped to propel companies like Millendo Therapeutics and ONL Therapeutics, both of Ann Arbor.
ONL, which stands for "outer nuclear layer," was founded by three scientists in 2011: Dave Zacks, a clinical physician scientist at the University of Michigan Eye Center; Jeff Jamison, ONL's chief science officer; and the late Railli Kerppola, ONL's former CEO and bioscience researcher.
"They had an idea," said Freshley, who became ONL's CEO in 2013 after Kerppola passed away. "Why do patients have successful surgery for eye detachment still lose a lot of vision?"
Through research, ONL scientists found that cells activate a death cycle in the eye. "By blocking that death cycle you can protect vision," Freshley said.
ONL acquired an IP, a peptide that targets the protection of liver cells. "Dave (Zacks) thought it might work good in the eye." A patent was filed in 2013 and research continues.
Freshley said ONL received phase one grant funding from the National Institutes of Health to get the company going. Over the next two years, ONL raised about $1 million in angel investment, then it received a phase 2 grant for $1.5 million.
But ONL scientists discovered an improved peptide from the original one, ONL-1204, which hasn't been approved for a patent yet.
"The problem with the first peptide is that it doesn't go into water-based solutions very well. In order to deliver it, you need an injectable eye drug that goes into the water," Freshley said. "We feel we have something here."
In 2016, ONL raised another $1 million in angel investment and received another federal grant from the National Eye Institute, which is part of NIH, that Michigan Economic Development Corp. matched.
Freshley said a number of angel investors have bought into ONL's concept, including East Lansing-based Capital Community Angel Investors and Massachusetts Eye and Ear in Boston.
"We think we have a good idea that has a broad utility, targeting patients with retinal detachment. We think it can protect vision and improve surgical outcomes. There are other applications with age-related macular degeneration and glaucoma. Those (conditions) have millions of patients."
During the next 18 months, Freshley said ONL is expected to be ready to start human clinical trials. "At that time we will need additional capital," he said.