VDP-76 [Assessment]: ZBiotics

[ninapatrick]

One-liner: A growing, profitable probiotics startup with an anti-hangover product on the market, plans for more, and a patented enzyme-delivery technology that could be useful for longevity interventions.

Longevity Dealflow WG Team

Reviewers: Not reviewed yet
Shepherd: Tim Peterson
Other squad members: Nina Patrick, Paolo Binetti
Sourced by: Tim Peterson

Project PI: Zachary Abbott

Simple Summary

ZBiotics is a VC-backed Bay-area biotech founded in 2016, which makes the world’s first genetically engineered probiotic product. Their technology is based on inserting enzyme-coding DNA in safe bacteria and orally delivering them to the gut. Their first product is capable of breaking down acetaldehyde, a highly toxic byproduct of alcohol, thus ameliorating next-day effects of alcohol, by targeting one of the root causes. The company is generating growing revenues and strong gross margin and is looking to expand to new markets and products, for example to improve gut health. Their platform could also be used to deliver enzyme-based interventions to target disease and extend healthy years.

Problem and solution

#1: The next-day effects of alcohol

With the growing health and wellness approach to alcohol, consumers are looking for solutions to help with hangovers. Each year there are 2.6 billion hangovers in the US which result in $179B lost in reduced productivity, not to mention long-term health consequences.

One of the key causes of hangover is acetaldehyde, a toxic byproduct of alcohol consumption and a risk factor for cancer development. In particular, acetaldehyde is widely considered to be the most potent in colorectal carcinogenesis through its interactions with various cellular and biochemical processes

Most existing anti-hangover products simply mix off-the-shelf supplements that do not target root causes of next-day effects and and do not work.

Zbiotics is the first product which addresses acetaldehyde. ZBiotic’s first strain – B. subtilis ZB183™ – contains a trait for acetaldehyde breakdown from the liver into a probiotic bacteria for the purpose of helping you feel better after drinking alcohol. It is patent-protected under US Pat. 10,849,938 B2. The product was determined “Generally Recognized As Safe (“GRAS”) by an expert panel, and the safety data was published in a peer-reviewed journal.

#2: Gut Health

Product in stealth until launch. Patent granted, product to launch in 2023.

Technology Details

The bacteria strain used by Zbiotics is a B. subtilis strain which has naturally evolved to pass your stomach acid unharmed in a dormant form. When it reaches the gut it senses the new environment, essentially wakes up and starts to produce the specific enzyme it was engineered to produce. The Zbiotic will take 18 to 24 hours to pass through the gut and be cleared from the body.

Zbiotics does not contain any antibiotic resistance genes. Only genes that are already present in the gut environment are used in their products.

Genetically engineering bacteria has been common for decades but products have been slow to reach the market because of the indication the products are being designed for. Zbiotics reached the market first by not focusing on a drug or a disease, but rather by building a probiotic, essentially a food product, for healthy people.

Zbiotics has demonstrated statistically significant breakdown of acetaldehyde after 30 minutes in vitro.

Zbiotics has done rigorous in vivo testing in-house before bringing B. subtilis ZB183™ to the market. In an in-house blinded study, participants were given 4 vials of probiotic. Participants did not know which two were placebo, the unedited bacteria strain, or which contained the B. subtilis ZB183™strain, which can break down acetaldehyde. Participants were sent out for separate nights to drink the exact same amount of alcohol, eat the same foods and then rate their pain on a scale from 0 to 4 across 11 common hangover symptoms. The results showed a statistically significant 40% decrease in symptom severity for those participants which had B. subtilis ZB183™. These studies are not shared publicly because they are not IRB approved FDA clinical trials. For a consumer product, it is important that the customer can perceive the benefit and these in-house studies demonstrated that perceived benefit. Additionally, ZBiotics customers rate the product highly with a Net Promoter Score (NPS) of 68.

Opportunity

Zbiotics is a platform-technology company which can build multiple products across a variety of health issues and indications. Their proprietary bioengineering achieves pharmaceutical-grade effectiveness, has high adaptability, is unique and is patentable.

Their strategy to launch in the consumer market and bring the world’s first genetically engineered probiotic to the market was a clever one. A consumer launch as a food product needed 10-50x lower investment and less than 3 years to market launch. This strategy was and still is successful, resulting in rapid growth and generating $10M in annual revenue only 2 years after launch. Zbiotics is celebrated by users with extremely positive customer feedback and tangible benefits.

ZBiotics was granted the patent for their second product for gut health earlier this year. They plan to launch the second product in late 2023.

Relation to Longevity

ZBiotics products keep healthy people healthy, by reducing the downside effects of consumer habits, such as drinking alcohol or eating a sugary diet, which can benefit overall health and wellness. In addition, Zbiotics technology could be applied to deliver enzymatic interventions with the potential to extend healthy years.

1. Breaking down acetaldehyde

Acetaldehyde is the first metabolite in alcohol metabolism and has been documented to be toxic, mutagenic and carcinogenic in animal experiments. Faster breakdown of acetaldehyde will lead to faster removal from the body which may reduce the risk of diseases associated with aging, such as cancer and heart disease.

2. Reducing inflammation

The second product improves gut health. By reducing inflammation, this will lead to better metabolic health. Product is in stealth until launch and further details must be kept confidential.

3. Technology as an enzyme delivery system

Zbiotics is a platform technology to deliver enzymes to the gut. This is very relevant as a novel delivery mechanism and has the potential to target a variety of problems and indications.

Plan & IP Roadmap

The Zbiotics team has already been granted 2 patents for their first and second product which builds confidence that future products will be granted patents as well. Next, they plan to kick-start R&D to create an exercise recovery probiotic and a sleep/mood probiotic. Future R&D will result in 1 patent per product. Their technology could also offer licencing opportunities for more products by other companies.

Team

The team is strong and came recommended to VitaDAO from contributing members.

• CEO & Co-Founder, Zack Abbott has a PhD in microbiology & immunology from U. Michigan. His PhD work was in microbial genetics and clinical trial design.

• COO & Co-Founder, Stephen Lamb has a JD/MBA from Penn Law/Wharton. He has worked in food distribution, market entry, supply chain and regulatory law.

• R&D is led by VP of R&D, John. W.K. Oliver, with a PhD in chemistry and biotechnology from U.C. David and a Post-doc from Harvard.

The team also includes people in charge marketing, supply chain, and food safety and quality.

Funding

Seeking $100,000 from VitaDAO

Goals with current fundraise of ~$1M:

1. Launch Product 1 on Amazon
2. Expand to Canada for first international sale of an engineered probiotic
3. Check regulatory boxes for Product #2 and launch

$1M is already committed, but they are making room for value-adding investors.

Strengths

• ZBiotics is already generating a $10M annual run rate (ARR) and a healthy gross margin with a consumer product and more to come: it would be the first revenue-generating company in the VitaDAO portfolio.

• They have a unique pharmaceutical technology to enzyme drug delivery with proven capabilities, which could prove valuable for longevity-relevant interventions

• Impressive customer lifetime values (LTVs). The early adopters are still buying, and the recent customers are performing better than the early adopters.

Risks

• After taking Zbiotics anti-hangover product, people may feel encouraged to drink more, with all its implications, such as drunk driving, aggressions, long-term health consequences

• This funding round focuses on the commercial development of Zbiotics anti-hangover product, which is recreational and unrelated to longevity: investing could have a detrimental effect on VitaDAO’s reputation

• There are no clinical or in-vivo efficacy data for Zbiotics anti-hangover product, although customer feedback is very positive

• Agree
• Agree with revisions (please comment)
• Disagree

[longevion]

There are a bunch of statements that aren’t scientific. We don’t know if these actually work, actually act as they are theorized, actually improve longevity.

It’s fine to not know yet, but why not fund something that will actually try to find out?

We don’t even know if we’d live longer with 0 alcohol and sugar consumption.

I would love to see a proposal for a joint venture for something that would use the same delivery for an enzyme that can actually cure a disease to provide the incentives to do clinical trials, then expand for multiple age-related diseases, for prevention, or for “aging” at some later point.

This team doesn’t seem to actually be aligned with our mission statement and I think we should focus on things that can have a significant impact on longevity (approaches like damage repair, reprogramming, tissue replacement, hormonal etc, not things that intervene in metabolism), and things that will use the scientific method, try to actually impact healthy lifespan, not just marketing to make revenue.

[timrpeterson]

I’m pretty disappointed in the voting here. The company has sizeable and growing revenue that is several orders of magnitude better than anything else we’ve evaluated including Glycanage, etc. (I love GlycanAge but have to be fair). It’s a Ycombinator company run by 3 highly industrious technical founders. I think we are missing out on a sure bet with highly practical form of gene therapy. The science can come. It wouldn’t be hard.

Boston Matrix has unanimous 16 upvotes and no downvotes, meaning it is ready for on-chain voting but Zbiotics won’t??? . I think this shows the limitation of our govenance.

[bowtiedshrike]

Didn’t Boston Matrix get trimmed down to $30k? This is asking for 3x.

I think the main challenges with this proposal is that there isn’t a clear link between funding and longevity, it’s marketed as a platform/supplement company, the roadmap to VitaDAO’s exit not clear, and it’s unclear how it will perform long-term with the competition.

I like the idea of probiotics to degrade acetaldehyde, but that’s being done by other companies too. Instead of genetically modifying B subtilis, I think competitors use other microbes that have the enzyme activity normally. I don’t see a moat for this company, and it’s unclear how it stacks up to the competition (eg TAM, what % market share they have, what they may expect, size of other companies, IP value). Would also be helpful for the patent lawyers to comment on how protective the patent is-- did they take using B subtilis off the table for competitors, all Bacilli, all spore-formers, Firmicutes, all bacteria, or what? Given widespread research into using genetically modified Lactobacilli as probiotics, I would imagine it’s not that broad.

I am wary of platform companies. If there was a concrete proposal-- $100k to develop enzyme X to improve a key longevity phenotype using the platform, that would be a lot stronger than ‘we can use the platform for this in theory, but it’s not even on the horizon’.

Also since their B subtilis doesn’t last long in the gut, any longevity benefit would likely require a daily pill or two. How well will they differentiate to the customer from the ‘once daily probiotic’ you can already buy?

This means it is a supplement business. I am skeptical of supplements claiming enhanced longevity, etc without data to support them. The reason they are a supplement business is so they don’t need those data to get to market. While a reasonable business strategy, I don’t think they’re incentivized to generate data.

It’s not clear to me what VitaDAO’s benefit is. How much of this company would VitaDAO hold? Is the plan to sell the stake after the success of Product 2? Or under certain criteria (eg the valuation goes up by 2-10x, or company gets sold to NatureMade)? Will a share of the current revenue come back to VitaDAO that can be used to fund other research?

[evoogod]

Hi, I am the one who initially brought ZBiotics to VitaDAO, and it’s worth noting that I am an investor in ZBiotics.

I invested in ZBiotics because their flagship product was a life changing experience, and I had the benefit of being introduced to the company while it was still in prototype phase.
Their revenue is incredibly sticky, with nearly 40% of sales coming from subscriptions. Simply put, once you try their pre-alcohol product, you don’t go back, it is that effective and if you are a regular drinker, undoubtedly alleviating significant damage to your body.

On moat and competitive advantage:
The competition mentioned by @bowtiedshrike has not been proven to eliminate significant amounts of ALDH in vitro, and also blunts intoxication, it is not clear if their product is effective at all. (Similar effects come from eating certain cheeses, they are basically negligible) In addition ZBiotics has a wide-ranging utility patent on the alcohol product and similar platform like-products: US10849938B2
If someone were to try to circumvent their patent, they would need a full year to pass GRAS and FDA approval at least.

On exit:
ZBiotics is doing roughly $1M revenue/month from ~10,000 customers/month, as their product is quite expensive at ~$10/dose and customers will not drink alcohol without it. The potential for a +100x here is absolutely on the table given the size of the US market, I don’t think this needs further explanation, whether it is from acquisition or a public offering.

It’s worth reiterating that ZBiotics is a live product in market, growing at 300-400% annually, with $1M monthly revenue, based 40% off subscription. It is the first successful consumer biotech business, and explosive growth is absolutely on the table as they ramp up marketing spend.

I understand VitaDAO is more focused on the mission of longevity than financial returns, but having market success will allow for ZBiotics to explore a whole new set of applications, and making this investment will allow us to recommend cutting edge therapies and solutions to them as their platform scales and healthspan-positive therapies become more definitive.

Please let me know if you have any questions on the company and mission, I will do my best to answer what I can given NDA etc.

[timrpeterson]

This is a gross exaggeration to make a point. Please don’t take personally. → I find it ironic that technical minds prefer fiction over fact. We will fund an idea as long as it sounds cool, but not fund something that actually exists and appears to be working but isn’t explained in a good way.

Let’s do an exercise. Let’s say there’s a novel form of gene therapy with a well established delivery system. The first application is to target genes that if successful could reduce the incidence of several cancers (the metabolism involved drives many cancers - liver, GI, etc. - via DNA damage and other mechanisms). Then, there are additional gene targets that have the potential to impact diabetes and a variety of other aging-related diseases. To me, this is what I think of when I think Zbiotics.

That there is a high % of repeat customers and that they are buying larger packs each time, says the product is working. Considering the prevalence of alcohol consumption, if the first product continues to go mainstream, I would bet this could actually make a bigger impact on healthspan than anything we’ve funded to date. And this is just the first product.

[bowtiedshrike]

I’m skeptical of the ideas, too.

Right now, the claim that it’s a platform is an idea because they only have one product.

If the purpose is to buy a cash-flowing asset, why not invest in Costco? Or even XBI? Or is VitaDAO going to start trying to get some 2-10x in adjacent areas, too?

If supplement subscriptions are the goal, lots of places doing that. VitaDAO could start one, too.

I think the issue here is focus. This may be a great company, but not sure the focus is right. It’s not even clear the focus will be right in 5-10 years.

Would VitaDAO get an option to develop longevity tech using their system with an investment?

[longevion]

Last point would be my dream. Spinning out a company together that uses the same approach within the geroscience paradigm. One example of an enzyme that would be useful for aging is one (or multiple) to digest lipofuscin in lysosomes.

I’d be in full support. Otherwise it’s too much of a departure from our mission

[timrpeterson]

It’s already in the geroscience paradigm. Alcohol is much more validated than lipofuscin as harmful.

[evoogod]

ZBiotics is onboarding more research scientists as they scale, and is absolutely committed to improving human health and longevity via their unique and safe method of enzyme delivery.

Their branding is extremely conservative for this reason, they do not use the word “hangover” in any of their social marketing, ads or on their website, and are extremely cautious about the handling of their brand/reputation so that they have credibility as they launch new solutions.

I also think that the success of their hangover product will be as instrumental for the normalization of biotech health interventions in mass-culture as Tesla was for electric cars.

It’s VitaDAO’s choice if they’d like to help steer the direction of this platform or not, I am confident if VitaDAO is onboard the team would love to hear our ideas for new therapeutics, that would otherwise take years of R&D to test and launch.

[timrpeterson]

Thanks again @evoogod. If this vote doesn’t change, perhaps there are other ways for VitaDAO to be involved.

1. We are in the process of launching our own store where we would sell swag and potentially supplements. We’ve been discussed for quite awhile various supplements “VITAmins” that we are interested in selling. (That there has been relatively strong support for other supplements is another sign that there can be flaws in rule by committee)

2. Helping fund R&D work that @longevion, myself and others want - to fund studies on the efficacy of Zbiotics product on healthspan measures.

[timrpeterson]

Last post then I’ll let it go.

Aging due to sun exposure , bad diet , pathogens , poor air or water quality , but alcohol ??? Why are we distinguishing one external exposure vs. another? Acetaldehyde is toxic. It causes cancer. Many studies have shown that. The level of evidence that Zbiotics product materially affects acetaldehyde levels in vivo is not less than many other projects we fund (because they don’t even have a product). Also, that so many people are repeat customers and buying larger packages suggests the acetaldehyde is getting broken down. This is a level of evidence that most of our projects will never have.

If we found something that could enhance our lung’s ability to handle tar from smoking would we not fund that? Smoking and alcohol are two of the biggest causing of aging related disease. Yes zbiotics is focusing on the next day because that’s all the matters to consumers, but to me it’s very easy to extrapolate that this could have huge positive healthspan effects globally if zbiotics keeps growing like they are.

[4xx2xy]

Cool product, and they certainly have a market. Probably easier to have people take a pill than to get them to stop drinking. People don’t change very easily.

I think that alcohol and smoking is more of a personal choice, vs your air or water quality, to some degree at least. I thought wine was good for you?

[timrpeterson]

@timrpeterson

Boston Matrix has unanimous 16 upvotes and no downvotes, meaning it is ready for on-chain voting but Zbiotics won’t??? .

Note to @rpill. This was not intended as a slight of Boston Matrix. I’ve been an ally in many discussions for that project. It was only meant to highlight that our Discourse (Phase II) voting has flaws and doesn’t always seem to reflect the VitaDAO community’s intent. Partly it’s no one’s fault because proposals can change midway through voting, which can make it unclear what the voting totals reflect. I know this is the case with Boston Matrix where there seems to be good agreement on giving $30K but it’s unclear how much more people would vote to give.