The first generation of microbiome companies made a strategic mistake that is easy to see in retrospect: they tried to treat the microbiome as a drug target before the field understood the mechanism well enough to design a drug. The result was a series of clinical trial failures in the 2019-2023 period that destroyed substantial investor value and, more lastingly, instilled deep skepticism about the space in the broader biotech investment community.
That skepticism is understandable. It is also, we think, starting to create opportunity. The second wave of microbiome drug discovery is built on a fundamentally different scientific foundation, and the companies driving it are notably more cautious about the gap between correlation and mechanism than their predecessors were.
What Went Wrong the First Time
The original microbiome thesis was essentially this: certain disease states correlate with altered microbiome composition, therefore restoring normal microbiome composition should treat the disease. The clinical programs that followed this logic — in inflammatory bowel disease, metabolic syndrome, autism spectrum disorder, and other conditions — largely did not work.
The core problem was the directionality question. Microbiome composition changes associated with disease might be a cause of disease, a consequence of disease, or both. Most of the first-wave clinical programs assumed causality without adequate mechanistic evidence. When you do not understand why the microbiome change you are making should produce a therapeutic effect, you cannot predict who will respond, what dose is right, or how to identify the patient population most likely to benefit.
There were also substantial formulation and stability challenges that received less public attention. Getting live bacterial consortia to survive manufacturing, maintain potency through distribution, and colonize the gut reliably enough to produce consistent systemic effects is harder than the first-wave companies publicly acknowledged.
Fecal microbiota transplant works for C. diff. It works because the mechanism is simple: replace a devastated microbial community with a functional one. The moment you try to apply that same intuition to complex systemic diseases without an equivalent mechanistic clarity, you are running a biology experiment, not a drug development program.
What Has Changed
Three developments have shifted the scientific foundation under the second wave.
First, the tools for studying microbiome mechanism have improved dramatically. Metagenomics, metabolomics, and single-cell transcriptomics can now be combined to trace the specific metabolic outputs of specific microbial species and connect them to host cell biology at a molecular level. The path from "this bacteria is associated with disease" to "this bacteria produces metabolite X, which activates receptor Y in host tissue, which causes effect Z" is now traceable in ways it was not five years ago.
Second, the clinical indication selection has narrowed. The most credible second-wave programs have moved away from broad systemic diseases where microbiome mechanism is plausible but unproven, and toward indications where the gut-to-target pathway is short, well-characterized, and testable in animal models that predict human response with reasonable fidelity. Recurrent C. diff remains the gold standard for proof of concept. Graft-versus-host disease, where disrupted microbiome composition post-transplant is mechanistically tied to immune dysregulation, has become a compelling follow-on indication with a credible mechanism story.
Third, and most importantly, the product modalities have diversified. Live biotherapeutics — intact bacterial consortia — are still being developed, but with much more attention to formulation, manufacturing, and colonization reliability than the first wave brought. Alongside them, a parallel approach using purified microbial metabolites as drugs is gaining traction. If the therapeutic effect of a bacterial strain can be attributed to a specific metabolite it produces, you can potentially skip the live bacteria entirely and deliver the metabolite directly. That is a much more conventional drug development pathway with better-understood regulatory requirements.
Where We Are Looking
Our interest in the second wave is specific. We are not interested in companies running broad microbiome profiling studies hoping to find correlations that will lead to programs later. That approach burned the field once.
We are interested in companies that have a defined microbial mechanism, a defined patient population with biomarkers that can identify responders, and a clinical indication with a tractable development path. Oncology is interesting: the microbiome's effect on immunotherapy response has credible mechanistic support, the patient population is well-defined, and the endpoints are established. Metabolic disease remains an area where mechanism is less clear, but specific programs targeting defined gut-liver signaling axes have a more defensible scientific foundation than the first-wave dysbiosis-correction approaches.
The second wave is real. It is smaller, more focused, and more scientifically disciplined than the first. That is exactly the right posture given where the biology actually is. The companies that survive it to clinical proof of concept will have earned something the first generation could not: a mechanism story that holds up under rigorous scrutiny.
