Episode #217: Mary Wheeler, BioRock Ventures, “2019…There Were 20 $1B IPOs…We Just Don’t Call Them Unicorns Because They’re Not That Rare”
Guest: Mary Wheeler is Founding Managing Director of BioRock Ventures, a Silicon Valley based life sciences venture fund investing in startups developing novel drugs to treat diseases. BioRock Ventures is open for new LPs and includes a startup developing a COVID19 treatment. She has over 20 years of experience in biotech companies of all sizes at the C-level and in various M&A deal lead, licensing and strategy roles at Johnson & Johnson, Forest (now Allergan), and as a startup founder. She has advised several dozen early stage ventures as well. She earned an MBA from MIT Sloan, a PhD from Princeton, and a BA from Yale. She is a Kauffman Fellow.
Date Recorded: 4/29/2020 | Run-Time: 50:04
Summary: In today’s episode, we get into biotech and venture capital. We cover Mary’s deep background that ultimately influenced her investment focus on biotech. We cover her fund, BioRock Ventures, investing in biopharma startups, her core investment criteria, and keeping an eye out for companies serving unmet need areas.
We touch on some key differences between biotech focused VC investing vs. other areas of VC. Mary even shares some insight into a company in her portfolio that has focused resources on potential COVID19 applications.
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Links from the Episode:
- 0:40 – Intro
- 1:56 – Welcome to our guest, Mary Wheeler
- 4:38 – Mary’s first startup
- 7:13 – Various roles Mary has held
- 9:22 – Mary’s path to the investing world
- 12:12 – BioRock Ventures
- 16:11 – How BioRock sources deals
- 18:33 – Walk through of how Mary looks at investments
- 24:01 – Attrition in the biopharma investing world
- 26:37 – Typical check sizes
- 27:37 – Thoughts on the current pandemic
- 30:10 – Primmune Therapeutics
- 31:52 – Research on medical ailments of the brain and the challenges
- 34:18 – Trends in biopharma
- 36:48 – Biggest mistakes people should avoid in biopharma investing
- 39:07 – Where the fund is right now
- 40:39 – Wishlist ideas
- 43:10 – Influencing her children
- 44:00 – Resources
- 45:26 – Most memorable investment
- 49:07 – Best way to connect: email@example.com, biorockventures.com
Transcript of Episode 217:
Welcome Message: Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: What’s up podcast listeners? Another great show for you today. Our guest is founding managing director of BioRock Ventures, a Silicon Valley-based life sciences VC fund, investing in startups, developing novel drugs to treat disease. BioRock Ventures is open for new LPs and the portfolio even includes a startup developing a COVID treatment. Mary has over 20 years experience in biotech companies of all sizes, from C-level to M&A deals, licensing and strategy roles, places like J&J and Forest, now Allergan, and also as a startup founder. She’s advised several dozen early stage ventures as well.
She’s got an MBA from MIT Sloan, a PhD from Princeton and a BA from Yale. Lordy, she is a Kauffman Fellow too. In today’s episode we get into biotech and VC. We cover our guest’s deep background that ultimately influenced her investment focus on biotech. We cover her fund, BioRock Ventures, investing in biopharma startups, her core investing criteria, and keeping an eye out for companies serving unmet need areas. We touch on some key differences between biotech-focused VC versus other areas of VC. And our guest even shares some insight into a company or portfolio that has focused resources on potential COVID applications. Please enjoy this episode with BioRock Ventures, Mary Wheeler.
Mary, welcome to the show.
Mary: Thank you. I’m excited.
Meb: I’m so glad you’d take a little time during this quarantine break to chat today. This will be a lot of fun because I actually, despite being an investments guy, was a biotech background. I did bio and engineering as an undergrad million years ago. This is an old hobby of mine and would love to hear your story. You’ve got a pretty interesting background to where we fast forward today. Do you wanna tell us a little bit about it?
Mary: Sure. Yeah. And you can tell me where to elaborate, but basically yeah, I started out in science. It sounds like you, found that really compelling and did it some more. After college, I went and did a PhD, but I care very much about impact so I pivoted, to use the startup term, and did go to business school. And ever since then I’ve basically been focused on innovation both in big co.’s like J&J or a company called Forest, which is now a part of Allergan, or my own startup, which is what I did right out of business school. And what I’m doing now is investing in startups, in small VC funds.
Meb: Awesome. I wanna unpack a couple of those real quick because it’s funny, I grew up in an aerospace family and it’d always been into being an astronaut essentially. And I’ve gone to college, obviously studying aerospace engineering and then very quickly found out that was not being an astronaut and going to the moon. That was tons of math and science and engineering, physics. When was the science inoculation for you? Were you doing chemistry stats growing up? Where did it set in?
Mary: You know what? So my dad was a doctor, you know, a general practitioner, but when I was in high school, he was always working. So he would leave “Science” and “Nature” papers at the breakfast table for me and he would have underlined, to me, it looked like he underlined everything, but key things that he thought were interesting. And of course, I didn’t really understand any of it. But, you know, I think like a lot of people, when an older mentor, whether it’s a parent or somebody else, kind of encourages you, that made a big difference. And so it made me feel like this was important and that I could do it. And so I just kept that interest going.
Meb: Yeah. And so the difference between me and you is that after undergrad, I had an older brother, so a similar mentor who had done a PhD and he’s like, “Meb, you need to take a couple of years off, make some money.” Because it took him like a decade, but so he’s like, “This is a long slog in life sciences. Like maybe just take a break.” I took a break and never went back. You kept going. The PhD came first, then the startup, then the MBA or what was the right order?
Mary: Yeah, it was PhD. Sounds like I have a sort of a parallel story to your brother, and then I basically went straight into the MBA. There’s some stories there. And then after that was the startup.
Meb: Okay, and what was the startup? And feel free to tell the stories. You can’t leave a dangling lead like that.
Mary: Yeah. A PhD just like your astronaut story, being an academic, which is what I thought I wanted to do, isn’t all just the fun bits of science. And what’s fun to different people varies. It’s a really long slog. And that’s like a whole other podcast on how can we better encourage academia to foster postdocs and grad students. It’s a tough path. Academia is ultimately a little bit less applied by definition. And that’s really what pulled me back into the business side is realising that a little bit of the practicalities of being an academic, writing grants, begging for money, that sort of thing.
Meb: And so the MBA was to kind of get some of that business experience, corporate ideas. What was the startup idea? Do you mind talking about it?
Mary: The MBA was basically to erase the PhD because a lot of people wanted to, you know, hire me for lab jobs and that was by then what I didn’t want. So I went to…got an MBA at MIT Sloan, which is a great place for innovation. I really enjoyed that and that introduced me to venture capital and startups. I’d never really heard of any of those things before then. And I looked at both of those at that time. And the startup was me and two guys who were much more senior. And that’s pretty common in biopharma, which is where I focus, which is developing novel medicines for diseases, that it takes a while to learn the ropes and you’re not really disrupting the FDA. This is more of a discipline of gradual innovation. And so I was grateful to be the third to these two very experienced folks, one who was the CEO and one who was basically running the R&D and I was the business person.
The specific thing that we were developing was a migraine prevention drug that had some clinical data in an academic lab and then we were taking it and doing the official biopharma through the FDA, really testing it in a real experiment with a lot of patients. So we did that. I was there for four or five years. I brought in a couple other assets. That was my job, was to figure out how to convince other companies that this little, tiny startup that had no money and nobody have ever heard of was worthwhile partnering with.
And we brought in a couple other potential medicines. And long story short, that company ultimately…I think now it’s sort of part of Pfizer, sort of very deep in there, in some of those assets. And then I went to work at a medium-sized company to get work experience and exposure to peers and sort of the art of the deal, so to speak, in biopharma.
Meb: And so then I mean you’ve got a couple of pretty big names on the resume, whether it’s the Bill and Melinda Gates Foundation, Impossible Foods, one of my favourite veggie burgers out there, probably my very favourite. What was the kind of progression? Was it mostly doing on that side investing? Was it corporate partnerships? What was sort of the main roles that led you up to where you are now?
Mary: Yeah, I came up through the deal side. And in biopharma they use the term business development, which a lot of people mean sales. But when you’re doing drugs, no one company develops a drug. The drugs that you take, you get in the pharmacy, usually pass through innovators and possibly some startups and possibly some big co.’s and in between you kind of hand off. And there’s some people that need to structure that relationship because it’s often a really longterm relationship with complicated, like you do the clinical trials and we’ll do the science and I’ll do the marketing. And so you need to kind of figure that all out and how much money is gonna get exchanged at which point.
The title was business development or corporate development for a lot of different companies, including the ones that you mentioned, and also Johnson & Johnson, which is a very big pharmaceutical company. The job is often the same where you’re working with scientists, but you’re also working with manufacturing people and regulatory people and tax and of course, a lot of lawyers because it’s in the contract.
So I came up through that. A lot of the evaluations that you’re doing as effectively a buyer of these potential medicines is exactly the same as what you do in venture and investing. You’re looking at the market and you’re looking at the potential based on the data that you’re getting access to, usually under a CDA. So it’s many months, sometimes a year and a half or so process for each thing you’re looking at. So I’ve done that for about 20 years, both for startups and big co.’s, also Impossible Foods. Like there’s just a lot of commonalities when you’re dealing with something that’s science-based
Meb: Listening to you talk about this, it’s so funny because it brings me back to my early days. My first job interview in LA was at Amgen, which is in Thousand Oaks, in their, whatever you call it, internal VC, sort of BizDev. Did not get that job, but it was a very memorable day at their campus. So you kind of gained all this experience, what started to push you to gravitate more towards your own investing path? Was it starting to syndicate deals? Where did this transition occur?
Mary: Yeah, well, totally honestly, I’ve been trying to get into venture capital since I first figured out what it was. So I eventually did a Kauffman Fellowship, but I originally applied for the Kauffman Fellows right as I was leaving my MBA because I was like this investing thing, this is it, this is what I want to do. And that was now, oh gosh, 15 years ago, more than 15 years, a long time.
Meb: 2020 counts as like an entire 3 years already.
Mary: Yeah, I keep thinking I’m in my 20s. I’m not. It was a long time ago. And so I’ve been interviewing for VC jobs all along the way. So this is not a new interest. You know, long story short, at some point two years ago I said, you know what, I’m just gonna do it. So I started my own fund. I had been in my M&A roles, been acquiring mainly venture-funded companies just because of the bite size. When I had those roles, it was venture size, like $300 million to a couple of billion is the kind of acquisitions that I was tasked to look at. And those were often venture-funded companies. So I kind of know and respect a lot of the key players in the space already and just have gotten to know them over the years and just really admire what they’re doing. But I also saw gaps in sort of coverage of the fund space.
And I’d say the gap, to put it succinctly, would be sort of small check sizes. It could be for any stage asset or any stage…any sort of round, but because of the labour-intensive sort of decision making process that I think really is inherent in picking a good biopharma company or asset, it kind of is hard to write smaller checks efficiently. Do you know what I mean? But I had been doing super efficient deal reviews for 20 years because that was my job was to get through, you know, a thousand, a couple of thousand a year, like many other people in my role.
I had a good idea of how to do that and I was kind of tired of saying no to these smaller teams who had maybe not a grand platform that had really amazing science, but really was just a practical, like we think we have a treatment for X disease and we know what we’re gonna go after because it’s been done before, but we’re gonna do it better. So a little bit less splashy, but also small checks. And so that’s what BioRock funds. It’s also right after I worked in pharma big co.’s, I spent a long time advising startups, several dozen of them, and they also sort of repeated what I had seen, like they just couldn’t get anybody to give them the time of day if they were raising less than $20 million in any round. Sometimes $20 million isn’t what you need to get the job done.
Meb: It’s interesting because BioRock exists, and I wanna hear you just kind of describe the fund concept in general, but exists in this space that there’s not a whole lot of other funds doing this. Am I right? And you can correct me. Tell us a little bit about the fund concept, what you guys are targeting and also how the AngelList syndication started tying into that as well.
Mary: Yeah, sure. Absolutely. So BioRock invests in biopharma companies, which means startups developing drugs for diseases, novel treatments for cancer, diabetes, COVID-19, in fact, is one of the companies in my portfolio is developing a treatment for that. Anything that is a disease that is gonna be regulated through the FDA and that you’re gonna do experimental trials, I’ll take a look at it. And as I said, it focuses more on the smaller check sizes and smaller teams, smaller everything because I’m focused on efficient capital use and a clear path to exit for the VC returns. On the other hand, it still has the same elements of data. I wanna see that you have evidence of efficacy and safety and that you have a clear indication that you’re going after versus, and this is also very cool, but it’s just not what I invest in, in contrast, you may have a really cool pathway, like a science thing that you’ve discovered that may have a role in 12 different diseases, but you’re still figuring that out. That’s not something that BioRock would invest in.
I would say a lot of the people…the funds here have raised, I think four of them just announced $1.5 billion and more around the new funds that they’ve raised, like props to them, Deerfield, Arch, I think it was maybe NEA and Flagship, you know, all awesome funds. They will be able to more deeply support those kinds of more platform kind of companies.
And the reason that BioRock invests in those is the first instance that I got to stretch my legs and kind of actually test this working hypothesis that I’d had for at least 10 years was when I was at J&J and I really fell for that opportunity to do that in the innovation centers. I set up a program to basically, if you will, angel or seed fund external companies that were working on something that J&J wasn’t in a position to engage in immediately, but that they wanted to have exist in the world, right, have a relationship with, and an example would be say SutroVax.
So through what I set up, SutroVax was formed around a syndicate. Other people invested as well as J&J. And I think they just announced a few weeks ago their Series D. So they’ve raised hundreds of millions of dollars. This was in the last six years. They still exist. But if we hadn’t helped start them, I don’t know if they were…you know, there wasn’t really anybody who would put that small first check in. I know that the CEO is awesome and he would have figured it out, but it would have been more of a slog.
Meb: You would describe this as a seed style fond or Series A? What is the VC parlance?
Mary: Yeah, I keep it to saying small check size because I don’t want people to feel constrained. If the CEO wants to call it a Series A, we have invested in a Series A company. If they wanna call it a seed, we’ve invested in a seed. If they wanna call it the pre-IPO round… I have also…actually quite a bit of my deal flow is people who are looking at a pre-IPO, they have to do one more step, they feel, until they get to an IPO exit because they have gone a nontraditional funding route or non-dilutive funding, which is exploding right now for example, in COVID-19 rightfully so. Everybody wants to progress that.
Meb: So you mean meaning grants?
Mary: Exactly. So you’ll see somebody will say, “Well we’ve done a lot of non-dilutive funding,” and that means that they’ve gotten…maybe they did a partnership with a bigger company and that came with $20 million upfront or yes, they got a government grant. You know, maybe it’s the Bill and Melinda Gates Foundation or something like that. So I will also often engage with groups that have sort of a nontraditional path.
Meb: One of the big differences traditionally with biopharma and sort of your world versus traditional say tech VC is when you’re investing in like the seed startup for a lot of these tech companies, they may have a product out the door running in six months, whereas the time frame for what you’re doing often can be, particularly if you’re involved in the FDA, years and years and years. Talk to me a little bit about how you source deals, how you think about doing follow-ons, how you even find these early stage companies because in my mind it would seem so hard to…I mean the validation of… You know, there’s so much involved in this. It seems like so much work. Just talk to me about kinda how you started to find all these companies at such an early stage.
Mary: I often get asked by tech people about sourcing and I would just say relatively speaking, the sourcing piece is less difficult. It’s kind of hard to secretly do a clinical trial, right? You have all these things that you’re needing to follow regulations, etc. So you’re not usually seeing their sort of usual suspects, CROs that organisations go to get these different experiments done correctly. Where I source things is number one, CEOs who have worked with me in the past usually refer their friends to me, and number two would be other VCs for whom the opportunity is just too early or too small of a round that they need. And the third is cold. I will absolutely look and I continue…I don’t wanna make promises but I’m continuing to do my best to read every single thing that I receive because you can very quickly…and you speak to the amount of work that’s involved, I think very quickly because I have a very specific lens just for BioRock, I can quickly determine if it’s a fit or not there.
And then yes, after making the decision to have initial conversations. The due diligence can be very involved, so it’s a pretty tight pipeline as far as the investing process goes. It’s very wide at the outset. People will send me devices or diagnostics or something, biotechie, that’s actually health tech, like telemedicine. None of that stuff actually is what BioRock invests in. So that’s super easy to say, “Actually that’s not a fit.” I do try to refer those to friends of mine or sort of groups that I know that might be a better fit, but if you’re in biopharma and you’re developing a novel treatment for a disease and you’re gonna go through, say the FDA, then I’d like to know about it.
Meb: To the extent you’re willing to, I would love to hear any sort of walkthrough, almost like a case study of any companies that you’ve either invested in or considering or whatever may work best for you, but just to hear about how you think about it, how you found them, what’s the potential?
Mary: Yeah, yeah, absolutely. So criteria, some of the criteria I look at once we get past that fit piece, so if you’re developing a treatment for a disease and it’s not a platform, you have a very specific sort of thing that you’re gonna do. Some of the things are very common to a lot of earlier stage investing in VC. I’m looking at the team and specifically often it’s just the CEO and the rest of the team is somewhat virtual and that’s fine. So a lot of the same stuff that you’re looking at for techs on the team side. Does this founder have grit?
Differently, I am looking for experienced founders. It is hard for me as a single GP to really get in and other than on the deal and exit side help companies that don’t have leadership that has done this before in some fashion, whether it’s in a big co. or small co. So team is one, market is another, competition is the third. Those are really common for any kind of VC investment I think.
Different for biopharma and I think also relevant for other life science investments is data. And I will say I talk to a fair number of people who enjoy dabbling and investing in biopharma, and I kind of sometimes cringe when I hear that they just had a quick chat for 15 minutes and then they were in. I don’t believe that’s a great way to make investments in this space. I really think you need to look at the data, not even just the stuff in their deck that they’ve kind of put together, but the raw data. And that’s usually under a CDA. And you need to understand exactly what kind of, again, I mentioned before, safety and efficacy, you’re gonna be expecting. You also have to have a good sense of the exit path. That’s something that I look at very closely. And a separate topic I’d love to talk about is kind of the assumption that it’s gonna be a, let’s say a 20-year path to exit. In fact, the Silicon Valley Bank put out some data recently that points out it’s three years to an exit via M&A in biopharma and it has been for the last three years, three years. That’s great.
Also, in terms of IPOs, I think it was 2019, I think there were over $20 billion IPOs. I could be missing the number a bit, but we just don’t call them unicorns because they’re not that rare, right? So you can exit in the biopharma space in a reasonable amount of time. That doesn’t mean that the product has made it to market. In fact, it almost always hasn’t. It’s just that it has reached a milestone that somebody else is willing to take on the next phases. When I mentioned earlier, that’s what I’ve done for 20 years is be in the front end of the buying position and saying, okay, well, here’s what we wanna see. So I can now turn that around and say, okay, here’s what I need to see these startups achieve. So if they get to point B, I know that these five companies are likely to wanna buy them. So I see the clear path to the exit.
Meb: Yeah, so that’s an interesting point because the traditional phase one, two, three path, you may, whether the drug or whatever, therapeutic takes a decade to come out. The actual investing time horizon may only take a few years because they get bought or partner up with a bigger partner at phase one data or phase two or phase three, whatever it may be. And that’s an interesting point. I would love to hear any examples of any companies that come to mind that you can talk about.
Mary: You know, if it’s okay, I can’t say the company name yet, and I can’t wait for them to be able to announce it, but I can describe their path. And this was something that when you start a venture fund, people say, well build your track record. And so I started investing on AngelList and have a wonderful syndicate of individuals who will choose on a deal by deal basis to join me on AngelList. Now, that is not what I do primarily anymore.
This is one of the investments I did before I started the BioRock Venture Fund. And this company basically…so they came to me with an idea. And I had worked with the CEO in a previous startup and this CEO had worked in a big pharma before that. So this person had both startup experience and big co. experience. So that’s what I mean by experience, decades of it, I think 30 or 40 years of it. He knew that a certain target had been investigated by a big pharma, like a public company for a specific disease. And I don’t like being so abstract, but that’s the best I can do.
And so they were gonna go in and they did go in after I put in the first non-friends and family money and basically created a better version against this particular target for this particular disease. They did it very quickly because they were able to leverage some cool outside technology from another company that, let’s call it…it’s not officially AI because it doesn’t involve any kind of deep learning, but allowed them to much more rapidly generate leads and then find an ideal hit to the target. They generated that. They did the next steps, which involves studies in animals. And then two years after the first investment, they signed an exit deal with a big co. We invested twice. The angel group that I led invested twice in 2017 and 2018 and then in 2019 they exited. So it’s real simple. It’s a specific target, specific path, specific disease. They did it slightly better, they would argue, in a meaningful way to patients and they got bought.
Meb: You know, when we talk to VCs, particularly the tech ones, and they talk about the batting average of investments, it’s often you hear that the power laws dominate where the vast majority of the portfolio, most of the companies may go to zero or may not succeed. A handful will do well and then a few will do extremely well. Is there as much attrition and failure rate in the biopharma side as in tech, do you think, or is it a bit different? Any other sort of similarities or differences you can think about? Because I remember the old phase one, two, three percentages, getting through is so hard for so many. I don’t know either way. I’m just curious.
Mary: Yeah, I mean there’s two kinds of success ratios that you could talk about in biopharma. One is where you were mentioning like when you start before you’ve got it in people, so it’s preclinical, so it’s before it’s in the clinic, then depending on the different disease areas, and it does vary dramatically, you have, you know, roughly…anybody can Google this, and it’s great, Tufts has great numbers, it’s definitely less than 10% success rates, sometimes as low as 1% that actually make it to the market. But as I was saying, that doesn’t mean you can’t as an investor, even in the public markets, but we’re talking about private investment, that doesn’t mean you can’t get returns in terms of, you know, making enough progress that a different group wants to take on the investment going forward and therefore you get your exit. And it can be worthwhile for everybody involved to go ahead and do that.
As far as investing privately in tech writ large versus investing in biopharma writ large, you know, I’ve never actually done a deep dive there and as a scientist I’d be like, well I have to do a rigorous… So I would say talking to others and anecdotally in some of my experiences, what I see is, especially in consumer, like investing in like consumer apps, there’s kind of like huge winners and everybody else is kind of a dud. In contrast, it does seem like a lot of biopharma is, there’s a lot of base hits, if you will. You’re aiming for 50X but there’s just a lot of 3X to 10Xs which is all good. You really wanna avoid disastrous failures because you are investing still bigger dollars on average and some of those have come down a bit. But you’re still investing bigger dollars so you don’t wanna lose that because it’s a black and white thing. You get to the next stage. Oops, it’s totally not safe so we can’t, it’s done. There’s no pivoting. You’re done.
Meb: What’s a traditional check size that you guys are looking to do in general? Is there a range end?
Mary: Yeah, we pretty much stick, and this is mainly because it’s a fun one, we stick to $250K to $500K for the first investment. We got our list of the context, and this is mainly because I’m building a track record. And then we’ll go up to $1.5 million into each company. I would say that most groups and what I would like to do in the future would be more percentage wise. And then you’ll see sort of similar to what you see in tech where people are aiming for double digit percentage ownership and maintaining that to the exit or something like that. So that’s definitely more common.
But the average round size recently in Series A for biopharma is over $20 million. There’s definitely an increase in the number of over $100 million rounds in early stages like Series As. So rounds are getting bigger in biopharma, just like they had been in tech. Now with COVID-19 happening right now, I don’t think actually biopharma will change, but maybe tech will. So we’ll see.
Meb: You alluded to COVID earlier, and we find ourselves recording this in mid-April, so one, I would love to hear any general thoughts to the extent you have any. My last guest, I asked when did they think they would be attending their next live sporting event or concert because today LA said something about it. There was a reference of it being 2021, which I would cry. That’s the first part. Second is to the extent you can, and you may not be able to, to talk about the company that you’re involved with that’s doing COVID research or treatment or whatever it is.
Mary: With regards to COVID-19 I hope anybody watching this is finding themselves safe and healthy. This is definitely a crazy time and not one that anybody really expected. You know, your question of what’s the over and under on when we’ll get to go to concerts and be in big crowds again? What I’m doing is placing my bets, making sure I can get refunds for different events through the summer in the hopes that that will happen, but I don’t know if it was Dr. Fauci or who has been saying it depends on the virus. It depends on our behaviour. It depends on luck and scientists. I’m not gonna make any predictions. I just kind of make bets and hope for the best, but we’re gonna make the best of it whatever it is.
Same thing I get often asked when will there be a vaccine? None of the companies in my portfolio are currently working on vaccines. I have invested in companies in the past that do that. So it takes a long time to make a vaccine and make sure that it is safe and that it works. And everybody I know who has any skill in this area has dropped everything else to work on that. And some people who have sort of related expertise have also dropped what they’re doing to try and work on this.
So one part of it is the science and getting it to work, but the other part is scaling it for everybody in the world. Everybody is just doing it at risk. Most of the efforts will fail if it’s like everything else in the biopharma industry and that’s okay. Failure shouldn’t be discouraging. That’s just the way it is. But if we all are doing this in parallel and okay with just basically throwing resources at it, knowing we’ll mostly lose that money and those resources, which is what people are doing. We will get there. So I can’t predict when. I’m just trying to do what I can to participate in whatever the community decisions are. So I shelter at home. I don’t leave my house if that’s what we’re doing. Wearing masks is what I saw New York City is doing right now. Everyone should try to cooperate with that.
As far as the company that I invested in through BioRock, the company is Premium Therapeutics. They have press releases out on what they’re doing. And I know we’re recording this a couple of weeks or so before you guys will actually see it, so check out their website and they’ll have the latest updates. And they actually came to me when they were focused on cancer. So they have a very cool oral, potential oral treatment that may boost innate immunity, which is a little bit different than some of the other cancer treatments, which focus on another part of sort of what happens in cancer. But because it affects innate immunity, it also is highly relevant to infectious disease.
So BioRock invested in the fall of last year, prior, I think to COVID-19 infecting anybody. We don’t exactly know when it happened yet, but people are saying December. If so we invested prior. And this team is great. So they saw that they had potential applications and immediately shifted. Just like I said, a lot of other companies are doing as well to see what they could do to help. They are finding that the…and I mentioned non-dilutive funding, there was kind of no support for infectious disease and vaccine work before this, that’s kind of why we’re finding ourselves where we are. It’s so hard to make a business in that space for so many reasons.
So it’s been really impactful. So I’m making up numbers now because out of respect for the Premium confidentiality, but let’s say they had to raise, let me pick a ridiculous number, $200 million in their next round. It looks like with all the non-dilutive funding, they’ll only have to raise like $80 million. So vast amounts of resources are pouring into this space. Both helps anybody who is investing in this space, but certainly should help speed up any kind of treatment.
Meb: Interesting. And as you think about the whole biopharma space in general, is there areas where for most of the investments it’s, you’re seeing the ideas, the people, the new developments and the drugs? Are there entire areas where you’d think, hey, look, this is really interesting to me. I’m looking to fund this area. There’s just nothing there or I think there’s massive opportunity. I don’t know what it possibly could be. It could be AI, it could be data, it could be all the CRISPR technology, whatever it may be. Is anything in particular subsectors of biopharma that you think a lot about and has a lot of potential?
Mary: Yeah, unfortunately, people continue to get sick and die of many things and I think a lot of us flipping through the news, you’ll see the comparisons on sort of causes of deaths and you can see the lists. I don’t know if anybody’s done that, but if you do it, you’ll see cardiovascular disease, cancer, diabetes, accidents. You know, you’ll see those things. They continue to be problems. Some of them are better than others with current medications or prevention.
A very big unmet need area is Alzheimer’s disease, Lewy body dementia, Parkinson’s, the sort of continuum of, it’s the CNS, it’s the brain systems, it’s hard to treat things in the brain. Basically, the brain has this good barrier that kind of keeps drugs out and it’s really hard to study. And I’m in all kinds of different working groups and there’s a lot of nonprofits or family offices that are very interested in this area. It’s very hard to see a path forward from an investment standpoint if you’re trying to get returns. But it’s an incredibly high unmet need, incredibly important. So I continue to look at everything I can in that space.
Meb: Why would it not be that attractive from a return standpoint?
Mary: Because everything fails. Nothing works.
Meb: So you mean there’s potential if it did work, but there’s such a high failure. Okay. Because I was like, it seems like an amazing opportunity you’re describing.
Mary: Yeah, there’s very few people willing to persevere in this space. And I think Biogen is one of the companies that has come up with the news recently, but they’re persevering in a space with [inaudible 00:34:06], which has been in phase three and I hope for the best for the sake of patients. But we just don’t really understand that. So there’s kind of a lot of science and medicine that really needs to happen for us to really understand that space.
Meb: What do you think is the most over-hyped area of biopharma where you look at it and you’re like, oh man, that’s just so much money flowing into that. It’s saturated. I don’t get it. Anything in particular?
Mary: Yeah. I mean, the thing is the good and bad of the actual investments, when I see like the people who’ve been in this industry for decades investing, I’m like, yeah, that’s great, almost every single time. I’m not like, oh, where do… There’s not a lot of hype in biopharma, which I really love. It’s not about the hot this or that. Nobody’s racing over here and racing over there. There’s a lot of very, mostly scientists or doctors at the core and then they went on to become investment people, just diligently like thinking through things. Some of the smartest people I know, I just love being in this industry because of that.
So I can’t think of anything. I will tell you some trends though, right, because that’s the other way to answer this. So immune-oncology has exploded and a kind of cancer that runs in my family has effectively gone from a complete death sentence to basically not a big deal in the last five to seven years, thanks to this immune-oncology investment and sort of approved medicines now sort of explosion. And it’s been awesome. But recently this year you’ll see in the numbers, the investment in immune-oncology by venture has slightly gone down. That’s not to say it’s not at all interesting. I think it’s still very compelling. It’s just no longer like exploding in a [inaudible 00:35:44] way.
What I would say, and I’m in Silicon Valley, right, so I’m talking to you from Palo Alto, California, I see a lot of people asking me about AI in particular. And that might be because I do a lot of work with discovery stage startup. They don’t have necessarily a medicine yet, but they’re working on figuring out a medicine or figuring out a new kind of pathway that might be relevant for a disease. And so there’s a lot of really cool stuff going on that leverages AI. But at the end of the day, those of us in biopharma for decades see it as a really cool tool, like many, many other tools that our industry has incorporated and leveraged for decades. So we don’t see it as something that’s going to cure Alzheimer’s disease because it’s not. So that would be something that I would say definitively I find way overhyped, but not within biopharma circles.
Meb: Obviously most of my audience isn’t gonna be going investing in private startup biotechs. They can already impale themselves in the public securities already, which are a minefield enough as you mentioned. What are some of the big mistakes you think are most important to avoid as someone in your chair? You talked a little bit about validating the deep science as a due diligence. Anything come to mind as like really important that people may or may not overlook, but things that you have to get right to sort of put the odds in your favour?
Mary: Yeah, I mean, I guess I would say two things. One is don’t do it on your own unless you’ve been in this industry for a long time, but that doesn’t really help anybody who hasn’t already been in the industry for a long time and it might come off as sort of arrogant or elitist. So I really would though…that would be my first thing is, hey, hire me to invest for you or go hire someone else who’s been doing this for a long time as an investor, or at least as a decision maker who invests other people’s money. Because they really, whether it’s a hedge fund or it’s a public advisor, they do a great job. I just think that on a whole, these folks are really…but what they’re doing and what you could do as an individual if you don’t feel like hiring someone or you just really like doing it yourself, you need to get access to the data.
That data could be any kind of data, but it’s the data that tells you that this is safe and efficacious for the disease. It also can be the data that says, they might say, “The FDA is letting us go ahead into clinical trials.” In my experience working as a buyer for big pharma where we’re able to sign a CDA and actually read the updated minutes or actually look at the raw data, a lot of times it’s not crap. They’re not where they think they are. And that really makes a much bigger difference when you’re developing something that’s a regulated product where you really have to get to point seven before you can go forward. You can’t kind of wing it or pivot or you know, it’s not like this growth curve and you’re okay. So it’s flat for a little while and you keep going. You’re just dead, right?
So you really do have to be where you think you are and if not, you have to fix it. CMC, so manufacturing is another one. So there’s just a lot of stuff like that that needs to be verified. It’s work, right? So investing in your friends’, brothers’, sisters’ startup is probably not a good idea. You can. Thank you for being the friends and family that support these great entrepreneurs, but you’re probably gonna lose your money. And that’s okay, if you know that.
Meb: I live in LA, as you’re describing the entire film industry pretty accurately. And where do you guys stand as far as the fund? Have you started to deploy a number of investments? Where are you in the process?
Mary: Yeah, so we’re kind of in the middle of fundraising right now, which isn’t a great place to be for early stage fund one and twos. I’m being told, “All is lost. Mary, we give up.” But we’ve deployed, we’ve invested it in three investments, two of which are disclosed. One is actually in an infectious disease space and the other one was in cancer and now is in COVID-19. So I am looking at all different disease areas, but for whatever reason I’ve ended up because of high unmet need, that’s what I look for, with two investments in infectious disease, so viruses and bacterial infections and bungles stuff.
Yeah, so we’re still raising and we’re gonna keep raising and deploying. And I would say all of our portfolio companies are relatively not impacted by COVID-19, social distancing, the markets. I think that’s very typical for biopharma is that it’s slow and steady. The path is written a long time in advance. So there’s not a lot of stuff that can rock the boat. These particular companies are also at a stage where they’re still able to execute. When you’re a little bit further along and you’re in the clinic, there’s a fair number of groups that are pausing some of their clinical trials because they don’t wanna expose people unnecessarily to the COVID hospital environment or academic labs that are pausing because why put any scientists at risk so that… But these startups are able to continue basically business as usual, which is, I guess a good thing.
Meb: Perfect. So if you could wave your wand and sort of say, you know, there’s an idea that I would like to fund. If someone was listening that hasn’t been built yet, you know, and said just there’s magically a family office that says, Mary, I’m gonna give you 10 million bucks. But now you have to go find someone to fund a certain idea, anything on the top of your brain that you would just lick your chops for and say I’d be really excited about this, that and the other?
Mary: Oh my gosh. So many things. Yes. Both on the specific company side, so specific sort of disease areas or teams that I would love to fund, a huge backlog actually of potential companies that I could invest in, but I’m still raising, so there’s this basic stuff. Right now I’m funding existing companies. BioRock would really like to do more of the new co. where you’re actually helping to form the teams. There’s a couple of indications that are more orphan diseases where very few, and often these are young kids are born with very severe medical issues and there’s not a lot of them. And the science isn’t always well understood. So it takes a few more steps to get the pieces together, whether it’s the team or the science. If I had more resources, whether it was more people or money, that will be one of the first steps that BioRock would do.
Broadly outside of BioRock, I think also I mentioned I invest in experienced founders mainly because of the learning curve and all of the different things you kind of need to have connections to and access to knowledge for. And typically people who’ve been around for a couple of decades have better networks and can get those answers quickly, whether it’s regulatory, clinical, etc. I would really love to be able to also better enable new founders. Maybe they’re just coming out of a lab, like an academic or a scientist. It’s not about age. It’s more just about they haven’t been in this industry for 30 years, whether maybe they’re a tech person who wants to switch.
That’s been a challenge. I’ve seen some accelerators try to work on, but it’s particularly hard to do that in biopharma because it is… There’s really specific knowledge. So I would love to be involved and help with getting that…it’s almost like an MBA/Kauffman Fellowship… You know if it’s kind of like baseline of information that smart people really could learn I think pretty quickly, the network is a little harder to hand over to people, but that would be, you know, something that you see some of these more well established accelerators are able to provide for their community, I would love to be able to do that as well.
Meb: Yeah. Good. Well, hopefully our listeners send you a bunch of money. I’ve invested alongside with you already, so hopefully you get a lot of inquiries. As we talk about resources, are you now highlighting stuff for your kids? I don’t know if they’re old enough.
Mary: No, I thought about that. Yeah. So I have 2 kids who are under 10. You know, you always try to balance the pedantic, annoying parent thing with the like sparking something. And I think when my dad left me “Science” papers at the breakfast table, I was kind of like, well whatever. But I really did love it. So it’s a little hard to gauge, you know what that might be. My kids right now are happy to tell everybody, you know, my mom is a scientist, which isn’t actually. I mean, I guess I have a science degree, but there are many more people who would fit that better than me. So that’s good enough for now.
Meb: For people who are interested in your world… I look back, I mean I remember some of the defining biotech books, Alchemy to IPO, the one about Vertex, I can’t remember the name of it, “The Billion-Dollar Molecule.” I remember what was for me, caused me to switch my major from aerospace to biotech and engineering was reading “Recombinant DNA” by Watson, just this beautiful book and just was…fell in love. As part of your daily, it could be journals, it could be books, it could be websites, podcasts, whatever, what are some of the resources that you use as part of your daily, monthly information consumption that you think are particularly wonderful?
Mary: I don’t know if I have an amazing answer to this. I have some friends who I always say, “George, what should I read?” And they’re always like this, this and this. And I’m like, yes, these are such great books. I’m not one of those people. So I used to do that back when I had frankly time. And that was back when I was a PhD student. And I read a lot of stuff on consciousness and theory of mind. And you know, neural networks back then were kind of new so you’d only do like three layers deep, and that was it, then your computer went kaput. It was overwhelmed. So I did a lot of that back then. So all the books I recommend are 20 years out of date.
Meb: Now, you just accept you’re a part of the simulation and that’s that.
Mary: Yeah, it’s virtual or something, but whatever. I’m gonna live it.
Meb: Let’s talk about a couple of quicker questions. As you look back, and this can be…for you, it’s a little different, not as a public markets investor, but the question is what’s been your most memorable investment? But for you it could also be most memorable deal failure, could have been great, could have been most memorable experience as a scientist, anything that just is seared in your brain? While you think about it, for me, you already mentioned my single worst investment of my life was trading options and Biogen when I was a young lad. So I went…as soon as you said that, I could still feel the needle pain of losing all my money, which was a great lesson in the early days. And anyway. Anything then come to mind?
Mary: Yeah, one of the favourite deals that I got to work on was actually was when I was working at a medium-sized public pharma company and there was this treatment that this startup had come up with. It was for a disease called hypophosphatasia and it doesn’t…you know, that doesn’t matter. But the company I was working at didn’t typically do… This was gonna be a biologic. It was like a big molecule, complex molecule. It didn’t typically do development in that. So that was kind of a reach. And then it was an orphan indication, which meant, let’s say there were a couple of thousand kids that we thought had it all over the world and that was it, which is actually pretty small for a drug. But these kids were being born kind of with no functional bones. I’m sorry, that’s kind of perhaps shocking for some people listening, but it was also shocking for me that these kids were not really getting an initial shot at all at life and this company had, it appeared to when we were continuing to look at the data and the due diligence, and they hadn’t got it all the way in the clinic yet, basically hardened those bones and gave these children a chance to live. Like they literally were unable to breathe in some cases because their skeleton failed to form and it kind of crushed their lungs, I mean it was just incredible.
Being able to advocate, which was effectively my role was…as was 10 other people in my company’s role as a business development person was to assess what was the business case for this, but it was also just like, how can you not want to help these kids and help this company move forward? It was what they were seeking was to be acquired when this great group of startup folks had done all this work to really understand the market. The head of commercial had come out of Genzyme, which is one of the leading companies that had developed treatments for many orphan diseases.
So for me, just kind of being able to do the work there and advocate, let’s say it was a billion dollars that we were gonna put together to make a bid for this company to acquire it and successfully convinced people who didn’t really understand necessarily the science, really didn’t do this kind of stuff, but could see how compelling this was in the high unmet need and went ahead and jumped in the contest to try and get…acquire this company, it was ultimately, we were one of the last two companies sort of bidding for this, and the company that one was not us, so it was a deal that failed effectively, but the company that did acquire them had a lot of experience with developing orphan products and getting them out and distributed to the kids and getting those reimbursed because they can be more expensive than say a pill, you know. So probably went in the right hands, but that was a very memorable deal for me, just the experience of working on that.
Meb: Yeah, I mean that’s the thing in your world, the purpose and having the ability to see something through that actually does make an impact. And for the investors listening, comparing funding something like that to helping Google sell more ads efficiently or whatever it may be, it tends to be an easy choice in my mind. Mary, where do people find more about you guys if they’re interested in investing and they wanna follow along with what you’re up to, what’s the best places?
Mary: Yeah, well they can email me at firstname.lastname@example.org or they can look me up on our website and find that same information, biorockventures.com. That’s biorockventures.com, all one word.
Meb: Perfect. We’ll add those to the show notes as well listeners. Mary, thanks so much for joining us today.
Mary: Yeah, thank you. This was fun.
Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us email@example.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. My current favourite is Breaker. Thanks for listening, friends, and good investing.