Berson Lecture | Jeff Aronin, Life Sciences Innovator | Full Lecture and Q&A

All right, we'll make this fun hopefully. Today you'll learn more about areas in life sciences entrepreneurship and on the business side, because my career, as Emily pointed out, has really been at the crossroads of entrepreneurship, life sciences, and business. To summarize what we really do: we find needs in the healthcare world—patients with diseases with no treatments—and we develop medicines, science, technology that treat those diseases, and we build companies around that. Our core strength is getting medicines approved by the FDA; we usually get multiple drugs approved every year. It's a long, complex process. Something people aren't aware of: there are only about 50 drugs approved each year, and there are 6,000 drug companies in America. That's not a great business, but the work we're doing is so important and meaningful—to be able to change people's lives makes it all worthwhile.

Before I even start today and give you my journey and talk about opportunities I see in the future, I'll start there. Often people look at somebody's background and miss the thing that's missing in what I do: it's meaningful and important work because you are helping patients who have no other alternatives. These treatments help them live longer. Today we're talking about cures with gene therapies, so it's super rewarding. People say, or I will say, it's the most rewarding thing I've done in my career—helping patients, getting medicines approved, and hearing from families. You'll hear about that through my talk. But the one thing I point out is it's not only rewarding because it's meaningful, purposeful work; it's the reason we've been successful. It's allowed us to hire great people because they want to come work somewhere where you're making a difference. It's allowed me to raise a lot of capital. It's hard to get products approved and work through problems for many, many years. For those of you who have worked in a research lab, science is unpredictable and takes a long time, but because you're doing something so important and meaningful, as well as interesting, it allows you to keep going. That purposeful, meaningful work has not only allowed us to be successful, it's made it worthwhile.

We have a product we just got approved last year in September for a terrible neurology disease. The scientist was an 82-year-old researcher from France who worked on this for 55 years. That's what it takes in science often—that level of commitment—because it is so purposeful and important. I'll talk a little bit about my journey, then we can talk about opportunities I see in life sciences, and then hear your questions.

As an entrepreneur, which you have to be in a lot of different fields, it started very young. I always remember starting new companies, doing new things, looking at the world in a certain way: 'Why is it done that way? How come it's not done this way?' My wife laughs at me because by age 11 I had a big lawn mowing business. It was really because I had no money and I didn't want to cut lawns myself, so I had all my friends and my brother cutting lawns and shoveling snow. I was always coming up with ideas to start something, to build something, and thinking about how things could be different. Today there's a fancy name for it: first principles. That's one of the things I've always tried to do—look at things and say, 'Why is it done that way? Why did they design a car like this? What if we did it this way? Why are we developing drugs that process? What if we did it this way?' Starting with those first principles has really been one of the things that helped me as an entrepreneur.

Early on I did every job growing up. At 15 I worked at Shakey's Pizza, and they had me do the books and order alcohol. I had a lot of jobs growing up, and I always loved science. I got to university, and as most of you juniors, seniors, sophomores, I certainly had no idea what I wanted sophomore year. I think that's more normal than most people realize; most people don't really know and will change their careers. I really loved science, but it wasn't my main focus. It's funny—we're in the chem building, and I struggled to get through biochem. I hated it, or I probably would have gone fully into science. Does anybody like biochem? Anyone know someone? Oh, we got one. Okay, you're the one. So because of that, I focused more on business, but I love science. I ended up thinking I was going to law school senior year, planning to go after law school. I had a girlfriend who had asthma; I took her to the medical center multiple times and would ask the doctors questions like, 'Why isn't that working this way?' I think they either liked me or I was driving them crazy. He gave me a card for a drug company representative and said I should call and ask him these questions. I ended up calling on behalf of my friend, and the drug rep said, 'You know what? My manager said we actually need someone in Chicago. Would you be interested in the job?' Because I was graduating, so that's how I got from law school to 'I'll pick one year and see if I like this.' I never went back. I loved it. I didn't love everything, but I loved that we were helping patients.

I remember the moment it occurred to me that this is what I want to do. I was still going to go back to law school; I was just taking a year to make some money. I was sitting in a doctor's office, and the doctor said, 'Let me take you into this other room. One of the patients on the drug trial for your drug is in there.' It was a young lady. Her family was Indian, so the whole family—there were like 30 people in the room for her doctor appointment. I went in thinking, 'Oh my god, I hope the drug is working,' because they were going to take her into surgery and remove a quarter of her brain—epilepsy surgery to stop where the seizures were starting. We went to the appointment, and it turned out she was having no seizures, from 20-30 a day. The family was thrilled, doctors thrilled, she thrilled. I remember thinking, 'Wow, we could do this with a medicine. This is what I want to do for the rest of my life.' It wasn't great design that I ended up there; it just turned out that I was at that point, and it really connected with me.

From then on I really committed myself. The other benefit of starting where I did was I was at the bottom of the company. I did whatever it took, but it allowed me to rotate through different divisions—manufacturing, clinical, regulatory, sales, research—and gave me a good understanding. I never felt like, 'I'm not going to do that.' The best thing that happened to me is I never felt that way. If somebody needed a job done, I'd do it. I was able to do these little niche jobs nobody wanted. They all wanted the big giant brands, the exciting cholesterol medicine with 40 people on it. I would take the little crappy drug with no sales that nobody wanted to focus on, but it was great because it was just me. That's advice I give everybody: go where you can differentiate yourself, where you can figure things out. It doesn't have to be the biggest, most exciting area. Go into an area, find opportunities, and that really benefited me.

Early in my career, about three years in, they needed someone in Japan, and nobody wanted to go for an indefinite time. I was young and thought it was exciting, so I raised my hand and went. It was a great opportunity that exposed me to things and gave me benefits. All these things were really helpful in my career. But something happened as I was growing my career. I was very fortunate to have a mentor, the president of a big giant drug company, who really helped me and promoted me. But as I grew, I recognized that we kept getting bigger, buying other drug companies. This is happening today; these companies grow, and it's hard for a large company to innovate. So they buy other companies to get new products and keep growing, and then they become very big and don't focus on smaller opportunities.

My first innovation was recognizing that nobody was focused on rare diseases. There are 7,000 rare diseases, and only 5% have treatments. Imagine if you're one of those families or people with a rare disease and you don't have hope because only 50 drugs get approved out of 7,000. You don't even go to your doctor anymore because there's nothing they can do. Big drug companies say it's not big enough for them; the drugs have to be this big for us to focus on. So I left the big company to start companies focused in this area. It was more rewarding to me. Instead of the fourth cholesterol drug, I could innovate something brand new where there was nothing, and it was meaningful and purposeful. I was able to recruit great people because of it, and the need was clear, so I was able to get financing partners. That was a great step in my journey—figuring that out and having the ability to just do it.

It was scary. I had Emily at home as a baby. I quit a big job with a giant company to go do this, put most of my resources in it. At that time, being an entrepreneur wasn't cool like it is now in Silicon Valley. People thought you couldn't get a real job. They couldn't understand why you would leave a big company to do this. It was a scary time, but we were able to quickly build. First, we had to recruit employees to this vision, which I was able to do because the need was there. I had to sell them on my vision, and I was able to recruit the best of the best—best scientists, best researchers, best finance partners. At 29 years old, we raised $150 million. I couldn't even imagine that. It was a scary time because we had to go build, but we were doing something purposeful and meaningful, so we all stayed directed on those goals of getting medicines to patients who desperately needed them. We got five drugs approved and sold that company, then sold multiple companies after that doing similar things. Along the way, five things go wrong every day, but staying focused on your goals and objectives makes it work.

Why did I start Paragon? Paragon came about because there's so much technology and innovation going on today like I've never seen before in the last 30 years. Because of genome sequencing, which we couldn't do anything with for 15-20 years because we didn't have fast enough computer technology, now we do with artificial intelligence, leading to gene therapies and all these opportunities. We're able to get drugs approved better, faster, and treat things in ways we've never been able to do before. We're not just talking about treatments. One downside to what I do is it's frustrating that we're treating disease, not curing anything. But today, turning genes on and off, we're able to actually cure diseases. A big focus of mine has been rare genetic diseases, single gene defects, where we can actually do a lot we never could before. It's incredibly exciting.

What does this mean to you? You're coming out knowing more than the guy who's been in the lab for 30 years. You don't have the biases; you're not thinking about things the same way. It's a really exciting time. Artificial intelligence—right now you go to the hospital and it's archaic. We don't use AI for anything. Everything is still hand-written, diagnoses are archaic. There's so much that AI will change in treatments, drug discovery, drug development. People who have the ability to understand AI and put it together with the genome work we're doing—there's so much we're going to be able to do in the next 10 years. Coming out of university today in the sciences or business, it's going to be a revolutionary time.

I'll give you an example. One of the companies on that video is called Evozyne. We are able to use artificial intelligence to understand how enzymes work and model them. We are developing and designing enzymes that don't exist in nature and then producing them. The world's largest producer of nylon came to us and said, 'We make more nylon than anybody, but we start with a petroleum base. It's messy, expensive, sustainability issues. If we had this one enzyme, we would be able to produce it out of vegetable oil.' We produced that enzyme, which will allow them to use non-petroleum-based materials. These are the type of things we're going to be doing. We can do this with drugs—create enzymes that are more powerful, a thousand times more potent than current enzymes. We can do it in human therapeutics, agriculture. We're working with big AG companies, companies doing sustainability and energy. One of the enzymes they want to produce takes carbon out of the atmosphere. There are so many directions this will go, and it's already happening.

I always view what we do as not necessarily projecting the future, but seeing what's going on already today. Your generation sees that better than we do. Every big company already has biology divisions. We're just producing things for them. That's a little bit about what we're doing today and where things are going. It's a really exciting time. I'll end by saying, as I talked earlier, it is the purpose, the meaning that allows us to be successful. As an entrepreneur, the most important thing you do is identify needs—a need that people are willing to pay you to solve. You can do this in any area. Science just happens to be one of those easier areas because technology is evolving so fast. But it can be done in any area. The most important thing is to find: am I really doing something valuable that is going to solve a big problem?

I'll end or go into some questions by saying this is the most exciting time. If you have a science background, especially if you're a science background and an entrepreneur, there's so much that can be done. We're counting on you to solve some of the big problems.

That's a great question. One of the—it's a whole class to talk about private equity, venture capital. It is one of the most important things you need to do when you build a company: raise capital. It is challenging, but I believe good ideas can all get funded. The real important thing is to find investors—whether venture, private equity, family offices, big mutual funds—that are in alignment with your objectives. Many people go to the wrong sources and it doesn't work. I've always tried to find long-term capital because science is unpredictable; you need longer term. Today we fund the early portion to get it to proof of concept, take that risk, and then we have partners like Fidelity, the giant mutual funds that are long-term focused. While we know most of our outcomes are five to seven years, sometimes it's much longer, ten years, and we want to have that room. Sometimes you end up in a partnership where their objectives and your objectives cross, and you have to sell early or do other things. The real trick is there are a lot of sources of capital today. It's gotten better and better. The most important is if you are really early-stage with an idea and you want help, you should go to venture capital. If you have cash flow or close to cash flow, you should go to private equity. Then there's family office money, even money from companies or family offices. There's also from patient advocacy groups—cystic fibrosis funded Vertex's development. There are a lot of sources. That's a really important area because it's like a marriage; you want to make sure you understand what the long-term goals are, and you have to live with each other for a long time, so communication is important.

So what we did was we learned the hard way. We would put a lot of drugs in one company, and what you find is drug development is really hard because different timelines—some drugs need a lot of resources, some don't. Different mindsets: neurologists think differently than orthopedic docs or oncologists. It creates competing cultures. So we set it up where we have one need—it's dermatology now, we're going to do rare genetic derm. So we have one platform and we're going to put all of our drugs in that company. It's worked really well for us. It's one of the innovations I think we've done better than Big Pharma.

You're exactly right. AI can save enormous cost to our system. I'm on the board of a giant credit card company, and we are using AI throughout the organization, saving billions of dollars. Then we look at our healthcare system—because we're so regulated, we're slow. We are not incorporating AI into our healthcare system the way we should be. You should walk into your doctor's office, say all your symptoms, and it should come up with a list of potential diagnoses. But we're just not there yet. We are evolving to get there. We're just ahead of the curve. AI will get there, and I think in the next few years it's going to change the entire healthcare system. But you're right, the risk is are you too far ahead of the curve? But I think it's a great place to be involved today. We even have two companies in AI right now.

That's a great question, great point. We have done that. We recognize developing drugs is a portion of what we do, but we are using—we have companies in AI diagnosis, radiology diagnosis. Right now radiologists are reading images, and there are too many images for them to read. There are a lot of false positives, a lot of problems. AI can do this very well. We got the first AI diagnosis approved for breast cancer, which was a very—it's a really good company, really successful because previously the process was not very good. I think this is going to be throughout life sciences. Yes, it's an exciting area.

Yeah, that's a great point. I do think one of the observations has been by a lot of university hospitals: a lot of training is spent right now on technical observations that can be done by machine learning or AI. If we can eliminate a lot of those technical observations—and we know how hard doctors are worked, how much time they're putting in—this will allow them to free up time to learn more about the patient and what's going on. I think that's where the training of medical centers is going as well.

That's a great question. I think a lot of today is about understanding all the different divisions. When we look at a product or an opportunity, we say: first, what's the need? Is there a real need? Does this technology work? Does the science act? Do we think it's going to work? Then you guys say: can we make it? And then you have to be able to recruit the people to do it. It's kind of putting all these pieces together. Having a basis in science helps you through a lot of those elements. Your background may be in business, so that will help you in other elements, or your background may be in psychology so you can work with employees. Understanding having a good base will make you better or weaker in one of those categories, and you can learn the rest. But today, I think understanding the overall and then hiring really great people to help you in the specific areas is what has worked well for me. I certainly don't know any of those areas well enough to do it myself. It's kind of the broad view that's helped me.

It's a good point. Look, we view the future as really exciting because I've watched us go from small molecules to large molecules to antibodies to now gene therapies to now AI-developed enzymes and other areas. Just think about that evolution in 20 years. It's unbelievable, and it's going even faster. We've always tried to get out ahead of it. If we didn't get into AI now, it's too late if you try to start in ten years or five years. Gene therapy—we have a company that has one of the three gene therapies approved. There are only three gene therapies approved, and we have gene therapy manufacturing, which is the hardest part. Getting ahead of it and being able to do that today gives us a platform to build off of. I think that's important: if you're going to think about your careers, try to specialize, understand the broader picture, but really get to be good at one of these areas.

That's always evolving. We sell drugs throughout the world, so the models are evolving throughout the world. Our focus has always been at Paragon—because remember, we start independent companies that end up commercializing and running it themselves. At Paragon, our goal has always been to innovate products that there's a high need for. If we do that well, everything else kind of takes care of itself because there's a real need. You're solving something that has a lot of costs to the system. If we can reduce cost—think about 30 years ago, you guys won't even know this. If people had an ulcer 30 years ago, they would take five days off work, be in the hospital for five days. The cost to the system was huge. Now you take a medicine and you don't have that issue. Think about how much time and money that saved the system. What we're trying to do is solve big problems. As the different payer systems all evolve, that will work out for itself. That's kind of our view.

First of all, legal is such an important area of what we do for multiple reasons. IP—the IP lawyers are critical to our success. We really need that; otherwise, you're going to spend—it's a billion dollars to develop a drug today, maybe actually more statistically. You need to know you have IP that's going to get you through. A lot of our regulatory divisions—I think that's what you're talking about—working on it is such an important area because understanding how to work through all the hurdles of the FDA is very important. And yes, every—I think we're in a—the advancing science, developing medicine, and just being in business, there are areas where you get a lot of accolades and some areas where you get—I don't know if criticisms are right, but questions around why are you doing it this way. So communicating is very important.

I think this is an area that is evolving, and there's a great area for people to go into: this whole tech transfer. Understanding—it used to be that universities were often white paper researchers doing basic research, pure, and you were doing God's work. But developing something to be commercialized looked dirty, like if you got paid for it, that was bad. That's the old model. Now people realize—even University of Chicago, Emory, all these great—Stanford develops and innovates more IP, Caltech. It's become where you want to see your science advanced, and these researchers are becoming entrepreneurs. They partner with business school students, create companies, and produce new technologies that get approved all the time. That IP—you want the university to do very well because you want it, but you want to incentivize the researchers to develop technology, develop research not just for 10 years but to actually get to market to help patients and help society. That's really changed. Now the best universities in the world are investing very heavily in producing more, getting more of their IP not just producing patents but actually getting them to market.

Yeah, I think it's kind of the entrepreneurial mindset. Big companies are forced to innovate incrementally and do a lot of the same thing—heart disease, let's all focus on heart disease drugs. It's important, but do you really need multiple drugs in the same category incrementally better? No. We were able to find areas of high unmet need because we don't have the giant infrastructure quite as big as they do. I don't think they need it because they do, but that forces them—if it's not a multi-billion dollar drug, they won't even start the research. We will. I think big companies in general are great at certain areas: distribution, best practices. I tell people work at a big company for a while; it's really valuable. But they're not able to innovate in any industry the way entrepreneurial companies can.

I think, and I'm not alone in thinking this, that in the next ten years the majority of drugs approved will be gene therapies. It doesn't mean we won't still develop traditional biotechnology drugs, but there's such an opportunity. We could do so much with these gene therapies that we could never do before, and they could be applied in so many ways. Some are going to be preventative. That's why I'm saying it's a very exciting time.

It's a great point. Right now the hardest thing about gene therapy is making them. Since we have an FDA-approved facility for making certain gene therapies, we are actually using that manufacturing to help other companies and in-license other products that we can make. So yeah, that's a great point.

Right, well a large percentage of patients don't take their medicine. There are a lot of reasons for it, but most of the time it costs the system more money when they don't take their medicine. We all know what happens when you don't take your antibiotic—you create future problems. This is with many other drugs. People take part of their medicine, forget, stop, which leads to ER visits for certain drugs. Compliance is a big issue. Somebody invent something to improve compliance, maybe AI-related. There have been a lot of things tried; nothing really works great. I'm guilty of it myself.

Right now the ones approved, the main one being talked about for SMA, and there's one for the eye as well, and they are cures. You take it once and you're cured. These are super small—like a thousand people have the disease. So the number is very high, but it's over a few patients. The insurance companies are all paying for it and covering it because it's a cure and because it's a very small group of patients. To their overall treatment, they do the math and say this makes sense for us to cover this. But ultimately, they will come way, way down as the diseases get bigger and bigger, as we're able to treat larger diseases. That's ultimately where it should go. Great question. I'm excited about it as well, and that's where I see things going.