Al-Razouki, Angermayer, Nelsen, Pujara & Tandon on Where the Next Biotech Unicorn Is

Good afternoon everyone, thank you so much for joining us. It brings me great pleasure to be moderating this discussion today with some pioneers in the biotechnology industry and some of the most sophisticated investors in life sciences. Just to briefly introduce our panel, we have Robert Nelsen, who's the co-founder and managing director of ARCH Venture Partners; we have Christian Angermayer, who is the founder of Apeiron Investment Group; we have Dr. Nina Tandon, who is CEO and co-founder of EpiBone; we have Dr. Mad Al-Razuki, who's an operating partner at Deerfield Management Company; and finally we have Rohan Puri, who's co-founder and general partner at Valhalla Ventures. Thank you all so much for joining us to discuss and answer the question of where is the next unicorn in biotechnology. I think everyone on this stage is more interested in discussing what are the platforms and technology that are going to drive the next generation of billion dollar valuations. So Bob, I'd love to start with you. Throughout your career with Arch, you've established over 150 companies, including 47 early stage investments that are valued over a billion dollars. In 2024 alone, we've witnessed the creation of 39 new biotech unicorns. Do you think that there's true and real innovation underlying a lot of those billion dollar valuations, and if so, what do you think are the platforms and technologies driving those?

Does that resonate with you, Mad, in terms of the way that Deerfield looks at making bets in the next generation of healthcare companies? How do you distinguish hype from reality and innovation beyond curing disease, which Bob rightly pointed towards, but creating lucrative, lasting business models in the space?

Yeah, I think it's very important. You look at innovation: there's innovation on the science side, there's innovation on the access side in terms of improving quality of healthcare services, and you also have innovation in terms of how we reimburse or pay for healthcare. There's a tremendous movement in the US and around the world to value-based care, and that's actually nothing new to this region. If we go back 7,000 years to the time of Hammurabi, physicians were paid to keep their patients healthy, not to treat patients who are sick. At Deerfield specifically, we've invested a lot in setting up relationships with 30 of the top academic medical centers in the US, and we're adding more around the world. We can actually bypass the technology transfer office of these universities and cut the time to market from typically four years to around 18 to 24 months. We've set up teams within Deerfield of really hardcore PhD scientists to support on therapeutic development, healthcare services, and medtech. We have our own medtech accelerator; we can develop a quick MVP, and we do a lot of the actual research in-house in New York together with partners. So for us, it's really about being on the ground floor of innovation. I want to echo the comments that Bob did on cell therapy. We're investors in a cell therapy company together, Jaguar Gene Therapy, which is doing tremendous things. But the financial part of the innovation, reimbursing these companies, is going to be the challenge. Out of the 38 gene and cell therapy companies approved by the FDA, eight have been pulled off the market by the companies because reimbursement hasn't been there. These are drugs that cost half a million to $2 million per patient, but there is a very strong correlation that these proteins have to be developed by these genes, otherwise the government or the payers won't pay. So again, it's pay for performance, but that's the world we live in today.

Yeah. Christian, you're not one to shy away from hype; I think you very much embrace it, but you're very good at detecting the signal in the hype. You've founded and established a number of unicorns, and you've also looked at the other side of the journey in terms of public markets with taking a life sciences company public. Do you see a disconnect between the way that biotech companies are valued in private markets and what seemingly looks like decreased investor enthusiasm once they hit the public markets?

Yeah, before I answer that, I want to say one more thing because Bob said it really well and it's so important. I think what is changing is that biotech for the last 20 years was incredibly low-ambitious. We always told our colleagues, 'Don't say we try to cure something; we try to make it a little bit better.' It was always those incremental steps instead of saying, 'Look, at the end, you don't want to just do palliative treatment for cancer; you want to cure it.' There are still so many things in our society, and actually more and more because we get older, which we all suffer from: cancer, whatever. I think now we're going into a time where the science is there, but also, although biotech in terms of valuation is at a low point, the ambition is coming back. People are saying, 'No, if I focus on disease X, I really want to cure it, not just make it a little bit better so people live a little bit longer.' What we are very focused on is taking that one step further. Beyond the cure, why should we just wait till people get sick? Why shouldn't we prevent things much better? For example, take cancer: it would be much better if we never get cancer because once you have it, it's actually pretty shitty even if you can cure it. And even on top of that, why don't we use biotech to allow ourselves to really upgrade us? You mentioned mental health. I'm always very frustrated. We invest a lot in mental health; I started some mental health companies myself, but again, we're always intervening when people already have depression. I would say if I asked the room, statistically 15% of you have a mental health issue, depression, anxiety, but it doesn't need to be dramatic. But if I turn the question around and say, 'Who of you every day truly feels happy?' a lot of you would say, 'I don't know, I have stressful days.' So what I want to say is we can always add more. We can add more happiness. By the way, who of you doesn't want to be a little bit smarter? Why do we accept that the intelligence we're born with is the one we have to deal with? There will be drugs that uplevel our intelligence. Why am I saying that? Because we have one drug, or one group of drugs, that changed the game: the GLP-1 drugs, Ozempic, whatever. Most people who are taking it are not obese. I'm taking it, and hopefully nobody would say I'm clinically obese, but they're made for clinically obese people. I'm taking them because they're outsourced discipline, and they make me, in my subjective feeling, better. So I think we are entering that time where we are much more daring, long story short, and really using biotech to cure things and then to even upgrade humans in whatever we want to be upgraded. To your question: capital markets suck at the moment. You can't phrase it nicer because it's really awful. Biotech was hit the hardest from the whole macro trends, interest rates, whatever, which is a huge distortion because you have private companies which have a valuation, and most, or many, high-quality listed companies are trading at cash, so they don't have an enterprise valuation. It's going to change, but I think positively, at the moment, listed biotech stocks, the good ones, are maybe the biggest investment opportunity because they haven't recovered while tech stocks, crypto, all the other interest rate sensitive stuff has actually recovered. But biotech will follow, so it's a temporary distortion we have to live with.

Agree, agree. Well said. I think there are two main themes that have really governed the conversation around innovation and biotech. I think personalized medicine is a really big one, and underneath that you have platforms like AI and other things. And then you've had a big conversation around longevity. I'll get to longevity in a second, but Nina, I want to turn it over to you because I think the company you've built epitomizes personalized medicine in many ways. You've developed a company that reconstructs bone tissue from patients' mesenchymal stem cells, if I've understood it correctly, among other techniques. It's a clinical stage company. I would love for you to share about what you're building, but also to touch on the point that Mad raised earlier in terms of scaling these high-tech applications and turning personalized medicine or boutique medicine into mass medicine that's available to all. What do you see are the barriers to that?

Well, I think the barriers are different at different stages. It's like a video game being a CEO of a biotech company. Level one is trying to get enough funding to prove that your technology works in animals or works on the bench. Level two is prove that your technology works in living systems, so that means an animal model. Level three is does it work in humans, in subpopulations. And level four is in the wild: does it work with the general population? With each of those stages, there's a different set of challenges. The earlier challenges before level four are the only time, at least in most economies, where you can sell product and see if there's a business model. But you have to be responsible as a founder very early on to show that there's line of sight on all of those downstream steps. So I think the challenge at the beginning is making sure people understand that this might be science fiction today, but it'll be science fact tomorrow, and just prove the technology works. That's something like angel capital, and that's not necessarily the hardest money to raise. But it gets harder when you find it like yourselves. We were not immune. We're looking for curative treatments for skeletal issues. We grow bone and cartilage from stem cells. In the case of bone, the cells come from yourself; in the case of cartilage, they come from donor. That's a simple way of saying autologous for bone and allogeneic for cartilage, and they have very different implications in terms of scalability, which comes into the whole question for level four of the video game: showing that you can make something at scale and make something where the unit cost economics imply that you don't have to charge half a million dollars for your product, and therefore delivering value. There can still be value-based care if you're delivering more than half a million dollars of value to society, but people start to ask more questions and raise more eyebrows when it's that many zeros. So when we're talking about the challenges we've faced, in the biotech winter, high interest rates, high inflation environment where people can make more money stuffing their cash under a mattress than investing in biotech, there's been a huge challenge because it used to be enough to say, 'Hey, I've derisked my technology, now I get a 2X valuation bump.' Not so fast when your competitive companies are trading at negative enterprise valuation in the public markets. So what we have found to be our key challenge, and I would say this is probably something we share with a lot of other companies in the biotech winter, is how do we derisk the business model? It's not enough to derisk the technology; we've had to find ways to derisk the business model. And I think that's why it's really interesting: never let a good crisis go to waste. It had a lot of silver linings. One of them is that I think we understand some tectonic plates have shifted. People expected that they could do clinical trials in lots of geographies; that's one thing. A lot of people decided, as healthcare became more globalized and people wanted to seek treatments for themselves, not necessarily trusting their governments to provide them with the best healthcare, started to be more independent in terms of seeking experimental therapies. So we have been very heartened, and I think there will be a wave of biotech companies doing what we're doing now, which is looking for other geographies outside of the normal players of the last decade. I think that's a big upside potentially for this region: regulations that are being written today for this moment, looking for value-based care but not necessarily looking for the same business model from the past. So I'm hoping that we can still not completely disincentivize innovators from doing the hard work because we can't prove all of those things at level one without some tectonic plates shifting around regulation and enabling technologies around scalability. I know Resilience, one of your companies, has a lot to do with that, bringing manufacturing. We don't want to have to raise money for infrastructure projects; we just want to raise money for our technology. So I think there are a lot of enabling technologies around AI and around biomanufacturing that will help bend the cost curve, and high tide will raise all boats, hopefully.

Yeah, certainly. I think there have been a few silver linings that emerged from the pandemic for the industry. I'll come back to you later on some of the issues between regulation and making sure that it doesn't slow down innovation yet ensures the process is safe. We've seen regulatory approval timelines accelerated and condensed in very serious ways during the pandemic. But I want to first turn to Rohan to talk to us a little bit about some of the bets you've made through Valhalla Ventures. You guys invest across a range of industries including energy and defense, and you've made a few select bets in biotech: AI in drug design, DNA on a chip technologies, as well as polygenic precision medicine through Polyge AI. These are all the rage right now in terms of buzzwords, but I'm sure you've made informed bets based on the potential of these technologies. Talk to us a little bit about those.

Yeah, thank you. So in biotech, the way we look at it, there are a lot of funds like Arch that do the traditional biotech model really well and are now exploring new areas in biotech and funding those things. Generally, when we approach an area like biotech, it's not the only thing we do, so we try to understand deeply how the industry works, what types of companies get funded, and then explore how we can be creative in terms of business models and technology and maybe take more risk than people in the sector might be willing to take. So one area, AI is very hot right now. AI and biotech, entire funds are being raised just around AI and biotech. So the question we ask is, what are most companies doing in the space? We saw a lot of companies doing AI for drug design, coming up with entirely new molecules using AI. Understanding where AI is as a technology, we understood that's probably very hard to do, if not impossible, with the data available today. Anyone who says they're going to design an entirely new molecule and take it to market or put it in humans is probably not going to work out. So the company we invested in, Co-Sign, which you mentioned, rather than designing entirely new molecules, they look at shelved assets that are owned by big pharma companies and find things that have already been validated in human safety, so you already know it's safe for humans. Then they buy them for very low costs and put them into a new indication that they think it can work better for, given the data they have. There, you're using existing clinical data that's already there, and that makes a lot more sense to me from first principles. It makes more sense to use AI for that than saying we're going to design an entirely new molecule from scratch. So that's one example. Generally, we're just trying to see where we, as an outsider in the space, can take more risk than maybe people in the space would be willing to take.

Fascinating. And speaking of risk, longevity is a space that's fraught with risk. We have in the Kingdom established the Longevity and Aging Biology Foundation, also very bullish on this space. But you see nowadays every new biotech company and their mother claims to be cracking the longevity code, and some would argue that they're receiving a disproportionate amount of venture funding and other layers of support. How are you guys betting on this space, and what are your thoughts on it?

Our largest investment is in this space, in a company called Alos. I think the leaders in this space in a way are Christian and Hu and Alos. But Alos views itself as a disease reversal company, not a longevity company. The question is, as you age, it's all about healthspan. It's all about how lack of disease is what we want. We would all like to live longer, but we would all like to be younger longer. I think it's the most exciting area of biology that there is. The data that will come out in the next few years: we will actually be able to take an old cell, we can already do this in humans, and make it into a young cell. It has all the characteristics of your young cells when you were 18 or 16, even though it's a 50-year-old cell, whether it's a skin cell or a kidney cell or part of your knee. You can imagine how that changes the health system. Right now, we spend trillions of dollars on a reactive health system that doesn't cure you most of the time. Imagine going in and getting a single injection and having your organ become younger and then the disease that that organ had go away. That's not crazy; it's actually going to happen, and that will fundamentally change healthcare. The opportunity for this region specifically is that whenever there's a fracture in a revolution in an industry, new players can play, especially if they make big bets. If the health system changes from a reactive system to a proactive system with prevention and cure, other people can play and own that, especially with regulatory innovation and some of the other things we've been talking about. When you're rewriting the regs for the new system, we start bringing our innovation here instead of bringing it somewhere else or being bogged down in the US. So I think it's the most exciting area of biology, and I think we're all going to be healthier longer within our lifetimes. This is single-digit year stuff, not decades.

No, same. I think first of all, if you say longevity receives a lot of funding, longevity is not in competition with other biotech. It's a very fluid thing because a lot of diseases, in order to not die, you need to cure a lot of things. The good thing is, is longevity a standalone category? Almost exactly, it's very hard to say. Almost we all do it because I think it underpins the ambition. So it's great that we're all talking about longevity, which means pushing out both healthspan, staying healthy for longer, and also lifespan. I'm very convinced we gradually will live longer and longer. But on that way, we need to solve many normal things like cancer. And then when we get older, maybe when we all get more than 100, there will be new diseases we don't even know about yet. But short version: I think longevity is a good, in a positive meaning, buzzword which is underpinning the ambition I just said before. The biotech industry is getting back to really cure things and make a real difference, not just an incremental difference. And as Bob said, it's a total addressable market of 100% of the population. We all age. Whoever says something different, we all culturally lie to ourselves and say, 'Oh my God, we get wiser.' Yes, I want to get wiser every day, but I don't want to age. It sucks. I want to be back in my 20s with my body and have the brain of now. That's the perfect killer combination. Most likely everybody will secretly agree, maybe not say it out loud.

Yeah, yeah. I think a lot of the innovation that drives everything that everyone has mentioned is very patient, early stage funding and collaboration with basic science and researchers. Mad, I'd love to hear from you about the partnerships that Deerfield has struck with institutes like the Broad. I know there was a commitment of $50 million and a venture partnership with Harvard of around $1 million. Even though the stages of funding are also very patient capital, I think that's as patient as it gets and really drives innovation into the industry. Talk to us a little bit about the value of those commitments.

Well, you know, thankfully you don't have to be as patient as before. We have some great success stories out of our innovation funds, specifically out of the Broad with Matt Shair's lab at Harvard. It's a public company now called New Ventures. We did the entire seed round as Deerfield, we did the entire Series A, we syndicated the B, the company went public, raised $800 million from the public markets, and today the company is worth $7 billion. That was a five-year journey, and because of our model, we still own 40% of the company. So this one investment has paid back our entire first Health Innovation Fund, a 2X return, and we have many more of those kinds of examples in the pipeline. I'll also add that we also do a lot of later stage as well, so we invest across the entire healthcare spectrum. We partner with a lot of the managed care organizations to create businesses on the services side, on the insurance tech side, to try and actually solve problems for them that they don't have the time or the staff to do, but they can actually support us in terms of the capital. We have very creative structures in terms of calls and puts with these managed care organizations and insurers to create a flexible model that they can essentially buy or we can put to them at any point in time. In terms of the early stage stuff, I do want to mention just to add a different paradigm to the discussion: we've spent a lot to bring in some top scientific talent into Deerfield. We brought in Professor Matthew Nelson from GSK, he was their top geneticist, and he is part of our functional genomics team that is now working on overlaying genotypic data with phenotypic data to come up with potential drug discovery knockouts, human knockouts that could lead to drug discovery. We also recently brought on Professor Frank Nestle from Sanofi, who again has done tremendous work in immunology, to run a lot of the internal programs we're developing at Deerfield. So there's a lot that is happening, and definitely I think it's a very exciting time to be in healthcare, to be in biotech. As my co-panelist mentioned, the public markets have really undervalued a lot of the public listed companies, and I think this is a tremendous time to get into the next wave.

Thanks for sharing that, Mad. I know we're close to time, so I would just want to share one final closing question, get maybe a 30-second response from each of you. If you as leaders in this sector were charged with building an ethical framework, a Hippocratic oath for biotechnology that truly puts the best interests of all humanity ahead of simply generating the next blockbuster drug, what one core principle would underpin that oath and shape your decision-making? We'll start with Bob and go this way.

Yeah, very similar. Like was beautifully phrased, I think we have to loosen up drug approval processes because they take far too long. It can take 15 years. Think about how much science has changed in the last 15 years. Some drugs which are coming to market now were invented 15 years ago or longer, and that's too long. Yes, the FDA and all the other agencies had something good in mind, protecting people, 'do no harm,' but it became overly protective. By being so slow, millions of people die because medications that will some way come to market are coming so slowly to market, and people are dying. So actually, rethink in a 'do no relative harm' way, it was very well phrased, the whole drug approval process.

I just want to second what you said: 'Let health blossom' instead of 'do no harm.' I think the idea of bodily sovereignty and giving people the right, should they so choose and make the choice themselves as a patient who, by the way, is not patient for their own cure, to maybe allow themselves to take a different risk-benefit profile for themselves in service of science. I think we should open ourselves up in an era of personalized medicine to N-of-1 trials. We haven't innovated clinical trials since the Book of Daniel, to go back to our roots here. N-of-1 trials mean we can allow for noisy data sets and we can allow for N-of-1. If people choose to put themselves at risk for the benefit of others, I think we should allow that.

Yes, absolutely. That's actually a similar point, but my issue with the Hippocratic oath always has been it starts with 'by Apollo,' the sun god. When I swore my Hippocratic oath, it was 'by Allah.' I think that's the first thing that should be changed. But just to add on Nina's point, real-world evidence is what I would put in there. The FDA has gotten better; we saw that with the Alzheimer's drugs. Pretty expensive drugs, $50,000 a year, but essentially even though the panel of 17 experts, neuroscientists and neurologists, didn't agree with Biogen's submission, they decided to just let essentially roll the dice and collect real-world evidence because there is no alternative. There is no better alternative. So I think this is very important to allow more flexibility in doing these real-world trials, especially for orphan diseases and types of genetic diseases where there is no cure, frankly.

Yeah, I agree with everyone else. I think that there needs to be change in how drugs are approved and how things come to market. I don't think we take enough risk. People should be able to try things. That's why we were talking before about the Honduras program. A company like Nina's shouldn't have to come to a different part of the world just to work as a business. We should have that risk tolerance all over the world. I also think as investors, we should just be more ambitious and actually try to solve problems and take more risk on longer time horizons if it's actually going to cure a disease or make people happier, versus trying for these incremental 10 or 20% better ideas.

On those very inspiring notes, please join me in thanking our panelists for sharing their insights today. Thank you very much.