E52: Charting the Course of Biotech with Laura Deming, GP of Longevity Fund, and Will Eden of Sylvan Consulting

28:00They messed up by not getting in on this game earlier. And so I think a lot of the successes you started to see emerging in the 90s and the 2000s, those got bought much faster, much earlier when they're much smaller. Right. And so even though those things become super successful when you look at the drugs that those companies made, they're like buried in like three different pharma companies because they've like traded the rights and it's been a long time. So if you actually go back and you trace the lineage, right, you can find these companies. You can find traces of these companies, but they're much more integrated into the system today.

28:34Right. In the last 20 years, help me understand what is sort of the scope of the biggest exits in biotech? like all i know is stem centrics at 10 million is there something that was a really big one is that like one of the biggest is there something at 50 how many decimals pharmacia was in the same range as uh stem centrics um but uh generally when it's above a certain size we call that like m &a and like consolidation right so like celgene was just bought by bms right that was a massive deal but i think people don't call celgene like a startup that that wouldn't be called like an exit per se right so yeah i think there's something like a soft cap of around 10 billion ish where you see a few at that number and above that i mean it's just consolidation among these like really really big companies why is it so hard for a startup to ever get get that get that big um yeah i think a couple different things actually uh one is the funding environment it's really expensive to take a drug all the way and if you just look at it from a financial perspective Again, we've sort of entered this era where the really big companies tend to be built by the VCs.

29:43And the VCs have a timeline and they want to exit, right? And so you get this dynamic where if they can exit with a great IRR after a few years, when the drug is in phase one, maybe phase two, maybe still preclinical, they'll sell. And because they control these companies, they can sell. So I think there's just less of a financial incentive on the part of anyone in the system to see companies grow that big. When you look at IRR based on exit, it does seem like there's a magic window post phase two where you just get the best exits. And companies that limped through a phase three independently, well, there's usually a reason someone didn't try to buy them.

30:28right and so generally the companies that that go all the way there tends to be a little bit of adverse selection but it's just because the really good stuff tends to get bought right and what we've seen is like this is happening earlier and earlier and earlier with both m &a and ipos right so in quite a few cases a company might you know ipo and it's only a like few hundred million dollar company whereas in tech again you see the total opposite which hold it privately as long as you possibly can until it's, you know, almost a hundred billion dollar company. And then maybe we'll IPO, right? Is there a dearth of late stage private investment in biotech?

31:03I would personally say so. Yes. And yet you guys are focused on the early stage is because, Hey, it's hard to create a late stage vehicle or what? Or because the returns are still best early stage or there are late stage biotech funds, but they tend to be sort of, um, like pre IPO investors, right? So they'll come in on like the last round before something goes public. So they might do a mez around and then the IPO and then expect to exit. And so their model isn't like exiting any later than the early stage VCs. They're just coming in later and they can still get a good financial return, but they're holding windows only like a few years long.

31:38Right. Whereas, you know, even the sort of company creation VCs, their holding period might be, you know, five, six, seven years because they come in so early, but they're still IPO-ing comparatively early in the lifespan of that company. I've listened to a couple of things with your comments. One is I'm curious how public market sentiment affects the venture IRR calculation and whether massively positive public market sentiment would result in an increase in larger independent companies over time. The second observation, in bio, it seems like there might be two phases to a company's life, not as much for platform companies, definitely so for a single asset company in which the first phase involves changing the product, being able to actually make improvements to your lead drug.

32:30And the second phase involves simply testing the efficacy of that product without being able to make any changes. Yeah, that's really tricky. For a single asset company, that shift seems like a really big one for a CEO to take on. And tech, perhaps there's a similar dichotomy between making and selling a product, but that the ability to just completely, having to completely freeze seems like a big deal. I guess I'll tackle the second part first because I think it's a simpler question. Yeah, I don't think there's nearly such a distinct breaking point with tech. The really big companies tend to be on this smooth exponential curve.

33:11You don't get that sort of lifecycle effect. Like, yeah, I get it. First, you're kind of building the product, but like you're doing it usually in conjunction with customers, right? Which is just completely the opposite in biotech. Again, unless you're selling like a tool or a service or something like that, right? If you're selling inputs to biotech, that's, I think, closer to that model. But with tech, yeah, you have this tight feedback loop from the very beginning. And the really good companies are these smooth exponential curves. And yeah, at some point you have to start monetizing it. I get it.

33:42Maybe something like B2B is closer than B2C, if you're going to try to draw an analogy to the tech sector. But yeah, I think biotech is completely unique for that very reason. Once you're locked in, you're locked in. You can't easily change horses in mid-phase two or something. Imagine if Mark Zuckerberg had to market the same Facebook website that he built in his college dorm, but for a decade. That's essentially what you're doing as a biotech CEO of a single asset company. yeah that's a great analogy and shows just how crazy it is in history it's so different so completely different is there any way that could change or is that just that's part of the game um you know the fta is doing some interesting stuff with like personalized treatments um historically they've not really been super into that it's like a drug's a drug right but particularly with some of these uh i would say cancer therapeutics in particular um there's just much more willingness to experiment.

34:42And the idea that sort of every person has their own unique tumor is something that I think has penetrated the FDA's consciousness, you know, and so creating a custom like cancer vaccine on a per patient basis, like that's the kind of thing that they're starting to think about now. So I'd say, yeah, personalized medicine is probably the closest parallel we can even draw. But you know, none of that's really that close to getting approval either this is still in the really experimental stage to tackle your question about the kind of public market sentiment um absolutely the public markets affect the private market for sure and i think a lot of why we've seen this sort of biotech ipo uh window is just because there's been so much public market interest like they've seen all these successes they see this new technology science news right is just everywhere there's all this potential and quite frankly uh the tech vcs aren't giving up their companies so it's like what are you gonna ipo right well uh from the perspective of biotech they're much more interested in sort of sharing that risk right and if they can share that risk with the public market at a low cost of capital they're going to do it right so i would argue like we see ipos because the public market is so interested in them uh it's basically at some point it basically becomes a no-brainer as a financing event, right?

36:05It's like, why take private capital if you could get much cheaper capital on the public market? Well, it turns out there's neither supply nor demand for late-stage capital that's not public, at least right now on the current margin. I think we could definitely see the industry change shape dramatically if the IPO window actually closed. How have private equity or hedge funds or other asset classes invested in the space? Yeah. Private equities tended to avoid it. Hedge funds have been pretty interesting. You can look at, you know, shops like Matrix or Viking. They're primarily hedge funds trading public equities, but they have a very large percentage of their fund allocated privately.

36:46Right. And so you find those sort of crossover investors cropping up more and more in the space, actually. Yeah. You know, they're facing a similar concern where they have a pretty low cost of capital and they're seeking yield it's very hard to get outsized returns as a hedge fund right now so what do you do well you start to buy in before the ipo and then if you're buying into the mes round why not buy into the round before that and before you know it they're funding series a's uh private equity historically has been a little bit more conservative because they're generally looking for cash flows you know they're more recently have been some uh some tech oriented private equity shops that have gone a little bit earlier.

37:27But even then, they're sort of looking for a monetizable product. But Claris just got acquired recently by BlackRock. And so that really does represent, I would say, the first steps of a private equity shop really starting to take seriously the idea of, okay, we're maybe going to do some, like, pre-commercialization stuff in the space. And why would they do that? or what's the why now seeking yield it's all yield i mean well i've wondered this question a lot what's the significance of martin scrully oh boy yeah what a what a um conflicted character right he was doing a lot of the same practices that a lot of other people in the space were doing you know uh buying up drugs and hiking up the price margins right he did it but he wasn't a likable figure and he did it loudly and he claims he was doing this because he wanted to sort of draw attention to the industry and i would say from from the perspective of of impact like the the fda after all that went down really did start to like take seriously like okay my land's the only one making epi pens and they've raised the price by like you know six fold or like even more like actually his excess did call attention to the problem um i don't think that makes him a good or a like noble figure but i think like he actually had the desired effect which is like people realize there was a problem right and um yeah the the fda subsequently uh particularly under gottlieb like really actually did try to sort of loosen the requirements on making generic versions of both drugs and devices as well.

39:17So yeah, I would say overall the effect was in the long run positive. Why don't you give a little bit of a history of the FDA in terms of, or even the last like decade or two, how has the FDA evolved their tune and what have been some of the biggest effects of that or what have been biggest drawbacks of that or, and where are we now? What can we expect going forward? Yeah. I mean, I would say the FDA is pretty different. So just for some background, the FDA, I think at this point is well over 100 years old. They were originally just trying to do things like, you know, how much heroin and cocaine and marijuana can you put in your like over-the-counter medicine?

40:01Which is like a noble pursuit. And they've sort of grabbed more and more control over the process over time. And it really wasn't until thalidomide came along that the FDA requirements started to become much more severe. And what's interesting about that story, right, so the FDA was approving drugs based on safety only. They weren't trying to judge whether a drug worked, just whether it was safe. Thalidomide got approved in the EU, but it was not approved in the U.S. The FDA successfully held the line and said no, we're concerned about the safety. And they turned out to be absolutely right. So thalidomide was never a problem with the FDA.

40:43The FDA responded exactly the way they should have. And yet people were so freaked out about the thalidomide thing happening in Europe that everyone demanded that something should be done. And so what did they ultimately do? They created new bars for both safety and efficacy. It was just like a completely misguided, like someone has to do something. And that's basically the regime that we live in today. And I would argue that that switch, you know, we wouldn't have chemotherapy today under that, right? Like we could never get to the point where we're testing, you know, four toxic compounds in combination, right?

41:20Like this is almost impossible to do today. So I do think that there are these sort of whole classes of experimentation and certainly cost, right, has just skyrocketed exponentially. Cost to get a drug to market exponentially higher. So I think that's a huge loss. And I think if you kind of weigh the cost benefit, I think the FDA has probably been negative in that regard. of course you obviously don't want you know heroin and cocaine and marijuana in every over-the-counter you know like child's cough syrup right well one way to frame the problem would be future lives versus current lives and i think the fda puts a very high discount rate on future lives and yeah i i would similarly frame in terms of like type one and type two errors right it's very costly for the FDA to show that they let a drug through that killed people than that they held the drug back that saved people's lives.

42:20There have been economists that have tried to measure this. And it just seems like, you know, the FDA probably costs like hundreds of thousands of lives by not approving like heart drugs sooner. I mean, that's that that is a very real cost, but it's a hidden cost. So I think we just shouldn't expect the incentives to align, you know, such that we get the optimal outcome. That's that I think the FDA has changed a lot. And I think the FDA is actually getting better in a number of ways. And I really didn't think I would say that before I really like dove into the field. But I mentioned, you know, a bit about kind of like personalized treatments.

42:55That's interesting. That's experimental. But like even the fact that we have gene therapy, CAR-T, right? I mean, these are, again, complex biologics with these like massive effects on the body. And the fact that the FDA is willing to like engage and approve that, right? it's even gotten to the point that people are worried maybe the FDA is being a little bit too loose when it's approving drugs for these like, you know, super, super, you know, ultra orphan conditions. It's like, okay, there's only 100 patients in the whole world. And you did one trial of 10 patients with no control. And it seemed like compared to their peers, maybe they did better using historical controls, question mark, and they approve it.

43:35So if anything, the FDA has become loose enough that it's starting to actually get blowback from the other direction. So I think that's at least a good sign that they are taking this problem seriously. There's also been a lot of talk about changing trial design to make it more flexible and to having a sort of different bar you need to meet, depending on certain cases. I think that's interesting. That's only really just begun to be explored. I don't think adaptive trial designs have been used more than a few times yet. So this is still very, very new. I would also point to the history of getting CAR-T approved.

44:12Some of the early experiments with CAR-T cells for cancer killed people. And when I saw that come out in the news, I basically thought CAR-T was set back a decade or more. And to my surprise, the FDA lifted the hold and let them continue the trials. I was shocked. I was shocked. That, for me, was a turning point where the FDA looked at it and said, you know, these patients only have a few months to live and they've cured a bunch of them. Cure actual, actual cures. Some people died. Some people lived. They were all going to die before they got the drug and they decided to just weigh it up and move forward, you know, but you only get that because these people had a few months to live.

44:54Right. And I think if it's something like getting a new drug and like cardiology, that's like the largest effect size we could possibly have. Something that could cure heart disease. Right. But like heart disease is this slow, silent killer over decades. So they're never going to let a drug that only kills one in a thousand patients through. They're not okay with that. So it's very context dependent, but I think the FDA is doing a better job at taking that context into account than they used to, I would say. And how do you expect the FDA to evolve over the next five to 10 years? You know, a lot of that probably depends on the political climate and the FDA commissioner and other things that are pretty hard to predict.

45:34The trend has been, I would say, quite positive. But I could not tell you where it's going to be in five or 10 years, actually. One maybe very bad question would be, how is the FCA different from venture? You could see both as holding on to a rate-limited resource that constrains the progress of startups and making somewhat correlated decisions as to which startups should go forward and which startups shouldn't. I mean, one is a government agency and one is a market process. That's a difference. So I think that's true. I would argue maybe one thing, which is I think people overly focus on the FDA slowing down the progress of groundbreaking therapies.

46:21The big problem from a personal perspective would be the lack of groundbreaking therapies to move forward. I don't think that there are many which are simply being completely blocked that I could point to today. One thing the FDA does do, which may be pernicious, is widely propagate ways of thinking about drug development biology, which may be very standardized and incorrect or not fully representative of what's going on. Venture also does that. So I don't think that venture is bad in all the ways that the FDA for all that's good may also be bad. But I do think they share some common traits which may actually hold back the progress of certain startups.

47:05Yeah, I think you're right. They're both bottlenecks. I think they're bottlenecks in different parts of the process. But I totally agree that like attitudes of VCs can certainly affect what gets funded. And that sort of affects things upstream. I guess I would say with VCs, you sort of have like the pull side where like money is like trying to find good ideas and fund them. And they do have their own sets of biases, of course, like as do pharma companies like funding trials. Right. I mean, there are a lot of kind of angles on this. I wouldn't say any of them are perfect. On the flip side, you sort of have like the push motive coming from a lot of like funding agencies.

47:44right be like the like there are tens of billions of dollars in basic research funding coming from the government coming up with a ton of ideas right and i think the problem on the vc side more often is we see a hundred ideas and we don't think we can fund any of them then that there's like a groundbreaking idea where we're like oh man we can't fund that I'm not going to say that it never happens. Like I, I personally have seen companies where I believe that the product works, but because of business reasons, I don't think I can fund them. I have been in that position and I've seen it and I, I totally hear you.

48:24And I think most VCs are a little bit too conservative. I would like to see a little bit more risk taking a bit more moonshots, but certainly before I became a VC, I was much more convinced that it was like, insufficient, you know, awesome stuff happening on the, on those, on those earliest stages where, where there just weren't good ideas to fund. Um, I am less, less convinced of that now, actually there, there, there very much are good ideas out there worth funding. Some of them are fundable in the VC model. Some of them aren't. If you can wave a wand, uh, either of you or both of you and change anything about either VC attitudes or VC approach that would bring about the outcome we all seek, what might that be?

49:09I'm fascinated by the idea that funding basic science can be profitable. And I'm not sure if you would call that venture capital, but I hope someday institutions will emerge that do that. How do you imagine that looking, I guess? I don't think it's possible right now for all areas of research. In fact, it's very obviously not if you run the calculations. I am curious if you were to look at the most productive researchers and select a group by certain characteristics each year, whether you'd find their aggregate royalties back from their companies might under some financial terms be enough to make that kind of model profitable.

49:55So from a very simple perspective, that's something that I'm curious about, but I haven't run that analysis. Yeah. I looked a little bit at like power law dynamics among IP, and it seems to be very extreme. There are a few patents that generate most of all patent revenue, right? Though I think some of this is confounded by the licensing terms. I would say most academic institutes give up IP for actually, I think, pennies on the dollar for what they're actually worth sometimes. Though, again, I think some of this is because it's hard to tell ex-ante what is actually going to work and not, and there's problems with translation.

50:31I think there There are good reasons that they're somewhat systematically underpaid, but certainly if you could identify an advanced valuable IP, there's definitely money there. There's absolutely money there. I mean, if you're talking about folks that have less limited time horizons and lots of cash, this sort of raises the natural question of why don't big pharma companies have really good R &D centers? They spend billions of dollars every year on what amounts to R &D. This is supposed to be basic research, billions of dollars. why aren't pharma companies able to innovate because like in some sense that seems like like a perfect fit for your model in some way right these are corporations that are expecting to live for like 100 years they're throwing off tons of cash they fund billions of dollars which do you most respect from an r &d perspective oh um i i mostly think they're not doing good work but it's a question of like it seems like like the most natural thing that would fit the model that you're looking for would be like pharma companies actually doing good research.

51:37Like they have long time horizons in that they expect to exist for a long time. If they make a drug, they can profit on it for 10, 15 years. And yet they don't seem to be able to actually produce reliably good work. Is it something that's systematically holding them back or is it just incompetence? That's a good question. If it's incompetence, you'd expect it to be more sporadic instead of more total across the board. One recurrent theme is pharma companies making all the right products. So looking at their pipelines, having all the blockbuster drugs, the next generation, and then stalling them out when another organization with different incentives presses pause.

52:20I think my answer to the magic wand scenario, if there's one sort of change I could make, it would be something like outlaw marginal contributions. Just like actually make it illegal to take the old drug and make it like 20 % better. Right. And I know this is going to be incredibly controversial, but I think if we actually said like, no, you will never get that approved. We have a drug for that. You have to do something actually new. You have to do something new. You have to do something with a large effect size. I think that would actually light a fire under these, under everybody, under the researchers, the funders, the pharma companies, the startups, the VCs.

52:55If they all knew that they had to come up with something genuinely new, I think they would actually just take more moonshots. And I think we would actually get more out of it. For pharma, maybe, if you look at biotech today, would you say the majority of new credible startups funded are not working on novel approaches? Way more than I'd like. Way more than I'd like. When you look at it in aggregate, yeah, there are a couple of companies that are doing something like a totally new therapeutic modality. You have like a velo doing like tons of bacteria, right? As a treatment, like, okay, that's actually novel, right?

53:33But you know, it's like when you look at acquisitions, it's like a target becomes hot. And then you have a bunch of startups get acquired that happen to be working on that target and a bunch of new startups emerge working on that target. Or I would argue like rare genetically defined diseases. Like I'm, I'm, I'm glad that, you know, those hundred people are going to get a treatment. you know, what about the 100 million that are going to get cancer and heart disease, right? So I would argue that there has been a lot of investment in things that are marginal, either in terms of like the number of patients total or marginal in terms of they're not that much better than like the Me Too competitor who's, you know, a month behind them.

54:15I think I disagree with that. But or if you were to take the portfolios of flagship Atlas, Third Rock, would you argue that CRISPR, mRNA, cell therapy, that those aggregate portfolios represent me to follow on approaches or that there are many other companies that are in that category that dwarf those aggregate startups in number? Yeah. I mean, I would say that it's hard to point to a sort of emerging therapeutic area that doesn't have at least a handful of companies doing it. And there's a question of like what the kind of marginal benefit is over, over those others. I basically think that it's good that we have many shots on goal actually.

54:59Um, but at the same time, you're also picking like, you know, the very most top end of the VCs and saying, well, is that good enough? Right. But I'm, I'm interested in the full stack, right? I totally believe that there are a handful of good VCs that are doing stuff that's like really out there, right? What's the median biotech startup doing? I think I can pretty confidently say just having looked at hundreds and hundreds of these that like the median biotech startup is not interesting and it's not novel. Right. And that's just like a lot of wasted effort, years, dollars that I would just like to see repurposed into something that's, you know, trying a lot harder.

55:36This would be a regulatory way to get about that. Is that approach because, hey, there's, there's no other market way to do it or because, Hey, we're already, so we're regulating it so much. This would just be a more effective thing of what we're already doing. Uh, it's more just, I'm trying to like pull out any stops that I possibly can to get anything to happen. It's so slow compared to what I think it could be. Right. That again, if I could wave a magic wand, right. There's all sorts of things I could do. Right. But like at the very least, I sort of trust that one to like redirect people's efforts.

56:12Right. What would you do about patents? How would you alter those? Or can you give some context on how that works? Patent law is another one of those things that's changed a lot over time. And I think knowing where the right place is is very difficult, actually. It's possible to keep things as trade secrets. A lot of the particularly platform-type companies will have some patents and some trade secrets because they don't want people to be able to perfectly copy it. But if it's something like a drug, like you just have to publish about it, right? Like you have to like release the chemical structure of it.

56:51Like that is just part of the like FDA process. So there's no real way to sort of get a competitive advantage in the space as it exists today without that. So like, would we need patents if you could, you know, just like freely sell drugs? I mean, sure. People used to do that all the time, right? I think that would look like a completely different system than we have now. I think it would be pretty hard for pharma as it exists today to basically exist without patent law. If anyone can freely copy the drug, why do you spend a billion dollars trying to get that drug to market? You basically would have to spend multiples more than that on marketing just to make sure that you can penetrate consumer consciousness enough that that's the only drug of that class or the only literal exact drug that they buy.

57:33right? I just think the entire market falls apart. If you pull out any one piece of it, right, the whole system looks radically different. So I don't think there's going to be one simple change you could make, like just, you know, pulling out IP completely that wouldn't, you know, radically change the whole system. And I think given other incentives right now, like we wouldn't produce a lot of new drugs. But, you know, there's also small shifts in patents as well. I think I will just like address a common misconception which is the idea that you know tech is super competitive and bio is like really monopolistic because they have this you know ip for like 20 years on these drugs if you actually just empirically look at it tech has such strong network effects you get a bunch of monopolies whereas biotech you get a bunch of me too drugs it's the literal exact opposite story from the story that everyone tells biotech is ruthlessly competitive it's ruthlessly competitive and tech is too early right but but once you have a winner you know we we do see them unseated every so often i 30 years or something yeah right facebook microsoft yeah yeah totally right um but even something like microsoft it seemed like it was a monopoly for a while and then it seemed like it wasn't and now it's one of the most valuable companies in the world so it's still doing really well even though it's not a monopoly technically But yeah, I would say with bio, the IP allows the model to exist as it is.

59:00We would need something radically different if we didn't have it. And the protections are really not as strong as you think. I will also say because of the influence of tech, the patent law has actually gotten significantly weaker. So you can't do something like literally copy someone's exact molecule, sure. But you often don't need to do that to find something that acts pretty similarly. And a lot of the patent law around things like, you know, half-life extension or things like that, that's getting thrown out actually at a much higher rate. And we have started to see pharma do a little bit less of that, where they're making these slight tweaks to drugs and then selling them.

59:36Still happens sometimes, happens less than it used to because patent law is actually then weakened by tech. Right. In tech, we do think a lot about, or we are thinking collectively about antitrust as it relates to, you know, how do you make it so someone can disrupt a Facebook or a Google? at some point but then also we're having this conversation about are these um spaces somewhat public goods or somewhat the commons and how to you know that's why people are excited about crypto for a bunch of you know the possibility of decentralizing control what's sort of the equivalent in the biospace one is antitrust a concern or is it not because it's competitive but then also this concept of the commons or public goods how do people think about that in bio or do they not think about it oh i i'd argue there are parallel conversations happening but but not quite that.

1:00:21One thing that I hear a lot is like the government spends a lot of money doing pretty fundamental research. How much money actually comes back to the government from the output of that research? I think that's a very common complaint. And who makes, who capitalizes off that? Right. So I would say that's one way in which is parallel. You don't hear calls to like break up pharmaceutical companies because they have too much market power. And if you just look at it objectively most of them don't have that much market power the the total size of the pharmaceutical industry is large but the total number of players is large it's like dozens of companies and why aren't there monopolies i guess no network effects or like what is yeah you start to see monopolies on the margins right you get the shkreli's you get the mylands right so like occasionally rarely you see those emerge and yeah they use their pricing power to the fullest They absolutely do.

1:01:13But again, that's like how the system was deliberately built. So I do think there are those issues on the margin, but they tend to be the smaller things. You know, that said, like the price of insulin has been going up really quickly recently. Well, guess what? There's like a lot of different types of insulin. You want them for somewhat different situations. And we're starting to see more stories about that. When something as vital and as widespread as insulin starts to have issues with pricing, that's when we're going to see politics start to really hit this sector pretty hard, I think. So, no, I don't think there's a lot of talk about monopoly.

1:01:48There's a lot of talk about pricing power. Should the government be able to negotiate drug prices? Should it be able to buy in bulk? Should we be able to import from overseas? These are all very real questions. It's about pricing. It's not about monopoly. one of the things we were talking about before we started recording is that the way you different or what you'd want other vcs to think like you in terms of use uh you see things what was the word used indeterminate or determined i think why don't you introduce this concept yeah yeah sure um i am stealing this uh from teal and the idea is do you have a worldview that fundamentally believes that that that you can understand the world right is the world determinant, right?

1:02:31Can you, you know, figure out the way a system works? Can you modify it? Can you do this reliably? Or is it indeterminate, right? Like biology is this complex system. It's extremely hard. We have all these unintended consequences. You don't know what's going on with every single piece of it. They're two radically different worldviews, right? And I basically think that most of the biotech field as it exists today, and again, I think this is maybe, you know, somewhat less true, you know, in the first wave of companies, but like the current belief implicitly looking at how people in the space act is that biology is fundamentally indeterminate, that we cannot say things for certain, that we cannot know if a drug will work, that we cannot know what the effect of something will be until we test it.

1:03:19And I think that is a pervasive worldview, all the way from like how stuff gets funded to the basic research, how the scientists think about it, how the VCs structure their companies to like avoid this, like all of it start to finish. I think that's the fundamental driving factor in why the sector looks like it does today. And so what are some constraints from other, like what would other people need to believe to come to that, that view? Like what is the crux of the difference? Yeah. I mean, if you ask them, they would probably say that I'm not indeterminate like enough for the space right that like they've experienced this for decades they've they've experienced the losses they've experienced the surprises and the failures right and i think in the face of that it's really hard to then believe on a deep level that they can actually predict how things turn out so i think it's more something like can can we either develop better tools and ways of analysis and ways of thinking and things like that, that will get us to better answers systematically, right?

1:04:24Or do we need people to just be willing to sort of go more out on a limb, right? And that's something we don't see a whole lot of today. And say more about the implications of what that mindset would lead to just way more risk, way more. Yeah, we would certainly see a lot more risk. I think we would see a lot more sort of seemingly crazy ideas, I think we'd see more complex interventions than are currently tested, right? There's so much focus on like, okay, we're going to keep the experimental group and the control group almost exactly the same. We're going to vary this one tiny piece, and then we're going to look at the effects in a whole bunch of different ways.

1:05:01And like, that always gets you the same answer. It's a complex system. We saw some effects and a bunch of unexpected stuff, right you don't see things like coles toxins which was done again like a century back it was just a guy who took a like bacterial sludge and injected it into tumors and it occasionally cured them like but the funny thing is the like fda actually allowed a couple people to try this pretty recently right but like it was a hundred years ago that we came up with the idea and despite seeing cancer cures it never developed into a systematic field of exploration Laura, where do you stand on all this?

1:05:39I think I kind of flinched when you were making that analogy. I love it, actually. I think it's such a powerful framework. Recently, I have come more around to the belief that the very best people in biotech are much more determinate. And certainly if you ask the CMOs or CSOs of many large pharmas, they do view their pipeline as a portfolio and they will not tell you that a drug will work with high certainty. But in sort of the neonatal stages of working with grad students a decade ago, I remember viewing the world in a very indeterminate framework. And I think one thing that kind of changed for me recently was viewing that more as linked to competence.

1:06:27So somebody's expectation that something will work a certain way being linked to their competence and less to a general worldview. And I think the determinant people or the competent kind of set often will predict that something won't work, but they'll have a reason why you couldn't have known a framework for what they expect to happen and a reason for why you couldn't have known why something would work out in the first place. So basically, the most successful common people I know in biotech have much more determinate worldviews than one would expect. And I think there are just many, many, many people in biotech who are not well-trained or who associate words with the idea that these words have proven constants behind them.

1:07:08For example, cancer or cancer model is assumed to be actually a cancer model. And really, the first person who created that mouse would have told you, no, here's what I'm doing. It's an experiment for these reasons. But now there's all this kind of vocabulary that incorrectly implies we know what we're doing. And it's just been kind of passed on to the next generation. But I think that really good people kind of see through that a little bit and really do understand what is meant by certain words. And it allows them to make better predictions. Yeah, I guess my experience has been I ask people to make a prediction and they're just really, really unlikely to be willing to give me any concrete number.

1:07:48and like i think i think this is somewhat true for people in general but you know these people are scientists right they're testing the hypothesis for a reason and they won't even give me a confidence interval about how likely that hypothesis is to be confirmed or not i mean surely implicitly somewhere in there they must have some idea but they almost seem to have this like stockholm syndrome where they won't even like admit it out loud because it's like putting those beliefs to the test, even in so far as making an on-the-record prediction of what might happen, pretty rare. There are some moving stories.

1:08:21For example, the founder of GPCRs being taken off HHMI and having to support his lab on salary from being an emergency room doctor, which may make one more humble about predicting scientific competence. But yeah, that makes sense. I mean is that Is that an example or a counter Example of the thing I'm talking about right I mean like he wasn't Sort of believed in by the field but he Was right Right like I think I think that's like the rare example Of sort of When this thing works like it Was a guy who was sort of crazy And didn't have The faith of the field but he believed In the thing and he got it done, right?

1:09:05And he got approved. Yeah, I mean, I suppose one question is just like, is there a way that we could enable that kind of person more? Or do you think we're sort of making the right tradeoffs in terms of who to fund, who to not fund, and how? How many of this category of person do you think exists? Well, empirically, there have not been that many, right? But has their impact been sufficiently disproportionate that we should try? How do we think about non-trained scientists investing in biotech? Many famous biotech BC has been scientists. How do we think about this? Great scientists have this characteristic, which is that they bend over backwards in Feynman's words to get at the truth.

1:09:54And you need that in a startup. However, that often comes with a huge reticence to even speculate on things that could be outside the realm of probability. I call it scientist speak. It's a way of talking that prefaces everything with a, well, I don't really know what I'm talking about. Or this probably isn't true, but. And it's a way of signaling to others in the scientific community that you really are quite competent because you're aware of how much you don't know. Entrepreneurially, that's very hard to translate over. That doesn't sound. Right. Right. And so if you look at many great companies, they come with a pair.

1:10:29You have the Bob Swanson and the Herb Boyer. So the person who can really sell the vision takeout in the Genentech IPO roadshow, they literally had these little beads that they'd click together to show recombinant DNA. And there's a great visual. And but then you also have the pragmatic tooth seeker who can help the organization get to what may actually work biologically. yeah i definitely think that it's hard to find those two in the same package that is exceptionally exceptionally rare which is why it's always good to have a co-founder um and you see this less in tech but it's not zero in tech often either there there are often a pair which one of them is more socially competent one is more technically competent but yeah in terms of non-specialists in biotech um i am not formally trained right but what i did do is spend you know hundreds and thousands of hours, like just pouring over scientific journals and papers, right?

1:11:24And just like learning on my own time, a lot of the particular details that you need. And so do I think that you need a formal credential? I'm not going to lie, it helps a lot to have other people take you seriously. Do I think it's an absolute requirement? I sort of can't really believe that in some sense, right? But, you know, look, I think there are different things that you need to evaluate when you're evaluating a startup, right? It's not just whether the product is good. It's not just whether the science is good. It's whether we believe that the company can sell itself. If nothing else, it has to raise another round after this one almost always, right?

1:12:02And at most, if they're actually selling like a tool or a service or some other input, they actually have to generate sales. So from that perspective, all else equal, you know, it's probably better to have someone with a lot of training in science evaluating the scientific aspects of the company. And I would say in biotech, that really matters, right? Because it's not like in tech where, you know, you can push something to production and it doesn't go that well. Well, you can, you know, pull it back and fix it and put it back out again right away. You don't do that once you've started the FDA process, right?

1:12:34So I do think actually having that upfront expertise is extremely, extremely helpful. But at the same time, I think that non biotech experts can still evaluate a lot of the same features, right? Because there's still startups, there's still companies, there's still businesses. I guess I was curious what gave in your mind Teal the confidence that he can make a statement like about sort of our need to be more determinate, what even confidence in his own sort of understanding and maybe him like he, like you has spent all this time, you know, self-training basically, or I guess how would you, or is that, do you not need that in order to?

1:13:10Well, I think for some of him, it's like a philosophical worldview, right? Like he fundamentally does believe that we can understand the world. Right. And from there, I think a lot of, a lot of being a VC is just about developing these sets of heuristics for who to trust and why. And again, you can, you can always select on the sort of non-scientific correlates of a business, right you can tell whether someone knows how to sell right and that's that's always true that that is a universal skill so again i don't think you have to be technical yourself to evaluate a startup you can always get someone to help you yeah so well you've seen uh because you've been doing this part of time at laura you have too you've seen how longevity as a space has sort of evolved over time.

1:14:00Why don't you guys talk a little bit about how that sort of emerged as a category and how it's evolved since? In 2011, longevity was a barren wasteland with tumbleweeds occasionally pulling through. There had been only a couple companies ever started that claimed to target the aging process. And on the biology side, there was a lot of promising science, but clinically there was nothing there. This year, you're seeing literally the first drugs show data in patients that are targeting mechanisms of aging that we're excited about. And that's a huge step forward. We don't know whether this first wave of therapies will result in drugs that work, but having patients exposed to drugs that sort of came up through this field is it's the first time in human history that that's ever happened.

1:14:57And it's really exciting. And it's happening literally the past couple of years. Yeah, I think there was a social inflection point that came with the announcement of Calico. And I think that showed for the first time there was real money and interest behind longevity as a concept. And that I think changed the just just the nature of the conversation. The other thing I would point out happening around that same time is the rise of senolytic drugs, which you yourself are actually quite involved in, like the first big company, like you helped start. And so that sort of gave evidence to the idea that this was something worth talking about, right?

1:15:37The idea that there could be these therapies that could clear senescent old cells from your body, right, that are causing these like systemically harmful effects. I think the pairing of that entire class of drugs and therapies, plus it becoming socially acceptable to talk about it, I think that was like the perfect combo that just made this whole space take off. I would be curious to hear you weigh in on beyond senolytic drugs, where do you think longevity is sort of performing the best as a field or like what things you see starting to come down the pike. We should talk about programmed aging.

1:16:17I'm sure we both have opinions about that subject. This is the time boy.

1:16:24One sort of misapplied analogy that people have tried to use in the past for longevity is the Manhattan Project or the creation of the atomic bomb. We're definitely not engineering longevity in anywhere that level of determinism. What's exciting is two major buckets of therapies. One involves tweaking genetic pathways, which we believe might impact lifespan for some reason. I think evolutionarily, it's very unclear the why. Perhaps we'll never know. The other bucket involved doing a myriad of different things that generally could fall under the heading of removing damage or rejuvenation writ large.

1:17:11And that includes many very futuristic things like replacing whole organs, which are also relevant for just disease in general. Worsing both approaches push their way towards the market. The first bucket has over 60 in some sort of classification, 90 different things in it that are interesting to watch. The second bucket has almost too many things to count. Just so many things could fall into that heading that it's hard to keep track of them all. And so I think what we're fascinated by is watching the first bucket because I think what we want to see is the first striking reversal of an aging phenotype in humans.

1:17:54And striking is the key word. A small movement on a graph is great, but a kind of striking movement in health by manipulating these pathways, I think, unlocks 10 times the kind of calico cascade of capital and interest and genuinely sort of scientifically motivated interest in the field. And that would be super exciting. Fully concur with that. We absolutely need some obvious convincer. And I think, again, that just changes the whole conversation. Right. And particularly changes like what funding flows to. I am definitely with you on the regenerative medicine side of things. And it seems clear if we can just undo damage, then to some degree we've solved the problem.

1:18:38Genetic manipulations I've personally been a little bit more skeptical about. But when I've sort of looked through most of the known mechanisms, it seems like there's a complex of growth, repair, nutrient sensing. right uh and and it really does seem like almost every large effect that we get on aging via these interventions has something to do with that sort of one shared common pathway i'm curious if you disagree with that assessment or or see things that are substantially outside of that i can think of four to five pathways which like most things in biology link together somewhere or another, which might fall into that.

1:19:18I do think there are some examples of drugs in people today, excluding the ones that I've, you know, Restore, BioUnity, which are the ones that are explicitly focused on aging, which make mice live longer when given to the mice overexpressed or given as a biologic and seem to have positive effects on age-relevant diseases. And those types of things, I think are pretty compelling in terms of, is there a protein that when administered in higher levels than one might normally see impacts lifespan? Okay, maybe it's not programmed aging per se, but that is modulating aging in a sense. So I put that forward as evidence in that camp.

1:19:59I mean, most of the things that I think of are like rapamycin, right? Which is very, very clearly acting to like suppress. But I think the huge story is There's such a variety of different things that impact lifespan. And you always hear about rapamycin and metformin and the insulin IGF pathway and chloroprestriction and mTOR in other ways. But there's so many more pathways that we found like that. And many of them come from outside the field of aging. So I think there's just such a huge green field of pathways, potentially, hopefully, that might come more to the fore. and those pathways are super interesting.

1:20:40But I mean, if the field was just those pathways, I don't think I'd be very excited about it. I think that might be a bit of a constrained place to play. Is there anything else you guys wanted to cover or you think you have questions for each other? What is your ultimate goal in life? My ultimate goal in life? I mean, I would actually like to achieve biological immortality. Like if we can, I think we absolutely should. and if not that I'm okay with uploading too so say you achieve either of those things how will you spend the next thousand years well hopefully it'll be much more than a thousand but having fun conversations like these I think what about blockchain?

1:21:26I'm just kidding

1:21:31I'm selling some bio coin

1:21:37I am excited about it for reasons completely unrelated to biotech. Thank you very much. Have a good night.

1:21:45My guests today have been Laura Deming of Longevity Fund and Will Eden, formerly of Teal Capital. For people who want to go deeper in your work, where else can you point them? Laura, perhaps let's start with you. So I have a blog at ldeming.com, and you can also look at our website, longevity.vc. Yeah, great. And for me, I probably should put a little bit more of my thinking online. But in the meantime, you can check out my Twitter feed, William A. Eden, E-D-E-N. Will, Laura, thank you so much for coming to the podcast. Thanks for having us. Yeah, thank you very much.

1:22:24Turpentine VC is a podcast from Turpentine, the network behind Moment of Zen and Econ 102. too. If you liked the episode, please leave a review in the Apple Store or rate us on Spotify.