Challenges and opportunities of investing in #longevity #biotech
Laurence Barker, CBO, SV Health Investors
Gregory Bailey, CEO, Juvenescence
Jens Eckstein, Managing Partner, Apollo Ventures
Xinhong Lim, Director, Vickers Ventures
Moderator: Reenie McCarthy, CEO, Stealth Biotherapeutics
- Investing in longevity biotech vs traditional biotech
- Fundraising strategies
- Managing investor expectations
REENIE: The World Health Organization has designated 2020 the decade of healthy ageing. One of our panellists, Jens Eckstein, remarked that ageing is the highest risk factor for disease, and this has been demonstrated by the stark and brutal reality of the ravages that COVID-19 is wreaking on our elderly populations. It’s timely therefore, for us to have this discussion about the challenges and opportunities of investing in longevity biotech.
So, the first question I’d like to focus on is: what are the major challenges that you see of investing in longevity biotech, as opposed to more traditional yields?
XINHONG: We generally look at the balance between risk and reward in all our investment decisions. So, if we drill down, I’d say the most outstanding risks are scientific as well as regulatory. If we look at the scientific risk, I think the field is has made an incredible amount of progress in terms of understanding mechanisms and markers of ageing, but we still have plenty of work to get a much more granular understanding of how to define ageing, and what we need to do to modulate it. This question of whether or not there is a distinction between lifespan and healthspan is something that I think the field this is still grappling with. So from an investment perspective, at least for now, it’s more tractable to invest in companies that are working on so-called healthspan improvement, which, broadly speaking, could arguably cover almost all areas of therapeutics and drugs and vaccines because they know anything that improves health naturally leads to a longer life.
It is interesting to ponder whether or not life extension itself is something that can independently result from manipulation of the biology.
Of course, the other risk that is a big one in the field is whether or not we can get the right standards and the right regulatory mechanisms in place that will enable some of these trials to be carried out in a tractable manner, especially for longevity focused trials, which by definition are much longer. A key challenge, both from the scientific and regulatory perspective, is to get to an agreement on what would be appropriate biomarkers that we can use to measure ageing and use that to reduce some of the risk.
JENS: One of the challenges is to redefine what we mean when we talk about ageing and healthy lifespan. The paradigm we are advocating is very different, in terms of how we are going to approach tackling age-related diseases. It’s not waiting for symptoms as we’re getting older and then treating the symptoms. Rather, it is really thinking about pre-symptomatic and preventive medicine in a very, very different way. The vision is to understand risk factors to developing certain diseases as you age, and start bending the curve so that that you that you don’t develop them at a later stage.
An enormous amount of money goes into cancer, but if you would actually be able to heal cancer, the overall life expectancy of mankind would only go up maybe two or three years altogether. And that is because we have poly morbidity. We usually don’t have one single disease in ageing, we have several underlying problems. That’s the challenge - to change the fundamental thinking of how we think about disease and how we can treat disease.
This has scientific challenges, but there are also challenges in the business model and economics behind it. You are challenging the way the pharmaceutical industry has done their business in the past as well as all the other approaches to diseases. We’re trying to really change the way we think in general about growing older.
REENIE: Greg, you’re also investing in diseases of ageing, but you’ve got some novel approaches to potentially moving the needle here – including looking at a nutraceutical approach in some cases. Is that right?
GREG: Yes, we have both conventional Rx and non-Rx divisions. Ageing is a unique market. You have 7-8 billion people who are getting old.
All of a sudden, you can do very inexpensive IP-protected products that don’t have to have Medicare or NHS to pay for it. This changes everything going forward. We need the Rx Division at Juvenescence because you need the credibility of it, and of course there are tractable pathologies. A lot of the scientists have both a non-Rx and an Rx product, so this gives us a great opportunity to interact with them on both levels.
REENIE: Laurence, your focus is on dementia related diseases of ageing. Do you think that we can learn anything from the developments in the Alzheimer’s or the Parkinson’s field that will inform a broader approach to diseases of ageing or longevity?
LAURENCE: If you step back for a bit and go back to some of the fundamental processes of ageing, there’s lots of pathways, targets, pathologies that we start to see come up in the dementia research and huge learnings we can take from some of these approaches. There is a lot of overlap in terms of the kind of iterative learnings and of the technological developments that are going to be required to be successful. Whether you’re talking about fundamentally understanding the pathology, the biology of these of these diseases, the mechanisms, and then how you test them both pre-clinically and in particular when you think about clinical development.
REENIE: Looking at cross fertilisation from traditional drug development, are there any biomarker developments, regulatory pathways, or any other shortcuts that we take to elucidate these pathways that we can learn?
JENS: Our vision is huge, and we have to take it step by step. Having the full arsenal and learnings of how we have done drug development discovery in the past is obviously helpful. For example, we have become very good at defining targets and getting different modalities to have a biological effect. At Apollo, with all our investments we are trying to dig up what we call a ‘stepping stone disease’ - that can be a genetic mutation that has an accelerated phenotype that sits on exactly the molecular mechanism that we would like to address for a broader application age related disease. Very often, those orphan diseases are where you pretty much understand who your patients are because they’re clearly defined by mutations or by certain accelerated phenotypes.
We will use those orphan diseases - not only to help those patients who are in very desperate situation, but because we can use those trials to actually find, discover and validate biomarkers to go in to age-related diseases much more broadly and also diagnose some of the things that are pre-symptomatic.
That’s the overall concept of Apollo. That’s why we are focused on building our own companies, because this is a very new approach of doing things.
REENIE: We’ve talked a little bit about therapeutic development, but what are your thoughts on gene therapy for ageing?
LAURENCE: I think it certainly has a role to play in some dementias. However, you really do need to ask the question upfront of whether it is the right approach, the right modality, the right way to interrogate and potentially solve a genetically driven dementia. Gene therapy is not the answer to all, obviously, but it certainly is with regard to some. I think that field is rapidly growing in the dementias, whether that’s in the ALS FTD areas, or elsewhere.
XINHONG: Gene therapy is interesting also because of the parallels with regulatory and commercial risk. I don’t think the field has been able to solve the question of how to pay for it necessarily and I can see parallels with the ageing and longevity field here. If you had a cure for ageing, how might one pay for it? First of all, one has to demonstrate the efficacy. But then we still have to figure out how to pay for it. I would really love to see how this might be addressed.
REENIE: That brings up the question of investing in this space, given the time and patience that it requires. Is there a different investor that you target when you go out to fundraise for your funds?
GREG: We’re not a fund - we are actually a pharmaceutical development company with a non-Rx division (but the major focus is the Rx), and we have seen a dramatic difference in the investor approach. The science and developments are happening at such a fast pace we couldn’t rely on just the traditional biotech investors which took 3-6 months to raise money from- we just didn’t have the luxury to wait that long. We’ve mostly secured funds from ultrahigh net worth individuals. It’s an easy story for them to understand. The other thing is that if you assume that Bank of America is even remotely correct that this is going to be a 500 billion dollar market by 2025 and you really believe that science fiction is now science, and you believe in the management team then this is a fascinating investment. I think we’ll seek thematic investors, ESG investors, as well as the ultra-high net worth individuals, and then maybe a couple of biotech funds.
REENIE: Xinhong, you were an earlier institutional investor in Samumed. Was that a departure from your typical approach? What was your thinking around that?
XINHONG: Our strategy has really traversed multiple industries and is to go after platform technologies that address multiple use cases. Going after the root cause of multiple disease indications is the problem. If there is a group that discovers novel biology that presents a novel way to intractably target a disease indication, especially something like in the case of Samumed, that could be so fundamental, that becomes a very attractive proposition because then that platform potential allows us to diversify risk across multiple disease indications. We would prefer to invest in a company that has a technology that will enable them to really tick off multiple shots on goal. Then, the question comes to whether or not the company has the right team. Can they execute on this? Can they raise the capital that they need to fund those multiple shots on goal? And I have to say that the good news from the institutional side is that there’s a lot more interest and appetite now in funding platform technologies.
REENIE: Jens, you also take a platform-based approach. Is that similarly resonating with your investors at Apollo?
JENS: The major advantage of a platform is that you have several shots on goal. I think the challenge in platform technologies is always that you have to figure out how to keep the platform alive, once you have nominated the lead program. You have to be pretty creative there, or you have to raise a ton of money - either one works! It’s up to us to not waste the value of the platforms, because I think that the clinical pathways will be a challenge. It will not be easy to show biological effects in the clinic and really define the biomarkers. On the other hand, if you go directly to consumer nutraceuticals, with time, you will also want to have trials and show that you have an effect
XINHONG: What helped in making the case to our investment committee was really that we weren’t saying that we were going after ageing specifically, but that we were going after age related diseases. There was a tractable path to development, and attractable route to commercialization.
REENIE: Laurence, you’ve got more strategic investors behind you as well as charities and sovereign funds. Do you think that is because of the specific diseases you’re targeting? What are your thoughts here?
LAURENCE: We knew we just weren’t going to get much traction if we were to target traditional biotech funds, because the industry record in Alzheimer’s is characterised by a history of failure. Two groups have been highlighted so far that have some fundamental strategic interests. We’ve been getting real traction with the ESG impact arms of groups whose own customers are screaming out to them that they want their money to be put to work to have real impact.
The other resonates heavily with what Greg said, the high net worth individuals or groups who want to see impact in this space. They had personal or family stories, of course, in this space. Unfortunately, I think we all do. They were willing to back the team and the types of approaches that we were adopting with the fund. I think we’re starting to see interest from groups that we previously had not. I think the only thing that’s going to further build that is, of course, success (which, from my perspective, means clinical success). We’re not there yet, but we’re starting to make material inroads.
REENIE: So to that point, is that the group’s consensus that it will be clinical level success that will be the tipping point?
GREG: If you can show investors a path that they can digest, if the science makes sense, then I think you can get there before having somebody definitively get a drug for anti-ageing. Alternate pathways you can pursue like fibrosis or inflammation play an enormous role in ageing and investors understand them and the regulatory pathways so will finance them. Having said that, the discrepancy between the amount of money that’s been available for anti-ageing research and the amount of money that goes into the next social media app is phenomenal. You’re going to need to drag those people over the sets to make them realise that this is important, and that this revolution in our ability to modify ageing happening now.
REENIE: Shifting to investor expectations, then, particularly if you’re going to non-traditional investors. Do tech angels and HNW’s really have the stamina to weather the ups and downs and long wait times of biotech life cycles?
GREG: They do, because wealthy people want to live longer. They enjoy being wealthy and they’re enjoying life, and so big tech investors like Thiel and Bezos are intrigued by these possibilities and opportunities.
JENS: Once you have a lot of money, like Thiel and Bezos and other tech billionaires, you can afford to have a long-term perspective. I think that’s why a lot of high net worth individuals coming from the tech world are interested in ageing because they have all this money and they’ve got to see a long life to actually take advantage of it.
REENIE: Do they appreciate your strategy of going from rare diseases as stepping-stones to more age-related diseases? Does that resonate?
JENS: I think you need to explain to them how drug discovery works. That’s a difficult thing, actually. There are very few shortcuts. The first thing you have to show is that whatever you do is safe, and that’s generally a Phase I clinical trial and all of the mind bogglingly complicated and bureaucratic nightmare that that entails. Getting investors that are non-traditional biotech investors to properly see and understand this is a challenge.
GREG: To add to this though, the nice thing about biotech is there’s a light switch that flips and your stock doubles after a successful phase II or I trial, which we have to educate investors about. If you go public, and if you are successful, your investors will make money, sometimes incredible amounts.
REENIE: When building your portfolio, do you need to think about where you are in your lifecycle across your portfolio so you can balance it out?
LAURENCE: You have to take a portfolio view, and you have to look at the time and capital you’ve got and if you are allocated sensibly across that for risk and reward based on the stages of your of your different investments. For us, we made the conscious decision that we were going to start out this fund by probably having to take some early investments and build companies from scratch, so we decided to construct a 15 year fund from the get-go rather than anchor it at 10. Time will tell if that was the right decision, but I think this approach manages expectations appropriately, and is an acknowledgement to our investors that these things can take time and can be tricky.
REENIE: So, Greg, does that influence what your exit strategy will be? You’re not a fund, so do you think about doing licensing deals or other things to pull in earlier catalysts?
GREG: Our job is to deliver a return to our limited partners, to our shareholders. When I’m talking to an investor, I’m not saying this is an amazing drug, what I’m saying is I am going to make you an extraordinary amount of money if I’m successful and this becomes real, because that’s what their mandate is.
I don’t think Big Pharma are really going to get how big the product is if it does what it aims to, so I think we’re going to end up licensing. To structure something where I could individually pass off the various companies and license them without having to sell the whole company is important to our strategy. We set it up where the licensing is done within a tax-efficient jurisdiction, and you can buy shares back pro-rata. So, investors can generate long term capital gains and don’t get double taxed.
To make this successful we have to have good products, and then we have to make sure that our investors do very, very well. By doing that, it will drive this sector forward in leaps and bounds.
REENIE: Xinhong, Vickers is a global fund. How are you structured and how does that influence your strategy?
XINHONG: We decided to be global from day one because we believe that innovation happens everywhere. And we need to be able to pick from the best innovation in order to give the best returns to our limited partners.
We have an interesting structure that’s a bit different from the traditional VC fund. We have a 10 plus 2 lifespan with what we call ‘a phase shift’ in the strategy. Most VCs would raise the fund, make investments from the fund but would save money for follow-ons from the same fund. You typically can’t invest across funds because there’s a potential for conflict, and LPs don’t like to see that. However, we’re structured in a way that right from the outset allows us to reserve about half of the fund to invest in the follow-on rounds of the most promising companies of the previous funds. Then we fully invest in so-called discovery companies that are new to our portfolio. This enables us to have multiple funds participating in the company’s growth and to have a long-term relationship with the company, which is particularly important when investing in longevity companies where there’s a very long lifecycle.
REENIE: Laurence, does your investor base look for first dibs on new technologies you are coming across or in your portfolio? Do you do anything different or are the just straight standard investments?
LAURENCE: We treat all our LPs the same, of course. We do give them advice about our companies on a nonconfidential basis so that they benefit from seeing what’s going on our portfolio, but our portfolio companies benefit enormously from their experience. Their capital is crucial for the fund to be successful, but also their advice, guidance and input is just as important. We have a formal mechanism in place to be able to leverage this, with our advisory board that meets several times a year. One of the fundamental principles of the fund together was to be able to deliver that insight – we’d be foolish not to leverage that depth of experience around the table.
REENIE: One final question to close. How do you see the impact of COVID-19 affecting investor interest?
GREG: We’ve seen an unfortunate side-effect of immuno-senescence and a disproportionate number of people over the age of 70 dying. I think Covid-19 gives us an opportunity to refocus. Governments and investors are now acutely aware of what the change in immunity level is, and so are going to make money available for those trying to find therapeutics. We now have an incredibly heightened awareness of the fragility of life, and also increasing success stories in our ability to increase lifespan.
JENS: I would add that Covid-19 has made everybody aware that we have been looking at disease far too narrowly. I think it’s really fascinating is despite the horror of what’s going on, that people are learning how complicated that science is around that virus. That the virus has specialised in a systemic approach and systemic weaknesses of the human body. That’s pretty much exactly what ageing is. Ageing is a systemic breakdown of regulation of fitness. I think that will open people’s eyes. Despite the horror of this crisis, I think it will help how people look at ageing and age-related disease.
LAURENCE: It has slowed down some fundraising and operational aspects of discovery and clinical work and so forth. To look at it more positively, though, it’s has reminded us how creative, and flexible we can be and still get things done. It’s not impacted nearly as heavily or made things as difficult as I thought it might. It’s encouraging people to do and be much more creative in the way they operate and the way they work - and I bet a lot of this will be lasting.
XINHONG: I would echo everything that has been mentioned and add that we have advised our companies to really batten down the hatches. We foresee challenging times continuing for a significant period ahead, and we tell everyone to raise as much money as they can and to take whatever they can at this point, even given the challenging environment.
The good news is that there are some sectors that are clearly benefiting from this. I would say that healthcare and life sciences investments have never looked better. If there’s any market not been severely affected this is it. Investors are now looking for opportunities that are not going to be changing with the vagaries of consumer attention and consumer-focused industries that are now suffering significantly. Investor interest has now shifted to looking at longer-term bets and things that are going to be important regardless of how or whether or not we can go out and socialise. Ageing and age-related diseases certainly fall into that category.
I would also add that it’s heartening to see scientists, policymakers try their best to marshal their resources in a global way. It shows us how medicine and science can be done in a global fashion. Hopefully we’ll bring the same sort of attention and effort to bear on problems of ageing and age-related diseases as well.
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This article is an extract from the Longevity Trends Report 2020 - mid year update
The report captures Longevity Leaders' extensive research into this space, including the most important longevity trends of 2020 that businesses, policy makers, scientists and the general population need to be aware of.