JP Morgan 2015 and the “Failure Age”

Last month, the industry kicked off 2015 with the 33rd Annual JP Morgan Life Sciences Conference in San Francisco.  In our opinion, there is no international calendar event that rivals it for attracting execs from leading companies, entrepreneurs, investors, bankers, VCs and PE firms alike.  We all assemble to renew industry relationships, refresh our industry perspective, share ideas, and learn new things. Who could have foreseen that Genentech’s IPO would herald a new age of biology, biotech innovation, advances significantly helping patients, and a population of biotech billionaires in less than a generation? Reconvening each year enables us to reflect on our impact as well as the fortunes gained (and lost) since last we met, learn which predictions came true (and which did not), and discover who the emerging leaders are as ever shortening cycles of innovation and new product development ambush market incumbents.

What became clear at this year’s gathering is that biopharma is polishing breakthroughs across many disciplines: neuroscience; immuno-oncology (CAR-T); cell and gene therapy; gene editing; and addressing disease with new found success, including orphan diseases, Alzheimer’s disease, and drug-resistant infectious diseases.  One source credited 2014 with more than 900 M&A and IPO events for private companies in life sciences with a value exceeding $109B, and 167 exits for VC-backed healthcare businesses. By any account that’s a big year.

And then there’s the topic of new venture funding. According to analysts at PWC, NVCA, and Thomson Reuters, new venture biotech funding reached $5.96B in 2014, the largest in 20 years — with $2B of that occurring in the fourth quarter. People are placing big bets in life sciences once again it seems. Our Apple iPhone 6s and Samsung Galaxy 4s chronicled our daily activity (Doug averages 15,000 steps) as we raced from meeting to meeting.

As usual, our confirmation bias was in full motion. We spent most of our time talking about our winners, burying our losers, celebrating the unique diversity of our community and its prospects for incredible net growth, and hoping our insights and hard work will lead us to be the winners everyone talks about at next year’s conference.

It was truly energizing to see many in our global network, attend interesting sessions, crystalize new ideas, and make plans to catch up in more detail in the near future—the great dividend earned for participating in a vibrant marketplace. Of course, as heady and valuable as all that industry interaction is, we’ve found that some of the greatest learnings and insights accrue from post-event reflection.

In other words, “Wait, not so fast.”

Our industry, like most, is intent on focusing on the one shiny side of the coin (success), but the other side (failure) plays a role every bit as important. As a sanity check, we recommend everyone review the November New York Times piece by Adam Davidson, “Welcome to the Failure Age!” In this engaging article chronicling innovation from the industrial revolution forward, Davidson acknowledges the uncomfortable reality that success and innovation are unavoidably tied with failure.  He cites the Silicon Valley used equipment consolidator, Weird Stuff, as an illustration of this truth; the company recycles and resells materials from both successful and failed startups.

The life sciences industry is not exempt from this phenomenon. When products do make it out of the lab, as chronicled in the record 40+ FDA pharmaceutical approvals in 2014, they often fail expectations at market introduction, or as soon as a better product comes along.  When products do win, they often create broad failure among the competition. New technologies, such as DNA sequencing, genomics, data analytics, 3Dprinting, robotics, and digital medical records, make it easier and faster to displace the latest product introduction, leading to even more failure. So, as paradoxical as it may sound, the faster we succeed, the more failure we are bound to create as well. Our innovation economy depends on it.

Traditional pharma industry market leaders have seen steep declines in product development productivity because speed in innovation matters more than ever. We’re finding that corporate core competencies in the innovation that underpins growth now primarily reside in external networks — the seedlings are growing quickly everywhere, and big companies find themselves in the role of buying what they missed.

All this to say that we think 2015 promises to be a very interesting year for those capable of resilience in facing the vicissitudes of the innovation economy.  But first, we’re going to celebrate the efforts of some of the failures out there by visiting Weird Stuff to do some discount shopping.

How to Win the War Against Infectious Diseases like Ebola and the Flu

Ironically infectious diseases are better at waging war with human host resistance than humans have proven at wiping them out. Urbanization and near instantaneous population mobility are turning emerging pathogens like Ebola and ubiquitous pediatric enterovirus strains like EV-D68 into imminent global threats. And then there are the infectious disease killers — like flu — that many people think of as benign, despite CDC reports that 200,000 hospitalizations and 3,000 to 49,000 deaths each year in the U.S. stem from influenza.

Not that this is new news. Civilizations have been shaped over the millennia by waves of deadly pandemics caused by the black plague (Yersinia pestis), smallpox and influenza, as well as the crippling of polio and morbidity of malaria and dengue fevers. We just aren’t old enough to remember them.


The path to better outcomes in the war against infectious diseases requires focus on four things: investment, economics, collaboration, and risk management.

  • Investment — Achieve a reliable level of public support: for basic research; for the current generation of young scientists who invent and design the discovery platforms that precede product development; and for public health infrastructure, as Research!America advocates.
  • Economics — Develop sustainability principles in public policy, including incentives and value pricing for the field so the product engine can take off.
  • Collaboration — Develop the triple helix environment of collaboration between industry, academia and government labs, leaving ROI, mission and public incentives intact and leveraging each other’s skills and risk capital.
  • Risk Management — Insist on a de-politicized and sound regulatory process that effectively manages risk without strangling innovation (i.e., let them do their jobs).

While 5,000+ people in West Africa have died thus far from Ebola, that number pales in comparison to the 50 million deaths that occurred during the 1918 Spanish flu pandemic — and we have no assurance that such a superbug won’t reappear. We must get serious about vanquishing infectious diseases, and that means doing things differently. Humanity’s future depends on it. Join me.

The World of Nano in Medicine

As our team participates this week in some fascinating roundtable workshops at the 7th annual NanoGagliato conference in Italy — a wonderfully intimate gathering of thought leaders and creative thinkers committed to working together to solve crucial problems in health care — we’re struck by the immense value in multidisciplinary collaboration. Surrounded by thought leaders in the areas of nanomedicine, ethics, entrepreneurship and design, it’s amazing how many fresh, innovative ideas get generated in our working group discussions.

Revealing the world at nanoscale — as you can see by looking at Rita Serda’s scanning electron micrograph artwork on the pages of this site — is at once beautiful and powerful. From the discussions we’re having here at NanoGagliato, it’s clear that some interesting applications in nanomedicine are rapidly reaching commercialization —with enormous potential near-term health care benefits. We’d like to share some examples of what we believe are compelling nanomedicine applications to combat cancer:

Celgene/Abraxis BioScience has reached validation at scale for site-specific tumor drug delivery (with a form of paclitaxel albumin protein-bound particles). Antineoplastic chemotherapy drug Taxol, originally derived from the bark of the Pacific yew tree, has seen improved efficacy in some of the most common cancers — including lung, ovarian and breast cancers as well as Kaposi’s sarcoma — with a material reduction in dose limiting side effects such as lower blood counts, hair loss, temporary myalgias and peripheral neuropathy.

In the particle sciences arena, we’re encouraged to see nano iron materials that concentrate in solid tumors and can subsequently activate a tumor lytic response by a physical mode of action, targeting external NanoXray to selectively increase radiotherapy activity at the cellular level. MagForce and Nanobiotix are advancing this strategy to the clinic for enhanced delivery of targeted energy in the therapy of glioblastoma, sarcoma, head, neck and liver tumors. (Nanobiotix utilizes inorganic crystalline hafnium oxide, which readily enters tumor cells and interacts strongly with local radiotherapy while sparing the surrounding normal tissues, allowing the dose intensification needed for tumor treatment.  MagForce utilizes iron oxide nanoparticles coated with aminosilane, locally injected and locally retained, which allows thermal cell killing by repeat alternating high-frequency magnetic fields.)

Building on the work of scientists at MIT to unravel the mechanism of action (MOA) for gold particle transit into tumor cells, CytImmune and AstraZeneca are collaborating on promising product profiles. CytImmune has developed a nanomedicine platform that uses the tumor’s unique biology to gain entrance to the tumor and break down its defenses by disrupting the tumor’s blood vessel architecture, enabling other cancer therapies to reach and kill the cancer cells.

Additionally, the Houston Methodist Research Institute is doing some very interesting interdisciplinary work at the interface of engineering, math and biology where Mauro Ferrari’s team has created oncophysics-based multi-stage vectors (MSVs) to overcome tumor resistance mechanisms; they have design features that continuously bring active agents to the tumor microenvironment by creating a drug reservoir with first order delivery effects.  The strategy, based in part on silicon particles, has now reached readiness to move from bench to bedside and human translational clinical research.

We look forward to actively participating in the brainstorming sessions in the coming days at NanoGagliato. We have big, hard problems to solve, but with the right multidisciplinary collaboration, we expect we’ll make surprising progress. We’ll be sure to share insights here after the conference has concluded.

Ciao for now!

Cracking the Code

Our team recently finished Jim Mellon’s book Cracking the Code, his fourth co-researched and authored with Al Chalabi.  The premise is understanding the biotech revolution, how it is transforming our lives, and how to participate as an investor. Jim sees the context of the impact of understanding our DNA through sequencing advances and the human genome project. We couldn’t agree more, and found chapters 4 and 5 to be full of important insights.

We also see a paradox when moving from context to action. On one hand, the massive increase in sequencing speed and data analysis and the associated cost efficiencies have accelerated sustainably beyond Moore’s Law. These productivity disruptions are making the secrets of the human genome assessable. On the other hand, we in science are stunned by the newly recognized and beautiful inter-genomic complexity, its variability, the epigenetic ballet, the choreography of functional genomics, the biochemistry of the control of gene expression, DNA replication and nature’s DNA proof-reading errors known as mutations. These natural mutational experiments result in evolution, sometimes under Darwinian natural selection leading to adaptation and fitness, and sometimes just serendipity.

As the market allocates public and private capital to advance biomedical innovation, investors seek out actionable investment entry points aligned with their risk tolerance and time horizons for liquidity.  We like betting on the filters and lenses of smart, seasoned entrepreneurs who work with teams of leading biomedical, biophysical and computational medical scientists and engineers. Their insights will make sense out of nature’s “Grand Reveal” and lead to valuable products that address human goals and improve value in our healthcare economy. That’s where you’ll find us prospecting for innovation.