01:44:21 · Ben Liu, John Coogan
[01:44:21] S6: That's right. So either you have to go public or you're raised from a traditional, like, Trad Bio OVC. Right? Flagship Like, [01:44:26] S1: pioneering or something. [01:44:28] S6: Or, you know, an Atlas or, you know, a lot of kind of great funds kind of finance these drug, you know, Arch Capital. Yep. You know, I think what separates our fund is we're not investing in companies, but individual drug assets. [01:44:42] S1: Okay. [01:44:42] S6: And so these are drugs that we put into Inuco. [01:44:45] S1: Yep.
01:44:45 · Ben Liu
[01:44:45] S6: And we not only provide like the 60 or 80,000,000 needed, but all the capital, but also the capabilities. So think about like the ability to run trials cheaper and faster, best in class human drug pickers. So our R and D head was the R and D head at Biogen. He developed the first, you know, genetic medicine for ALS, the first, or a drug for SMA, the first disease modifying drug for Alzheimer's. And we have a guy who also discovered, a neuroscience at Roche. So folks really experienced in drug development, but also the AI systems allow you to, like, look at every single drug in the world, match the right drug to the right disease, design the right study, and then be more efficient in getting the drugs ultimately to a clinical balance option. Maybe kind of share a little bit more about how I got started. Know, I trained as a computational biologist, so I think like many, you're really excited about how all the genomic, proteomic, transcriptomic data mixed with machine learning AI can transform discovery. When I was a graduate student, we had the discovery of few candidate drugs in Alzheimer's and Parkinson's, and just bearing that you believe, we went to some pharma execs and said, hey, we discovered these drugs. Aren't you guys excited? And they said, you know, sorry to burst your bubble. And this is like ten years ago. There's already more good drugs discovered than we could afford to develop. When a single clinical trial in Alzheimer's across all the phases can cost like hundreds of millions of dollars, actually it's 500,000,000 per per shot, we just can't afford to prosecute everything we we discover. And now with AI, that's probably going to 10, if not 100x, right? And so if we can't like ultimately solve this throughput, we're not going to get more medicines to patients. And so this fund is dedicated for, you know, let's say a biotech and discover five, 10 drugs. As soon as they have a lead asset, traditionally, all the capital needs to go to that lead asset. That second, third, fourth month, not getting love. And so we're saying, hey. We can provide the capital
01:46:32 · John Coogan, Ben Liu
[01:46:32] S1: Yeah. [01:46:32] S6: But also all the capabilities to enable that company to take more shots. And if it wins, we kinda share upside. It could be upfront royalties, milestones, and even equity. And so it's kinda a win win for for for the industry. [01:46:45] S1: Yeah. [01:46:45] S6: But it's maybe the counterintuitive thing. I don't think people appreciate that, like, you know, drug discovery has not been necessarily the bottleneck for a pretty long time. Yeah. And it's only gonna get more and more acute as you have drug discovery abundance. And and ultimately, it's like, how can you get them into clinical proof of concept? And that's what the market values too. Right? Because if you have an abundance of discovered drug assets, you really don't see value until you demonstrate human clinical proof of concept. And that's where... Maybe the heuristic to think about this, like, a discovered drug isn't worth much. Mhmm. Once it has clinical proof of concept, so in human trials in the disease post phase two, the heuristic is one x peak sales. So you can sell drug for, you know, if it's a $5,000,000,000 a year drug for 5,000,000,000. Once it's over phase three, past phase three, it's two to three x peak sales. [01:47:36] S1: Makes sense.
01:47:36 · John Coogan, Ben Liu, Jordi Hays
[01:47:36] S1: Makes sense. [01:47:36] S6: And so, you know, it gives us an interesting... Like, we kinda ask the question, like, why hasn't there been a big pharma company really in our industry created since the nineteen eighties? Yeah. And one of the big challenges, if you're a venture... And that's kind of the Amgen's Vertex If kind of of the you're like venture backed company, it takes you like three to five years to get in the clinic, and then two to four years to run a phase one and phase two. Phase two is only worth 30% of the time on average. And let's say you're fortunate enough after you spend 60,000,000 to run a phase two, and it works, and a pharma company offers you $5,000,000,000 to take the chips off the table, you could, you know, not sell, run a phase three. There's a 40% chance it goes to zero, a 60% chance the phase three works, and then you can sell for two to three x peak sales. Risk adjusted, the rational thing is to sell. So we're structured as a company as a hub and spoke so we can sell in new co without selling the whole company. But if you can only take three shots and you hit a winner, you should probably sell. Right? Because if the expected value is 30%, you know, it's more likely your MOVE and IRR is gonna be diminished if you kind of run those two shots versus just sell off the first shot. So as a consequence, our industry usually has biotechs get acquired before they can become the next, you know, Roche or or or Novartis. [01:48:47] S0: Same exact [01:48:48] S6: thing we're humming from. [01:48:49] S0: Consumer packaged goods, honestly.
01:48:49 · Jordi Hays, John Coogan, Ben Liu, Jasper Zhang, Mark Gurman
[01:48:49] S0: Consumer packaged goods, honestly. [01:48:51] S1: Oh, yeah. [01:48:51] S0: Like, there there has been, like, a [01:48:52] S1: new Yeah. Yeah. Yeah. Yeah. There's no new guests in Humble. [01:48:55] S6: They buy... Yeah. Yeah. [01:48:57] S1: They buy the protein company. They buy the supplement company. They buy the cereal company, but there's no one that's... And there's been super ambitious founders that have gone after it, but all of them That's right. With point solutions. Yeah. [01:49:08] S6: And and that... And to to your point, like, the second thing that's important is you take enough shots. Right? Because if you can only take three shots, you should sell for the reasons we discussed. But if you can begin to take more than 10 shots [01:49:17] S1: Yeah. [01:49:18] S6: Your expected value is three out [01:49:19] S4: of 10. [01:49:20] S6: Now we have AI systems, and humans have done better three out of 10, but it's better to underwrite considerably Sure. And and kind of exceed on the upside. Once you run 10 shots, you you expect three out of 10. Yeah. So what the fund allows us to do is take more shots, number one. And we can increase the throughput of also the industry, but it also allows us to raise capital and then always have to raise equity. [01:49:42] S7: Yeah. [01:49:42] S1: So it [01:49:42] S6: lowers our cost of capital over time. Yeah. And, you know, like, right, so you'll
01:49:42 · Ben Liu, John Coogan, Jordi Hays
[01:49:42] S6: lowers our cost of capital over time. Yeah. And, you know, like, right, so you'll [01:49:46] S1: have, like, diversified cash flows so you can actually start scaling, like, the internal mechanism of the business. Like, the OpEx at an Amgen is what makes it a biotech biotech company, a big pharma company. It's not just that they have one... Yes. They have cash cow drugs, but they have a cash cow drug every ten years that cycles out so that they can actually sustain the business, get the headquarters, get the teams, get the, you know, the whole flow flowing. And if you're just like a one trick pony, a one hit wonder, you're gonna see this, you know, sort of up and down round tripping of your cash flow. [01:50:18] S0: Do you think public opinion do you think public opinion around pharma will be better or worse in ten years? [01:50:26] S6: I'm very optimistic it's gonna be a lot better, specifically because I think we're beginning to pursue drugs that just help you live longer and healthier. And you guys know about the GLP ones. GLP ones. [01:50:35] S1: You know, [01:50:36] S6: the two top GLP ones did more revenue than OpenAI and drop.com and also kinda did it profitably. And we think we're in early innings of things that just help you live longer and healthier. So things that help you walk longer [01:50:47] S1: Yeah. [01:50:47] S6: Like muscle. Right? Cartilage, bone density increases. [01:50:52] S1: Yeah.