Biotech Investing During Bear Markets

A business man meets with a health care practitioner and have a productive meeting by the looks on their faces.
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On this episode of the Biotech Decoded Podcast Series, Chris Garabedian, Co-Founder, Chairman, and CEO of Xontogeny and Portfolio Manager of the Perceptive Advisors Ventures Fund joins Yaron Werber, Biotechnology Analyst.

Chris shares his insights about

1) what makes or breaks a successful biotech from his time at Gilead, Celgene, and Sarepta

2) how investing has changed now that interest rates are high and capital is expensive

3) his investment philosophy at Xontogeny and advice to other early-stage investors.

Press play to listen to the podcast.


Speaker 1:

Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Yaron Werber:

Thank you for joining us for another exciting episode in our Biotech Decoded podcast series. I’m Yaron Werber, Senior Biotechnology Analyst at TD Cowen. I’m super excited to be joined today by Chris Garabedian in this episode called Biotech Investing During Bear Markets. We’re going to be discussing early stage investing, value creation, and how biotechs are adjusting to the new tough fundraising reality.

Chris is the Co-Founder, Chairman, and CEO of Xontogeny and portfolio manager of the Perceptive Advisors Venture Fund. Previously, he was the President and CEO of Sarepta Therapeutics and led Corporate Strategy for Celgene. Prior to Celgene, Chris served in a number of global commercial and corporate development leadership roles at Gilead.

Chris also serves on a number of boards of life sciences companies and was a Senior Advisor for the Boston Consulting Group, and is a member of the Corporate Relations Board for the Keck Graduate Institute. So, Chris, thank you so much for joining us. It’s great to see you, and I really appreciate you being with us.

Chris Garabedian:

Yeah, great to be part of this, and thanks for the invitation, Yaron.

Yaron Werber:

So, it’s been so fun doing the biotech hang out with you, and you’ve been so kind to invite us. And it’s such a great highlight of the week for me of following what you’re all thinking and what happened during the week. And then, you really dawned on me. You and I have known each other literally for years and years, going back to the early days of Gilead and the early days of Celgene. And you’ve had such an amazing career both as an operator, and now very much as a venture investor. And I figured, we got to get together for this podcast so much to talk about literally 20, 25 years’ worth of history here.

Chris Garabedian:

Excited to be here.

Yaron Werber:

So, let’s talk a little bit. You started your career in many different facets, and then you had a commercial experience and corporate development experience at Gilead, and then you transitioned to Celgene where you ran BD. How did all of that impact your view on company formation?

Chris Garabedian:

Yeah, it was twofold, really. Gilead was a really unique experience because it was really during their growth years. When I joined, they had a little over 100 employees. They were less than a half a billion-dollar market value. And when I left about eight years later, they had a couple of thousand employees and were $25 billion plus in market value.

Celgene was already fairly established when I joined them, but they were in a growth trajectory. They had just launched Revlimid and hadn’t catalyzed to the big biotech that what we know today or after, before BMS acquired them. But there were really two main things that I learned, which was best practice for good drug development, not from large pharma, which had these huge bureaucracies, tens of thousands of employees, but how can a small team come together and get drugs over the finish line?

And so, being part of those smaller teams and learning what does that look like, was one component that shaped my view of what is required for a small biotech to drive a successful drug development program. The other piece of it was, I’m more on the BD side. And just to clarify, Celgene separated their M&A, and corporate strategy from the traditional BD, which was led by Perry Karsen, George Golumbeski while I was there. But what I would do is really focus on the larger transformational M&A.

So, led the Pharmion deal from soup to nuts. We identified Abraxis when we acquired that. I presented to the board a number of strategic acquisition targets, just remembering Insight and Onyx and Alexion, and there were a number of them that we were proposing like these would be good acquisition targets. At Gilead, I did the whole gemish from BD to M&A. But both of those companies, they really demanded often to get a deal done with a Gilead or a Celgene.

And so, we were in that position where people were calling on us, they were hoping that they could get a meeting with us. And so, being on that, what I would call buy side of the industry, we were the acquirers or the licensors. You really started to be discerning of, “Wow, which management teams had their acts together? Where did they have the pitfalls? Where did they mess up? Wow, you really messed up that manufacturing run. Or, gee, why did you approach the FDA with that strategy in question?”

And you would see where there were the weakest link of the chain of all of the different disciplines. And so, one thing I always had in the back of my mind, even before I became the CEO of Sarepta, was that, wow, a lot of early stage biotechs get it wrong. They mess up early and it’s unrecoverable. It’s hard to go back and redo everything. And so, a lot of good science, a lot of good technologies never find success because they made those early mistakes.

So, that was something that I always had like, wow, if I’m going to get involved in something, I think it’s better to get involved from inception to get involved as early as possible, so that you can help that founding team or the scientists did not make those early mistakes.

So, that was probably the most formative thing from the Gilead and Celgene days that I brought with me to what I do now. I didn’t know I’d be doing what I’m doing now, but it was definitely a guiding principle that I had in the back of my head.

Yaron Werber:

And as you think about things that Gilead and Celgene did right, that were instrumental in the long-term success, and I’m not talking about developing the right molecule. I’m talking about on the operations, execution, management committee level, what came to mind?

Chris Garabedian:

Yeah, it’s really interesting because they really had very different corporate cultures. Gilead was very austere, I don’t want to say miserly, but they would fine tune a program budget and there would be very little fat in there, and they would obsess over the design of a clinical trial or whatever regulatory strategy. It was very fine-tuned. And it was largely about, once we knew what we wanted to do, then it was all execution focused. And the culture was very much that.

There wasn’t a lot of room for trying things out that we weren’t sure about or allowing serendipity of R&D to take hold. And partly, that was because they were largely initially focused on antivirals, which are very predictive in preclinical models. It’s a lot easier if you can deal with a bacteria or a virus in vitro. It translates to in vivo. And so, you had the more courage of your convictions.

Celgene, and partly this has a little bit to do with where they’ve resided geographically. Celgene was in the middle of pharma. And so, the talent pool that was in Northern New Jersey was from Pfizer to GSK in Philly. They were really bringing a lot of pharma experience, but they did bring some folks like me from Gilead, Tom Daniell came from Amgen. There was a CFO, Dave Gryska came from Scios.

And so, they were bringing in some of us biotech culture into Northern New Jersey. But what I appreciated… When I first got to Celgene, I have to say, I was like, “How does this company survive? They’re not efficient at all.” And what I realized was they were very efficient compared to big pharma and everybody else. They just weren’t as efficient as Gilead.

But what they did, and you knew Saul and Jerry Zeldis and a lot of the folks on the R&D side there, but they would allow that serendipity. They were willing to take an idea. And a lot of this came from the investigators they worked with, as you know. And thalidomide was one of those drugs that because of the REMS system, they knew every single application that thalidomide was used for. And so, it was almost like an exploratory R&D in the clinical setting to help guide development, not just of thalidomide, but lenalidomide and pomalidomide, and where could this whole platform go.

And so, I fully appreciated, not at first, but I came to recognize that there are more than one path to success, more than one good corporate culture. But I think, Gilead later probably realized they needed to do a little bit more of that Celgene exploratory going into new areas to be successful for the long term. And so, I took the best of those two cultures with me when I ended up joining what became Sarepta.

Yaron Werber:

Yeah. So, let’s talk about Sarepta. That was a transition, and Sarepta at that time was a company that was doing a lot of genetic engineering, early pioneer and gene therapy and genetic manipulation so to speak, or genetic therapies. And when you came in, the company was beginning to go in a new direction. Can you talk about that? What was the opportunity set that even motivated you to go there? Because that was very much a turnaround story with an undercapitalized small company that really needed a lot of work at it.

Chris Garabedian:

Yeah, as the years go by, fewer and fewer really know the original origins of Sarepta. But a brief sketch of it was this was a company that was founded in 1980 on technology that was discovered in the 1970s, and it was a unique chemistry scaffold called phosphorodiamidate morpholino oligo nucleotides. And this scaffold was one of the early antisense companies along with Isis, Ionis and Gilead, interestingly was one of the early pioneers of antisense.

But this little company in the Pacific Northwest, which was called AVI BioPharma, and it stood for AntiVirals Inc. And that was the name of the company when I took over as CEO. They were using the exact same technology that they had discovered in the ’70s. Now, fast forward, they were able to survive because they went public about 15 years before I joined, and they were able to do these, I mean, this as a banker.

They did these warrant laden deals with heavy discounts to just keep the company alive, but highly dilutive and not any shareholders that you would think are reputable. We’re in it for the long-term. And so, what really happened was they attempted to apply this technology multiple times, bringing products into the clinic, and they all failed. I think they had seven programs, polycystic kidney disease, hepatitis C, West Nile virus. They all ended up failing.

And what I saw when I came on board was that, they just didn’t have the rigor of early develop. There were some great scientists, and one of the reasons it appealed to me to join them was they were really strong evangelists for this differentiation of this RNA platform. I thought that the choices that they made on drug development and coming out of Gilead and Celgene and knowing what best practices look like, I felt was lacking.

The other piece of it was when I came on board, some of the key investors were mostly focused on their antiviral programs, which were government contracts for Ebola, Marburg, hemorrhagic fever virus, pandemic flu, and long before COVID. At that time, there wasn’t a lot of investor interest in that. And I’m like, “Guys…” And I joined the board.

So, the reason I got involved was, I was asked to join the board of directors, and I wanted to get some public company board experience, had no intention to join as CEO. But once I got more involved, the investors and the board got to know me better. They started leaning on me, “Would you consider taking on the CEO role?” And I said, “No,” probably half a dozen times. But what convinced me was, they had this early signal in a European study in Duchenne muscular dystrophy.

It wasn’t the best design study. They looked at very low, low doses then what’s being used now in DMD, and didn’t even get to the doses that are currently approved. And they saw some modicum of response, but not something that would get anybody excited. But I felt that there was enough of a signal there with some of the dystrophin fibers that they were producing that it was worth pursuing.

So, one of my conditions for coming on board was like, “Look, we can support the government contracts, but we need to focus on this DMD.” The company at that time wanted to partner worldwide rights, and they literally couldn’t give it away. So, I said, “Look, let’s develop this ourselves. Why is Pfizer going to know any better how to develop this than us? Let’s do this ourselves.” Number two, I’m going to have to raise money to do it. So, get ready for dilution investors. But look, I come from companies that have a good return on equity investment.

And number three, I’m probably going to need to replace a lot of the staff and management team. And that may take some time, but we need to bring in and attract the best talent that we can. So, that was the beginning of 2011 is when I assumed the role of CEO. And I actually, canceled their poorly designed phase two study that was about to dose. And I said, “We’re going to go back to the drawing board and try to design this in the best way possible. We’re going to reengage FDA. We’re going to get this on a fast track even though we’re delaying the program.”

Long story short, I ended up raising about $30 million from some more reputable investors, perceptive being one of them. They had an early position in the company before I joined, and it took us about 18 months. But on that $30 million, we did a small phase two study. Now, it’s well-known or notorious. And that readout, when we finally unveiled the 48-week data, we went within two months from a $70 million market cap to a billion on the day we announced the phase two data.

And then, at that point, everybody was paying attention. The bankers had to cover us. We were able to raise a lot more money to build out manufacturing and produce more drug. And then, there was the back and forth with the FDA. But for me, it was the learnings from Gilead and Celgene on focus on a high value proprietary program, get that right, and then you can open the door to do a lot more stuff.

And then, I helped advance some of the other early chemistries that one of them was a project they started that’s in the clinic now with Sarepta PPMO, that’s in the clinic. But really, focused on bringing those three drugs into the clinic in the US that are now FDA approved for targeting three specific exons. And at that time, again, DMD was a sleepy area. And now, there’s 50 companies going after DMD. But that was a formative experience, I wouldn’t trade it for anything.

And definitely, this is how I’ll bring it full circle. If I could do that with Sarepta, with a 30-year-old technology that was largely failed, that was somewhat mediocre, it wasn’t the best cutting-edge technology out there. How much more fun would I have if I could select some of the best early technologies and be involved from the beginning, so that they don’t make the mistakes that Sarepta and other companies did in their early development.

So, that’s when it all came to fruition to say, “This is what I want to do. I want to work from early lead candidate through clinical proof of concept, and I don’t need to be involved in commercial or pricing or any of that stuff anymore. I just want to create the most value inflection there.”

Yaron Werber:

Yeah, yeah, so that was quite a transition. And at the end, at that time, that was also PTC and the Prosensa wars, and BioMarin ultimately buying Prosensa. I mean, that was quite an exciting time. And the role of a patient started with Genzyme, right?

Chris Garabedian:


Yaron Werber:

But it got powered to a totally different level with you and Sarepta. And obviously, the DMD foundation as well and CUREs. When you’re thinking about the industry in hindsight, before DMD and after DMD, on the orphan side, how have things really transitioned?

Chris Garabedian:

Yeah, you raise a good point. I think there were a lot of factors. There was a confluence of factors that caused that. So, number one was the PDUFA V was when they really put a mandate out and said, “FDA, you’re not using accelerated approval for rare disease.” And so, in the summer of 2012, and this was in the works, they were really pushing the FDA to focus on rare disease and to think about accelerated approval for rare disease. So, that was, there was a regulatory legislative push.

Number two was the FDA started meeting with these companies partly for cover, partly to show that they’re taking the patient voice. But you started to see this emergence where you’d have patient groups meeting with the FDA that was shaping their opinion about FDA policy, about how to interact with the companies that were developing those drugs.

The third thing was this social media phenomenon. I remember investors would come to me, “Yaron,” and they would say, “Chris, I had to join Twitter because I was missing out on key information about your company that was being posted on Twitter.” And many who followed the story know there were patients or parents who were posting videos of their child who had gone past the placebo-controlled version. And this was giving a lot of people excitement about how good the drug was working. So, and Twitter became this community of investors, industry people, media, right?

Yaron Werber:


Chris Garabedian:

The company has to be careful about what we say on social media, but that was this confluence of events that… You can’t go back to before that. And that is what I think catapulted in Sarepta just happened to be the company, along with the other ones you mentioned Prosensa and PTC at the epicenter of those changes that were happening in industry.

Yaron Werber:

There were chat rooms. It was the beginning of a lot of formal workshops between PMD and FDA. They were open to the public, and you can really glean a lot as to how things are transitioning, and really gave a big booster, as you said, to an accelerated pathway, and flexibility at endpoints in a fairly major way.

So, then you decided to, after Sarepta, you moved on to early-stage biotech investing. You were obviously, co-founded Xontogeny with a team at Perceptive. How did your thinking evolve? I think you started talking about that already. And what was surprising to you that you didn’t anticipate in early-stage investing?

Chris Garabedian:

Yeah. First, I didn’t know I was going to start Xontogeny. Initially, I was getting a lot of recruiter calls for other CEO gigs and trying to figure out what type of company I would want to lead next. But what surprised me was how many people, some I knew, some from my network, some cold calls. But the number of entrepreneurs and scientific founders who’d followed my career or knew me as the CEO of Sarepta and would reach out and say, “Hey, will you be our chairperson? Will you be a senior advisor for us? Will you be a partner and we’ll give you some equity to help us with our company?” And I really was surprised at the volume of these requests, without putting a flag out saying what I was going to do next.

And in the first nine months after leaving Sarepta, I had about 70 of these, so dozens of these requests. And I realized, and not all of them were great. And I’d say, “Well, let me see your pitch deck and what are you trying to do?” And it was more of a coaching mentorship initially. And then, for some of them I thought, “Okay, these are worthy enough. I’m going to write a check out of my own pocket. I’m going to help fund this.”

But then, I quickly realized, “I’m not going to be able to scale this.” And the best way to do this is to have a team that can help me, manage a portfolio. I can’t keep writing checks out of my own pocket for every one of these. And so, that’s when I went to Perceptive Advisors who I knew well as a public company, CEO, and they loved the idea. They were a big… A public equity investor. They’d been involved in crossover investments, but they really hadn’t done much seed or Series A investing in their history.

And so, they thought this was complimentary. They had just launched a credit fund strategy, so they were starting to diversify their investment vehicles. And they knew me as an operator. They saw me front row seat, Joe Edelman, Adam Stone. They would meet with me more than before I met any of the other analysts or managing directors at the company. They knew what they were getting. They liked the idea.

And, for me, it was kind of… There were some parts of being a CEO that were not the parts that got me most excited. So, I really love the drug development parts of it. I love getting studies right, waiting for readouts right. You design something and you wait, and you wait for the big payoff. And as a CEO, you’re dealing with investment conferences. You’re reading SEC documents, and you’re preparing for governance and board of directors’ meetings. You’re getting calls from media. You get investor calls when there’s a rumor on Twitter, and they want to clarify.

And then, you’ve got a large company and you’ve got personnel issues. And so, when you add up all of these things that you have to do as a CEO and deal with, I realized like, “Wow, I am not doing as much of the fun part. And wouldn’t it be cool to just help CEOs and entrepreneurs get that drug development piece?” And so, that’s how Xontogeny was born, Perceptive loved it.

And what they said was, “We don’t want you running around trying to raise the Series A rounds for all of these seeded companies. So, why don’t you join our firm? Help us launch our first venture strategy.” And I joined them in 2017. We started talking to investors LPs in 2018. We closed our first fund in 2019 at $210 million. We deployed that quickly during COVID in 2021, May of 2021. We closed our second fund at $515 million. We’re still deploying capital out of that. We’ll probably need to go and raise fund three next year.

So, that’s the big story. But I love it. We’ve made over 25 investments from the two venture funds. We’ve made 16 seed investments at a Xontogeny, five of which have graduated to the venture funds. So, yeah, I enjoy it now. The markets haven’t been great the last couple of years, but we’re weathering through and not going away.

Yaron Werber:

So, I definitely want to talk about the challenges of investing in this new reality, which is obviously a big focal point for this podcast specifically. But when you’re thinking about the investment philosophy at Xontogeny in early stage, what are you looking for?

Chris Garabedian:

And this really, hasn’t changed from inception. So, first of all, the venture fund invests across life sciences, right? Diagnostics devices. We’ve done tools, companies, all that. Where we felt the greatest need was for seed, where Xontogeny plays an active management role in addition to providing seed capital is in that drug development side as we talked about earlier.

So, we mostly do the seed investments for drug technologies and advancing those. Usually, we want to see at least a lead compound. It doesn’t have to be an optimized lead. That’s great if they have an optimized lead. But a lead compound that has been tested in at least a model or two, it could be an in vitro, patient cell line, it could be a rodent model. It could be more than that. But we want to see the preclinical initial proof of concept that does the… Do you have a proof of mechanism? Is it a validated target? What differentiates your technology?

So, what we’re not doing, which there’s a lot of other firms that will, we don’t really like to engage in early drug discovery. Hey, I think I’ve got a new cool target. It’s not validated, but we did this knockout mouse and extended survival, and we want to start a medicinal chemistry program to find elite. Yeah, that’s going to be millions of dollars. It’s going to take a couple of years. Maybe, it’ll work, maybe it won’t. Maybe we’re mistaking causation for correlation or vice versa.

So, we’re still not that quick to embrace early discovery. But if you’ve got a lead compound and you’re meeting an unmet need, then what we like to do is get involved where we either optimize that lead for you and better characterize it. Now, that could be another in vivo model. It could be going into a larger species. It could be doing some more tissue distribution work. It could be looking at more PKPD or dose range finding. It could be that we need a pre-IND meeting because this is a complex area. We need to get guidance from the FDA. But all of those choices and things you can do in early development before you’re going to the routine IND enabling toxicology, let’s check the boxes and get our IND submitted. We’re trying to de-risk these early opportunities as much as possible, so we can have more predictive power for what might happen in the clinic or what’s the right strategy to apply this technology in the clinic.

And then, the Series A, which we can come in and lead or co-lead or follow another, that’s really trying to get the company through an open IND. Sometimes, you’ll need a healthy volunteer, single ascending dose, multiple sending dose studies. But our North Star is we need to get to the value inflection of a clinical proof of concept in patients, that can be a small Phase 1B or Phase 2A. But that’s our goal. We want to hold on to our investments and our management of that program until we get to that at least clear signal or early signal in patients in the clinic.

Yaron Werber:

So, what are you seeing from your approach? Now, the interest rates are high, capital is tighter, it’s much more expensive, and the availability new funds are not popping up the way they used to three years ago. And as a result, people obviously warehousing funds to support their current portfolios. What are you seeing both on your side from your approach? And also, within companies, how are people reacting you?

Chris Garabedian:

Yeah, it’s definitely slowing down. What I mean by that is, we were in an era, probably a five, six-year run where nobody was worried about where the next check was going to come from. So, what that did is, it produced behavior across early venture capital, private equity where you saw a few things. You saw larger funds. You saw them wanting to create new companies. You saw VC funds who were not worried about writing the whole series a check thinking that there’s going to be another investor who’s going to write the next check at an up round.

And you would look across the… Let’s take the top 20 VCs where if you went back 10, 15 years ago, you’d see some series Cs, some series Bs, a handful of series As. You’d see some series Ds and F’s, right? And that’s what venture was. It was a long game and you had to select where you were going to diversify your investments. What you saw from circa 2017 to 2021 is every VC was only doing series A’s and they were leading them. And what that did was it produced a lot of inventory of companies.

And so, if you look at where we are today, I often… I’ve been saying this over the last year and a half, the hardest thing right now is to get a new investor to come in to write a series B, to lead a series B. And that’s because we have just still too much of these series A funded companies. Now, what did the VCs do first? They’re like, “Okay, we need a bridge round. We need an insider extension. We need to lay off. We need to rationalize these programs. How do we get to a key value inflection to make this an attractive investment? But it trickled down. And what I mean by that is, it slowed down this pace of series A investments.

So, series B is the hardest. The next artist is the series A. And then, the seed stage, these are usually different types of investors often, and they sometimes think, “Well, we have money to deploy. We’ll do a seed investment.” I don’t think they’re quite realizing how difficult it might be versus let’s say, five years ago to get that series A round completed. Because most of these seed funds don’t have the wherewithal to continue investing or write a big series A check.

So, that’s why all of us have slowed down where we’re still investing. I mean, we’ve moved from the earlier stage toward later stage opportunities, further de-risk. So, for example, our venture fund, which was only doing series A’s in fund one, we’ve done some series B. We did a large series A in cargo that’s in the queue to go public.

Right now, TORLs and other cancer company that we supported a series B in that company, we just led a series C with a big syndicate of $175 million in Avalon. And so, the reason for that is that when valuations have come down and there’s an abundance of opportunities for private equity to invest in, it crowds out the early-stage opportunities.

Now, this has always been the case, why should I invest in your drug discovery when this company has already got a lead and it’s already got preclinical data? I’m going to go after that. It’s not that much more value, pre-money value. So, I think that’s what we’re seeing.

I think it’s going to take another year to really get to full steady state. I described it like, how do you get someone who’s really drunk sober. You can’t do anything but wait for time. And I think we’ve gone from a 0.3 alcohol level at the beginning of this to 0.15. But I think sober is at least in the horizon.

Yaron Werber:

So, you’re prescribing high-dose IV, IV saline stats.

Chris Garabedian:

That’s exactly right.

Yaron Werber:

So, maybe we can just expedite this cleanse. When you’re thinking about… You’re looking at early stage investing, as you mentioned, you’re still even series B, we’re still talking about young companies.

Chris Garabedian:


Yaron Werber:

There’re very technology target. The management quality is a little bit more variable. A lot of times, you’re first time CEOs, almost always, sometimes you’re the founder scientist. As you think about from an investment to real company formation longer term, what do you look for in the first time CEO?

Chris Garabedian:

So, there are different flavors of first time CEOs. People like to point out that Henri Termeer was a first time CEO, and Art Levinson was, and John Martin a big mentor of mine. So, but I think I’m looking at… So, what are you bringing to the table? So, what is your experience? And not just how many years and where were you on your resume, but what’s your track record of success?

So, one of the first things I like to ask anybody that I’m hiring or interviewing is, what are you most proud of in terms of your contribution that you feel was you directly had an impact on? And that’s a softball. Anybody… It’s saying pick the best thing you’ve done and accomplished. And so, I’m surprised how many people are caught flatfooted on that. But I want to hear about what skills they have and how they’ve demonstrated that success in the past.

When you’re dealing with this, I’ll call it a more burgeoning movement of founder led biotech. These are young, scrappy, passionate entrepreneurs who don’t have a lot of experience. I want to harness that energy and that passion and that commitment because that is valuable. They’re not going to quickly jump to the next opportunity, but I’m looking for a level of humility.

I’m looking for flexibility, coupled with that passion. And that passion should be about what they believe they know more than anybody else. What insight do they have around their science, their technology? And they’re going to have to convince me that nobody else has figured this out and we’ve got it and we’ve got the IP around it.

So, I want them to be expert in something as it relates to the entire scientific thesis and program, but not expecting them to be expert in drug development. And so, it’s going to ultimately have to be a collaboration and they’re going to have to be able to listen and they’re not going to… We don’t want them to cower in the corner and not contribute. They’re part of the team.

And so, what I’ve learned across my career is some of the best synergy happens when you have a great scientist or entrepreneur who’s been thinking about this full-time 24/7 for years sometimes, and coupling that with good disciplined drug developers who know what to do with harnessing and amplifying that cool data set or that’s a signal that might be there.

Yaron Werber:

Yeah, a lot of first time CEO, and we’ve been writing about that extensively historically, and even talked about this in the podcast series with some of the guests, feel that they need to be the domain expert in every area. And that’s absolutely not what the job description is about. The job is to really be, how to be a leader quarterback, get the best out of people and get the team to operate well and make the best decision and execute very different skillset, so to speak.

Chris Garabedian:

I mean, that leadership and vision is important and they should constantly think about that, and also be ready to look for opportunistic areas to exploit. And we invite that. We like that. As long as they don’t get distracted, like, “Hey, we’ve got a lead program. We don’t want you spending 80% of your time on what next.”

But you’re exactly right. I think a good CEO, they always need to be in student mode, always learning and trying to become as expert in these other disciplines that they may not have come through the ranks on, but asking good questions. That Socratic method to uncover information, to uncover possibilities. And if you do that right, it’s actually, it builds a great corporate culture. You could ask questions and say, “Hey, I’m open to anything. What are the possibilities here?” And then, the job of a good CEO is also to clamp down when it needs to be clamped down and focus.

So, yeah, I think we’re looking for a personality that doesn’t have all the answers that is in constant learning mode, and that is really flexible and open to hearing other more experienced ideas.

Yaron Werber:

So, as you think about your experience on both sides, what advice would you give to other early-stage investors as they think about deploying capital? Especially, you’ve seen these markets now both ways, boom to busts.

Chris Garabedian:

It’s really simple. And this will sound funny or a little bit counterintuitive. The best thing… Because there’s a lot of early-stage investors, they think it’s only about the science. If the science is cool or is well-explained that, wow, that’s what we’re going to invest in. Look at this nature paper, right? Wow. Look at this experiment.

And in my 33-year history in the industry now, I’ve not seen any correlation between the most elegant science or well-published experiments to success in biotech. In fact, sometimes, it’s a mediocre drug, or I mean, we know this. A lot of scientific theses that were ridiculed or dismissed become the new blockbusters.

So, I think it’s not to make the mistake that it’s about the science. Yes, of course, doing due diligence and having your baseline substrate make… But nobody invests in bad science, so you’re all starting with some baseline of good science. The real issue is what do you do with it? What’s your next experiment? How do you design a program? What’s your regulatory strategy? How have you produced a preclinical dataset will predict what will work in the clinic. And so, I think all of that is what I call drug development.

So, don’t confuse… People think, “Oh, there’s science and there’s business, or there’s R&D, and there’s commercial.” No, there’s drug development is this big chasm in the middle of all of that. A lot of people ignore. And I’d say, that’s the best advice I could give to early-stage investors.

Yaron Werber:

Yeah, and one of the things when we were on the operator side that amazed me, which I guess I never really appreciated that before, being on this side of the fence as an analyst, is how many of the nature papers, even… Or is the science papers, the best labs? Right?

Chris Garabedian:


Yaron Werber:

You cannot reproduce that data, and the data is not fraudulent. And so, they’re not at all what we’re saying, but a lot of these experiments are very unique and they’re not reproducible, and amazing companies get founded. And then, they just struggle to operationalize it or scale it. What happens in the lab in a small scale is not exactly what happened to the company.

Chris Garabedian:

For sure.

Yaron Werber:

So, as you’re thinking, maybe kind of last question as we go into my favorite part of the podcast at the end. As you’re thinking about now over the next three to five years, what are some of the most promising new areas and technologies that you’re seeing?

Chris Garabedian:

Yeah, that’s always a question that’s hard because if you go back 10 years, 20 years, you’re seeing every area that we have as modalities continue to improve. So, you look at where we are today with RNA therapeutics, it continues to evolve. So, that’s an exciting area. A DNA, gene therapy, CRISPR-based setting, that’s evolving. Antibodies, we’re going ADCs, bispecifics, trispecifics.

So, we continue to see these modality areas grow significantly, and I think that’s pretty cool. But for me, it’s how we apply the new tools to accelerate that innovation curve. And that’s where… On one hand, I can say, AI machine learning is not going to be the be-all, end-all to solve all the problems. But what I’m hopeful for is, it’ll start to unlock some of the interactions, whether it’s a 3D moving pictures of inside a cell or protein folding, or how we can use some of these new tools to do better drug discovery and produce better thoroughbreds at the starting day.

You still have to do good drug development. But I’m excited to learn that. And obviously, that also applies to the understanding of the biology of disease, genetic basis of disease. I’m looking for tools to unlock new possibilities because I think we’re pretty mature on the modality front in a lot of areas at this point.

Yaron Werber:

A lot of the challenges is, if you look at the last… The last boom, so to speak, the last cycle, it was a cycle of new technologies and… But I would say, the commonality is validated targets, and there’s almost too much capital. So, think about there’s 20 different Revlimid in development, how can anybody possibly win? Now, we’re going into this next cycle, and it was a lot in neuro, it was obviously a lot in oncology, a lot of in rare… A little bit increasingly in INI. And now, it’s very common in INI.

And so, we’re thinking… For us, we’re getting a lot more interested in unvalidated early-stage novel targets. Because at the end of the day, there’s two ways, you can create value in near term and validation, but then it’s going to be very hard to monetize that long-term in a competitive environment. It’s better off to be first in a new area. But, of course, that carries its own risks.

Chris Garabedian:

I would say, there’s two things. How do you accelerate testing those new unvalidated targets in vivo? And how do you improve the models in which you’re actually testing them in? If we can improve those two things, I think you’re going to see a lot more interest in unvalidated targets.

Yaron Werber:

Yeah, so let’s go into the next part. That’s my favorite one, where we really get to know people and a little touch of humor. If you could become a professional athlete, which sports and position would you play?

Chris Garabedian:

I’m not a great athlete. I like recreational like skiing and hiking, and that sort of stuff. But I am always intrigued by the more mental aspects of sport. And I think, golf is one of those where it’s you against the elements or the ball, or you’re battling with your mind. How do you recover from a bad hole, et cetera.

So, that’s something that I think would be constantly fulfilling because you’re always competing against yourself while you have a group that you want to try to beat. But you could lose a match and still feel you had an amazing day or vice versa. You could be beating yourself up even if you ended up with a lower score than everybody else that you’re playing with.

And similar to that would be like that one-on-one, that tennis or wrestling or where it’s you against one other person where there’s a different type of mental or boxing or something like that. That to me is there’s a mental element of that, psyching opponent out, being prepared. I don’t know. That to me would be cool to do at the highest level.

Yaron Werber:

That’s incredible. As you said, so much of it is mental to physical, and you tighten up in golf and you go right downhill. You tighten up in tennis,and you go right downhill. I would be… For me, this one’s a tough one. I would either be, I played soccer growing up, so I would go back and play center halfback. And the game is so… For me, it was delivering the ball and getting… I’m unfolding a strategy and position of people, or I would be a professional triathlete. I mean, I’ve done nothing. I’ve do half of long, long distances type thing each time. But that’s tough, that’s mental. But that’s really physical too. And I started it way too late.

Chris Garabedian:

Yeah, endurance is a whole another game.

Yaron Werber:

There’s the mental endurance, but then there’s actually the physical body endurance, and you can only fight with your body for so long. Chris, always great to see you. Thank you so much. This was illuminating. This was a tour of the four. So, history to the future. Always great to see you. Thank you.

Chris Garabedian:

Yeah, likewise. I enjoyed it, Yaron. Thanks so much.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.

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