Origins Of A Biopharma VC Deal With Bernat Olle, Ph.D. and Parag Shah

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I'm Matt Piller and if you're a regular listener , you might recall an episode that we did a few months ago called Anatomy of a VC Deal with four bios Dima Kuzman and Ray Therapeutics' Paul Bresge .

I thought it would be a cool idea at the time to invite a funder and a fundee , so to speak , onto the show to walk through and break down their relationship , and I guess that was a pretty good hunch because it's turned out to be one of our most popular episodes ever .

So I decided we'd do it again , this time with an old friend of the show , vedanta Biosciences CEO , dr Bernard Orier , along with one of his most recent backers , k2 Health Ventures , founding Manager , director excuse me Founding Managing Director and CEO Parag Shah . Parag and Bernard , welcome back to the show .

You don't look like you've aged a bit in the last three years .

We had just received a contract from BARDA , the agency of the US government around our lead program . We had finished phase one data showing that that drug was safe and well tolerated And we now wanted to bring it into a study in patients that have a type of hospital acquired infection called cluster surgery due to difficile , or C difficile for short .

That contract was important for us because it brought a lot of non-living capital into the company And , at the time , basically what we knew about our lead program was that the drug was safe and that the dose seemed to matter . And I say seemed to matter because we could see that the more you gave , the more colonization of the bacteria .

We make drugs that are based on bacteria , So the more dose we gave , the more colonization we could see in the intestines of patients .

What we did not know at the time , which we spend our time and funding seems to get to know , is , one , whether you be efficacious in patients And two , what is the threshold of dosing and colonization that you need to see efficacy .

And so the key development from a drug development point of view , the key development since last spoke is that we did conduct the first phase two study around the mice phase two study in patients with this infectious disease . We saw that the high dose of our drug worked really well . We tried two doses , low dose and high dose .

The high dose worked very well , Low dose didn't , And it gave results that were clinically , we think , very relevant compared to the drugs that exist today .

So on the basis of that , we needed to go back to the well and fundraise more which I guess we'll talk about today to be able to run a phase three study , which we hope could be a pivotal study that leads to a first approval of this drug modality .

And so we've been working on all the preparation work to first build a facility to be able to manufacture our drug and then qualified , violated , and we're now in the middle of the GMP runs to produce the drug that will go into the phase three study which we plan to start later this year .

And in the meantime we have a second program that is for inflammatory bowel diseases . Specifically , we're looking at a study in colitis where there's a phase two study that's starting imminently . Well , that's exciting progress .

Those bacteria are anaerobes , so you cannot expose them to oxygen when you manufacture them . There's many of them , some of them from sports The number of things that make the manufacturing complex , which basically cornered us into having to build this manufacturing capabilities in-house .

When we last spoke , we had done manufacturing for phase one and phase two studies , which is a certain degree of buttoning up , But for phase three studies and in particular because we want to use the same facility for a potential commercial launch , if the drug gets approved , then you have to meet a different standard with the agencies .

So we built that facility in our Cambridge site and we spend some time getting it up and running , doing engineering runs , doing all the validation , training the personnel , And now we're an actual company making drug for phase three studies , which is exciting .

Not so much anymore , but if I looked at it in a vacuum , if I was dropped onto the earth from Mars and I had no idea what was going on in biopharm and capital markets right now , and I looked at what Vedanta did in the springtime raising $106.5 million I think well , that's pretty impressive , particularly in the light of these sort of stinging market conditions

, and market conditions that haven't been , like you know , like super hot on microbiome therapies . In fact , quite a few folks in your space have kind of suffered recently . So I'm just curious about your strategy going into that fundraising effort , you know , swimming against that tide and coming out on top .

Our goal with the financing was to get sufficient funds to be able to run two things to run the phase three study of early programming infectious disease and to run the phase two study of our next program , inflammatory bowel disease , And for that we needed a little bit over a hundred million .

We knew that insider's loan could not cover all of that , So we need to bring a meaningful amount of capital from new investors , And getting that was the number one priority . It can only optimize for so many things in those processes , right . So we need to find , you know , a syndicate and demand to cover that .

And , given the market conditions that you mentioned and I mentioned , the strategy was to broaden the pool , find out who was active , meaning investors and really focus on the substance . That's the short version of it . The more elaborate version is , as you know , investors active in private deals . Well , all types of deals have shrunk significantly .

There's whole groups like crossovers that have been just sitting out the market , mostly absent from private rounds , Some focused on buying cheaply located public stocks , instead Some just sitting in the sidelines . So , with a little bit of work to try to piece out who were the investors active in this market .

Talking to network IR firm banks can be helpful without too , And take a broad look at growing our potential syndicates .

So , looking at both strategic and financial investors , looking both in the US but also ex-US in the ultimate financing that are cutting investors from Europe , from Asia , And you're right that microbiome is not favored , I'd say in this market nothing is really favored .

A good thing that we had going for us was that we had our own clinical data face to data , with clear and ambiguous efficacy , so we could be judged on the basis and merits of the data that we generated rather than , you know , data from others . And we focus on the substance and the fact that we had meaningfully the risk , this asset in the clinic .

We focused on explaining what we thought was a realistic path to get it approved in the case , for why we think it could be commercially relevant And I think in this environment you know that is one of the key things that investors are looking for right .

I'm going to go ahead and assume that he listened to that episode and that it influences the decision to get behind . Absolutely , parag , you guys were a new contributor to the recent round And I want to get both your perspectives on this sort of the coming together of K2 Health Ventures and Vedanta .

But I'll start with you , parag , since you've been waiting , waiting patiently , to field a question . Tell us about the coming together . What circumstances led you to Bernat and the company ?

We had looked at a number of different players . We've looked at some who no longer exist in this space as well , but my particular meeting with Bernat was fairly unique and it comes sometimes from you know , when you do good things , other good things happen , and in this particular case , this was through the Timmerman traverse .

So it was the Presidential Range hike this past September 2022 . Luke Timmerman puts together a set of hikes that he's now done kind of all over the world . This one was on our coast in the White Mountains , and it's scaling seven peaks named after seven different presidents across about two and a half days .

You do it with a bunch of biotech executives , other investors , but the primary purpose is obviously A you're doing the hike , so it's there , but it's raising capital for life sciences cares , which is a anti-poverty organization . So there's this whole profit and purpose piece that goes along with it . That , i think , goes throughout both our ethos as K2 .

I know Bernat has talked about this in his path . What probably brought him here from Catalonia at some point to , you know , use all his skill sets in the best way that he possibly could and make a difference . I think that's part of what initially might have connected us unknowingly , but I would say the real reason is I was a laggard in the hike .

I'm in the back of the pack and Bernat was one of the unofficial guides of the hike , so he had to stay in the back to make sure everybody actually got up the mountain . So it was a natural forcing function to have our long conversations .

You go up for eight , 10 hours over multiple peaks in a day and at some point you can't , you have to stop talking because all I could focus on was just put the next foot in front of the other . I have to make it to the lodge tonight . There's no way down .

So but through that got to really know Bernat in a much different way , in a beautiful setting , and we got to have a longer conversation . Let's say that doesn't just become your 15 minute soundbite of trying to impress each other . But you know , get to kind of where did you come from ? How did you start ? Why are you doing this ?

All of that , so you know that led me to understand a few different things about what is important to us in someone who's leading something like this because , as Bernat said , it's a very , very , very hard task in doing something novel , new and building out something that is different . Even within a defined area of microbiome It's not so defined .

You're making up some of that as you go along in terms of what really works , you know . Anyway , through that , i will say , the key differentiating point for me always and it's played out well for me is this idea of persistence , right , and you know there's . The presidential range is a good analogy for this You have .

There was a former president speech that dealt with persistence and talked about persistence forges results , right , and the key piece there is like there are plenty of geniuses and unrequited geniuses , almost a proverb .

There's plenty of educated derelicts , but persistence is usually what gets you over the hump and I think you can recognize that in different people , and I know I mean this fundraising process . The building that manufacturing facility that we toured is a labor of love , right , you know it's a labor .

You make a lot of mistakes along the way , but you have to keep going And we saw that in what you know , in what Bernard and his team , dan Cudo on the manufacturing side he mentioned Jeff Silver what they had been able to put together there . You know that attracted us .

It's something that has helped me in my you know time and developing K2 as well , and building that up from the ground up . Persistence is a big part of it . You mix that in with a decent amount , some amount of smarts and and a little bit of humor along the way , and I think you can go go a long distance .

So several of my guests over the years have been participants in Timmerman traverse adventures and expeditions . It's an amazing cause that I want to hear more about . So , luke , come on the podcast , but I want to . What was that , bernat ?

But it's easy to make commitments in these , in these thrilling , you know , maybe sometimes irrational commitments , in these thrilling and beautiful environs . And you know , you said you were bringing up the rear and Bernat was kind of , you know , nudging you along .

You know , maybe there was a little bit of , you know , deference to , to bring , i don't know , but not I don't want to accuse you of threatening anyone , but there may have been a little bit of like .

white mountains . Everybody just went right in to get like some hot drink or whatever . And I have this weird thing where whenever I'm out in the mountains and I'm like sweaty and tired , i like to find a river or a lake and just get in there , no matter how cold it is , and it's weird , nobody else wants to do this .

So as soon as I get to the HUD , i pick up my stuff , i head to the lake and guess who's there , right in the lake , brock . Okay , i need to find out more about this guy . This is interesting .

for you , when you realize there was something about this company that really aligned with your strategy And I don't want to dig too deep , so I've got some questions for you about your portfolio strategy , because it's incredibly diverse .

Dare , i say that to the outsider looking in , you might look at the K2 Health Ventures portfolio and be like I mean , their strategy is quite blankly diversity because they have an incredibly diverse portfolio .

But , specific to Vedanta , what was it about the company and its efforts that you thought like this is going to be a good match or a good fit for our portfolio development ?

We tend to go fairly deep in a particular area and as we did that , we lay out the landscape of who are the different players in that space . So obviously , vedanta was one of them and what some of the pros and cons , differentiation pieces are there for each one .

You know and it wasn't necessarily on the hike that we got into all the details , but you know , suffice it to say that there was enough . There was enough interesting information . With respect to the platform , right , one of our fundamental thesis is can this platform spawn multiple shots on goal ? Does it have the capacity to really go ?

yes , you have your lead program . What's after that ? if we can give more capital towards that , can we see this in the long term , continuing to put capital in here to get passed and do multiple good things over time ?

And you know what Bernat and the team had built was exactly that right , this ability to put together a variety of different defined bacterial consortium not an easy problem in a way that goes in a pill , a unique for my problem . The delivery modality , the cost , the ease of administration all of these pieces start to play out .

It's like oh , wow , you could really affect a very broad population If this works . And that's why you do the clinical trials and you know they were deep into that and their capital could play out on both sides . You know we participated significantly in the you know , full raise . We also do . We do both debt and equity capital , matt .

So we provide equity but we also provide less dilutive capital on the debt side to help companies extend cash runways as well as do it in a less dilutive way for themselves , their existing shareholders , etc .

So we were able to provide a multiple , multi pronged financing And I was interested in that or open to it , had done some of that before , understood it And you know the stars aligned down the road . The beginnings of it was at the time of introverse , but conversations obviously continued for multiple months after .

But not , yeah , i've had many conversations with folks like Alan Shaw was a frequent , frequent guest on the podcast and he's he's pretty , you know , sort of a bio pharma finance guru , you know , and and he's told me that not all money is good money . Even in restricted capital markets , even when money's super hard to come by , not all money is good money .

Why was K2 HV good money for ? for the ?

So you know , when you're past all the work of figuring out if it's worth spending time with an investor in terms of you know what role they take in the financing , what's the right stage for them , what's the switch spot is the ticket size , and then something that makes sense for your round was moved the needle , which is more like the mechanical part of

figuring out who you should focus the efforts on . You have to go with proxies to figure out if it's going to be a good . Cultural fit is a little bit like like being interviews is either as an interviewer or as a candidate .

You're trying to piece together from an interview whether you know there's going to be a good relationship And , um , some of the things that I look for when I talk to people that maybe we consider as teammates are do they really know the company very well in the space called ?

Do they know what they're getting into And do the questions that they ask show that they understand the risks that they would be getting into and they're comfortable with that ?

I think that the same is a good thing to look for in potential investors Do they really understand the field and the company well And do the questions that they ask , show that they understand and they have gotten comfortable with the risks that they're assuming with that investment . So I look for this .

People understand their story well , ask good questions and particularly underscore , can give good candid feedback Candid , actionable it's rare , it's very rare . It's actually hard to get high quality feedback than it is to get dollars , and I don't think this is an exaggeration .

So I felt like the K2 team , barack and Austin , who work with us , understand the field very well . They run a thorough process but efficient . The diligence the company they focused on some of the important risks that I would have diligence if I was on their side and also throughout gave good candid feedback on their thoughts .

So these are some of the things that I saw , but also that I look for in other investors that we interact with .

it takes two to tango and we find in companies that we work with and Bernard mentioned my colleague Austin , who have now worked with him for 16 , 17 years My co-founder Anuparara , who we've now worked together for 10 years , and our process of getting deep is something we say that the companies that like that are going to be a natural selection for companies that

we want to work with and have at least the patients to bear with us as we get a little deeper into each piece of that and hopefully it makes us both a little bit better and it helps us be a better long-term partner for the company so that when the inevitable ups and downs happen and things don't necessarily go according to plan , you're not just going off of

one graphic and say , hey see , you told me you were going to get this thing done by this date , but in reality when you dig into it you're like , all right , well , there's so many factors that go into picking this one point in time that this is when I'm going to get the data , and you know the variability , you understand how different it can be and you

work within that and you don't freak out when things don't happen according to the timeline . In fact , you try and support the company or bring your own thoughts to bear and participate in the conversation in that process , so that helps us be better investors .

not , i would say , two-thirds or three-quarters of companies like that , not all management teams like that , and there's a natural selection point where you're like , okay , we're not the right buyer and seller in this tango .

but in the case of Bernat and it seemed there were very patient with us and we spent all the time that we needed and we really appreciated that and led us to really want to double down .

It can be pushback even at times , i'm assuming . Can either of you share some examples of what kind of quality feedback , what it looks like , like what it was in the case of the K2HV-Vedanto relationship ?

I'm excited to do that in a way that I don't get into too much confidence information , but I think that the most useful discussion is when the company kind of lays out look , this is what , everything are the key risks of the investments , of the investments you're considering , and these are the things that we put in place to mitigate that .

In our case , in our field , even being able to make the product manufacturing is a big risk and there's been failures there . You need to explain this is why it's a problem and these are the things that we've done so that hopefully we mitigate it .

In our field , in the past , recruiting for patients has been challenging , so we had to explain this is the challenges that we've had . but for the phase three , this is how we're planning to be able to recruit better and these are all the places where we want to go and this is how we plan through the studies so they can recruit well .

So basically , go category by category , acknowledge the ways that we think is important and then give the opportunity to the partner to then kind of either ask us directly questions or go to KOLs and ask them the same question to get a different view from them .

I think if you can focus a lot of the time on what everybody thinks are those key risks , that's where you get the best spend time , either because the party decides those risks are not right for them , or because they understand it and they buy on New Yorkers to discharge them , and then we can move forward with an investment .

angles and some people might think , oh , i don't want to share this because maybe that will make this investor think of things they never even thought of and take them down a rabbit hole . But I think what it does is it shows to investors that you've really thought through everything and you're not trying to hide anything .

You're saying , hey , here's what it is , here's how we've thought about it . It's never 100% certain one way or the other , but here's what all the mitigants are , and you can see different people and it becomes a more collaborative process and ultimately that usually works out better .

So I think that feedback loop that happens when you and I think we added some questions to that list , others added questions to that list and you get a more robust understanding of the company over the long term . So yeah .

So we just decided to have a central repository where all the information would be .

But then we realized that this actually can be quite useful when folks are triaging what to spend their time on and then when they're ultimately writing their investment memos and they want to just have a sort of crisp description of the risks , that they can just kind of take some of the material from there directly .

So I found this to be a from the feedback we've gotten , a useful little thing that you can do in the process to make the diligence on the other side a little bit more smooth .

Right , between the two of them There's teams and stakeholders . So in this case , with K2HV and Veranta , who's involved , like who's involved in the agreement making , and give us a little bit of color on , i guess , the roles of the people involved in that decision making and maybe even some challenges or obstacles that are faced .

I throw that out there and , yeah , parag is nodding , so you can take that one first .

And I say that as a way of background because it aids in sort of what our decision-making process is , in that it's myself and my co-founder , anup I mentioned . We're the investment company . We don't have to go outside of that structure to ultimately make a decision to make an investment .

And so , in this particular case , though we don't make those decisions facetiously , and we do all the diligence up front And we put together a deal team , typically of four people In this case , i was leading , but Austin really was leading And I get to say I'm leading , but Austin was the true lead in terms of digging in And he has a couple other people from

our team , in this case Jason and Patrick , who all together really dug in on the materials . And they come back and we talk about it internally and we make an initial decision whether or not we can issue a term sheet . Before that , bernad and I are talking to understand parameters around what makes sense , right , so that we know if is there a fit here .

Is there a fit for what they want , what we want to do , how much we want to do ? timelines well , the timelines work out what else is going on in anyone's pipeline at any given time to be able to put the resources to get things done . So all those things come into consideration .

And then where does this stack up in terms of your level of interest with respect to the rest of the things you're working on ? So this all bubbles up to the top of the stack or somewhere in the top five in the stack there . Let's go and do this because there's an opportunity .

Cost , right , just by us doing the work and we get excited doesn't mean Bernad has to pick us . There's still a everybody on the investment side .

You still have to market yourself as well , right , you still have to bring things to the table And ultimately the company gets to decide who they're going to allow in or bring into the fold if the supply and demand plays out that way And in many cases it does in good companies . So , yeah , i mean Bernad and I .

We're talking at the top level , but there are many other people involved .

We're making sure the parameters make sense And then we go up and down from there to make sure everybody's in agreement with those decisions And hopefully we come together on a signed term sheet , which then which we did which then moves to going forward , and I'm talking about the signed term sheet on the debt side .

And then we're also looking at the terms led by the syndicate on the equity financing of $106.5 million by Magnatar , and others were involved And do we want to participate in those terms as well ? Gotcha , yeah .

So it's our chief financial officer , mark , our head of strategy and BD Prenitta and myself that will be part of all the tactical aspects of the process of bringing it to conclusion , which are both sort of on the legal side all the documents but then also on the diligence side , making sure that investors have access to the information that they need .

And then these three from the team kind of branch into the rest of the team to get what we need as the requests come in . So typically the diligence requests fall into very predictable buckets that will be corporate . So Prenitta takes care of a lot of that . Clinical usually will go to Jeff's team or CMO and he'll provide that information .

Cmc so we'll go to Dan's team and provide that information . So basically there's a small team that kind of reaches out to the rest of the company , gets the information that you need , puts it into the hands of the investors and then , when the diligence are finished , then switches to focus on just the mechanics of closing the deal .

The pod is brought to you in collaboration with Citeva , a global provider of technologies and services that advance and accelerate the development , manufacture and delivery of therapeutics . Check out their resources at Citevacom . Backslash emerging biotech . That's C-Y-T-I-V-A dot com . Backslash emerging biotech .

The term sheet that you mentioned , parag is this sort of where the gives and gets of the relationship , if you will reside Like the stated ? I don't know , gives and gets is probably a pretty bad way to characterize it , but is that kind of where that element of the relationship is is codified ?

It also forms the basis for , potentially , the terms under which , over time , you might provide more capital . You want to make sure everybody understands the pieces there . We're not in team or familiar with that type of capital . They understood it .

We got to explain a little more about our unique take on it , if you may , and how we might play over time with the company on a go forward basis . It forms the basis of that for sure .

Multiple stakeholders are involved in that The management team , the existing shareholders , which wear a slightly different hat than new shareholders coming in , then the board , who's supposed to manage all the different dynamics and make the best decision they can for the company .

So there's the financial terms and then there's the business terms , which affect how you get your capital in the first place . What are some of the milestones in the future that might be important , things like that .

If you were to say to Parag I intend to spend some of this money on X and Parag was like that's not really the part of your project that we want to fund , is that going to play into it or is it more directed by you ?

Then the investors can decide if this is a plan that they like or if this is a plan that they're going to take a pass on because they view it differently and maybe they don't think that's the right use of proceeds .

Obviously , once an investor is part of the board , then you have a say on that and after a year you'll decide if the way the budget is set up and how the money is spent is right . But at the time of the financing there has to be very good clarity on high-level terms how you want to use the funds and what type of data you're trying to get with that .

That has to be crystal clear . Not surprisingly , in this financing we spend a fair amount of time explaining exactly what money goes where and what type of data we expect to get when with that funding . I think that's really a critical , one of the most important exercises in the financing making sure that everybody's aligned around how the funds are being used .

Other than Bernat buying a plane to get back to Catalonia quicker during this , everything else is probably on the table , yeah .

What you just said , parag , is that we're going to agree to the deal and we're going to hand it over and we trust that it's going to be put to good use , and that's a cultural thing . That's insured in the cultural match . Give us a little bit of that flavor around . Again , i hate to ask questions , because it's one that you don't really .

It doesn't invite a quantifiable response , but how do you assess and suss out the cultural fit between the two companies ? Parag , i'll invite you to start with that one .

I had the good fortune with my co-founder to start this K2 Health Ventures from scratch , and I left another firm back in 2015 , partially because of just dynamics around senior management , team etc .

The idea here was really , to be honest , i didn't know if I'd come back into the investment world , because maybe the DNA or the personality type that tends to get into the investment mindset is not always the type of people I want to hang out with . At some point in time , you decide well , what is it that you really want to do with your life ?

I was fortunate enough that I didn't have to come back into this thread . That's the one side of the finance world . You make more money than you probably should in the process of the type of things you get to do . If you're good enough , you can do pretty well . You could take your time and figure out what you really want to do .

When I did decide to come back into this , it was about doing with people I really really wanted to do it with and trying to align on our vision , that idea of okay , we have a thesis , we're looking for very interesting platform companies .

We're looking for companies that truly have something differentiating IP or a differentiating process , or they've figured out some hard problems , or the people have been at it for a while and they've gotten some , or they have good backers .

As Bernat said , you look for various signals in that and then you're looking for an alignment in , as you said , the cultural match . Are these people you want to work with ? Is this somebody you'd want to work with ? You do have a choice in that matter . It's not really about the profit And it is what they're doing meaningful to you .

Are you going to be excited about talking about it and moving forward ? You don't always make all your investment decisions based on that , but if you can , at least for the majority of the time , do that , it's a nice ability And well , i'll mention that when we get to our portfolio , which I'll use the word .

It's diverse for a reason , but it's based on real expertise that we have in-house . That then focuses on specific areas .

Again , just like in teammates that we'll work on , we look for , do they really understand what they're getting into ? Do they understand the company well ? Does it seem like they really care about this field , based on what they choose to ask ?

And then , more importantly , can they be very straightforward and candid and tell you exactly what they think , give you either positive feedback or constructive , challenging feedback when needed ?

Again , this is one of the hardest things to get from people , whether they're a teammate or an investor , and I would argue for an investor is even harder to get from a teammate , because some of the incentives that lead people that work together every day to be candid with each other are not present when you interact less often in an investor entrepreneur dynamic .

So being able to find a few folks to work with that can be really candid and tell you exactly what they think about the company , without regard to whether this will put them in a better or worse position , but just because they think it's the right thing to do . That is a rare thing to find and I value that .

I want to touch on just a couple more things , and one of those is the majority of our audience are leaders of , as I said , new and emerging biopharma companies , many of them aspirational , many of them seeing this stuff for the first time .

So I'm hoping you can share some advice and insight based on your experiences around best practices for those hitting the fundraising trail , perhaps for the first time . So , bernat , talk about getting attention . This is getting attention Man .

I've interviewed so many folks in this space and most of them very good at it , understanding the sort of the foundational , the important foundational aspects of getting attention , but a few who maybe aren't so good at it . They're striving for attention that they don't necessarily deserve .

There is also such a thing as like too much exposure beyond whatever your news or the newsworthiness of what Jeff to share is .

But the actual fundraising process is a mix of you proactively reaching to groups that you think are going to be the right fit and some groups reaching to you because they learned about you through some of the channels through which you saw that attention .

I think when you get into the process of actually getting not the attention but the money , then each situation is different . right , what field you are in ? How supportive is your existing syndicator of insiders ? Do you have clinical data ? Or how far are you from getting clinical data ?

Will the current financing get you all the way to whatever is next month and how much money do you need to get to the next month ? All of those things make each fund raising different rich person , so it's difficult to give generic advice , but I think that there is a common . there are some common elements in the current environment which we talked about before .

We on the entrepreneur side , we all have to do more work to raise the same amount of money as years ago more meetings , more longer diligence processes . You have to be a little bit more patient with that . It's just normal in this environment . Investors will take more time and be more demanding about terms .

I think , generally talking biotech , looking through the financing process with some of the following things in mind , is useful . Number one whatever was the pool of investors that you reached in your previous financing , consider broadening it geographically and by type of investor . Number two , because that will generate more work than you had before .

then , be more deliberate about finding out who is active from that pool of investors . There are it's not easy information to get . It's not like you can Google who are the active investors or chat , gpt it , but there are ways to find out who is being active .

Again , you can talk to bankers , ar firms , talk to your board and focus the efforts in groups that you know are investing And then , in this environment , really focus on the substance . If you have clinical data , if you have a commercial path .

that really is what investors want to hear more about now , so make sure you give the right amount of time to the substance . There have been other times in our field where telling a really exciting story about what could happen in the future may be an advisable thing to do in the financing process .

You should all have your own thesis for where you want to take the company , but you should also understand that in this environment today , what many investors will really want to hear is okay , how efficient can you be with the money that I'm giving you ? What data are you going to get , how quickly and how the risk is the process ?

And make sure that there's a drug behind what they're investing , not just an idea or a hypothesis or a platform .

Everyone wants my attention because I'm a spreader of that attention right , i'm a spreader of the message just by virtue of what I do , and they want your attention because you're a giver of the lifeblood of what they do . I have my own cues to look for , my own methods for sussing out who I want to give my attention to and who I don't .

What are yours Like ? what are you looking for and what are you just missing out of hand ?

LinkedIn , something here , something there , but the ones that typically rise to the top , that you spend a little bit of time on at least , is a trusted coming through a trusted source . And I think that plays itself out across multiple factors .

If you're interviewing for a job , right , what rises to the top of a resume is if somebody calls the partner at that firm and says , hey , i know this person , i've worked with them before . You should at least take a look . So , out of the 50 in your pile , you're at least going to look at that resume .

Very similar for us , whether it's comes through a board member we know , comes through another entrepreneur . We get a lot of referrals from CEOs and CFOs of our portfolio companies . Hey , i know this CEO and they're doing XYZ . I think it's pretty interesting , take a look . You'll at least take a look .

Right , you'll do that courtesy to take a look , if not at least to give some advice , if you can . And , best case , you start to get further interested . So I think the shortest answer for me is that , just coming through , the entrepreneur has to do some work for that right . They have to do the work .

Maybe that's when I first started in this business it was hitting every conference possible so that I get to know people And there's no substitute from the legwork . You have to do it .

No matter how good you think you might be , how great your science might be , how much money you might have , you still have to do the legwork and put yourself out there and make the relationships and show up at events and talk to people so that ultimately you do your first and your second , your third Thing , and people get to know you as to who you are and

then they're willing to refer you . So I think that that basis helps us filter out things . Initially , you know as the primary factor And the other part is show up at conferences because we're there too , right , yeah , happen to meet and we might get into a good conversation . And you know , one thing leads to the others .

I had a lot of conversations with biofarm startups leaders , biofarm startups who were pitching over Zoom , right , Like that was the only thing they had and pitch deck . We spent a lot of time talking about pitch decks and just how important they were because you had to present something over Zoom . Are pitch decks like still ?

is that still a place to focus a lot of your time and effort for , not an energy ?

Right , i'm no particular fan of PowerPoint or any specific tool , but I think that using graphic support and slide support to inform some of the key messages that you want your investors to understand can be very helpful . To convey the substance behind the company will be very helpful too .

And providing those as reading documents before after the meeting , so that if the people want this in preparation before the meeting , they can , and they can do it with one single document where you try to concentrate everything that you think is important , or if they want to follow up after the meeting , they can refer to what was discussed .

So , yeah , i'm a supporter of the user to pitch deck .

That's very valuable to somebody that gets . It peaks their interest further that , oh wow , they're really thinking about this and interesting where they've thought about this issue deep enough that I'm curious now to understand .

right , but you don't know from the get go which are the themes that will really resonate for investors .

You just know what you think is important and you'll spend the time accordingly And then , as you start experimenting with the deck and having discussions with investors , you'll see that there are slides that , although you thought were important , they never really get any question at all from anybody , because either they're obvious or turns out that you thought it was

important but other people don't agree . You can get some very useful feedback .

Whatever you may have questions that come up , we keep referring to a slide in the appendix and then I'm sure why you're like well , maybe that should be in the main deck is that it's important as what people want to know , right , so early in the financing process , that can be a tool to help you figure out okay , which are the messages that I wanted to

convey that are landing well and where am I coming up short ? And then you can use that information to tinker a little bit with the deck and hopefully , when you get deeper into the financing process and you're using it many times with any investors you quickly go on into a version that works .

I'm interested in your perspective on that , but if you're considering conferences and events where you sort of expect players to be there and ready to play , what of those conferences and events would you sort of reference ?

Hey , i'm interested in talking to these 10 companies and many people on our team will . Three , four people from our team might go to any particular name and investment bank conference . That's happening , whether it's New York , boston , san Francisco , some they'll go in person and some they'll do virtually .

You'll have these one-on-one meetings set up and it's an ability to kind of speed date , if you may . Right , with a number of different companies , talk to people in a few different fields in an area that you've gotten particular interested in , and you're talking to companies there .

Some may be raising money , then some may be raising money a year from now , but you start to develop the relationship .

They have the ability to have multiple legs of the stool with intellectual property , have the ability to spawn multiple programs , And then you lay around top of that , what are the expertise of the people that we have internally and where can they go deep and where do they want to go deep ? where they have looked at before .

An individual on our team has gone pretty deep Derek , on the oncology space . So in the biotech arena we will focus across a bunch of different areas , some of what we know and some of which we're willing to dig into deeply Ag Biotech you mentioned , for example .

So as we got deeper and deeper and really did our work , we got to understand the applications of biotech tools to a new ecosystem and where the frontier was there And that company you know has raised recently raised a couple hundred million dollar round to continue to finance itself .

At the end of the day , we talk about one health , right , we talk about population health and one health We could , we could have a pretty intellectual discussion about , you know , ag Biotech and its relationship to the human microbiome .

Does the use case make sense ? Meaning ? the typical question we'll ask is hey , if you had management team , ceo , cso , CFO , if you had an extra 20 or $30 million today in less dilutive capital , could you do something with it that would create more value , inflection points for you ?

in the same amount of time Meaning , could you take program two or three through the clinic a little quicker ? Could you better power your clinical trials ? Could you ? would it help you in a negotiation with a strategic by having a better balance sheet ahead of that negotiation ?

Or would it just give you a little bit more comfort that if timeline slip I'm not going to run out of capital before I have to raise my next round ? So that's where we play is in those use cases for biotech and other companies , other life sciences companies in this space , and then you know we do have this other side to us .

That is , in the healthcare space because , as I mentioned before , one of our partners , austin , was in the value based care space and in understand the payer provider dynamic pretty well , so he's led some of our investments into that world as well . So we're basing it on our diligence .

But then fundamentally , these use cases that allow people to extend their runways in a less dilutive way .

If I need $400 million to get to the end game , if 50 million of that is with less dilutive capital , well maybe I should make that a part of my overall strategy to get it over time to help fund it so I can do it in an overall less dilutive way for myself and my shareholders .

Now FDA has said this is good enough for an approval , and I think what's next for us , but also for the field , is show that we can do better than in both cases .

Those drugs are made of fecal donations , which carries a number of issues in terms of safety , in terms of quality attributes of the product changing from fecal donation to fecal donation but also in terms of commercial scalability , and so what we want to bring to the field is a defined modality where we can break free from the need to use fecal donors and have

drugs that are not made from feces . I think we can do better as a field and we should be able to get there , and so if we can get a first drug approved and show that that is in fact , possible , that that is the key , first priority . So get a first defined consortium drug approved .

In this case we're looking at the recurrence of the facility population , then the other thing that we want to do with the financing is do a well done well power randomities experiment to see if the utility of this type of drugs can be expanded beyond infectious disease , which is something that many investors are eager to see , but many patients are even eager to

see . And specifically we're looking at the inflammatory bowel disease field . This is a field where there's been several decades of research looking at the role of the microbiome driving disease , and there we're starting a randomized phase to study globally in patients that have mild to mother ulcerative colitis , and what we'd like to see is .

So the experimental question is if you compare to placebo in patients that have received some of the earlier safer drugs that are given to quality patients but not yet the more our core biologics that have safety issues to share with them , this patient population , can you see a meaningful , a meaningful efficacy with a clean safety profile ?

This is the second question we're trying to ask in this timeframe and with these funds , and so that's what's next for us .

It's a pretty unique time , a difficult time for many from a point of view of the fact that we've had 10 years of a real bull market with a lot of money pumped into this arena , with a lot of good science being developed , but people getting maybe a little sloppy with the amount of burn each company is hitting on a monthly basis and it's coming home a little

bit to roost with being unsustainable for that many companies burning $5 to $10 million per month each . So some of that aftermath is playing itself out now . Even companies that have pretty good science , for the first time maybe in biotech history , may not get funded . So it's an interesting time to be watching .

Not at the same time , we continue to participate because the companies that have again great platforms and great management teams and still good backers will get funded . We had a little shout out to one of our portfolio companies that just announced today a $140 million raise .

This is a small-cap biotech company with a $50 million market cap that closed a $150 million public offering . No straight up , but why ? Because it's T-Scan Therapeutics great platform in cell therapy , great management team and backers that could go along with them .

Baker Brothers and others and ourselves participated in that , and so it's a type of thing where there is still plenty of capital to be put out there and we have plenty of capital to put out there . But it's looking at the things we talked about today . Management teams that are focused can figure out the priorities .

Maybe you can't spend as much as you wanted to , as you could have two years ago , because capital is not as cheap . Maybe you have to prioritize a little differently and you learn lessons from that , but you can still ultimately get there .

As Bernat mentioned , it takes a little bit more patience these days on each front , but still , biotech , there's so much to do and there will always be money for things that have not been cured yet , and that's one thing about this industry that I don't have any doubt about that .

There will be continue to be good people and capital and people invested into it .

I feel like we could spend a whole lot more time talking , but we're going to wrap things up here , but I do . I just really appreciate the transparency and the thought behind your responses . I think it's super valuable for our audience and I think this was really time well spent . So thank you very much .

Also , be sure to leave us a review , let us know how we're doing And , as always , thanks for listening .