The Legendary Steve Gorlin's Golden Rules

Shortly after Thalidomide became a household word—albeit a very, very bad one—a biotech investor bought it for a couple hundred grand. Who on earth would want a drug pulled from the market for causing birth defects? Steve Gorlin did.

Today, Thalidomide is  the foundation of cancer drugs worth billions of dollars. Gorlin doesnt own it anymore, but the story of how he got it is just one of the experiences that contributed to the codification of his "golden rules." Following those rules has paid off. SIx of the companies he's founded acieved valuations, or sold, for more than $1 billion each. This week, the Business of Biotech sits down with the legendary biotech investor Steve Gorlin, now CEO of CoRegen, for a conversation on his golden rules for picking winners.

Gear up for an action-packed, LIVE, and INTERACTIVE Business of Biotech as we delve into the nitty-gritty of IP and legal considerations crucial for budding biotech entities.  Get your queries resolved straight from a seasoned professional, minus the lawyer's fees! YOU HAVE TO REGISTER FOR THIS ONE (no cost), so head to tinyurl.com/boblive23, or secure your spot for Business of Biotech Live! Legal & IP Protection For New Biotechs here. Join us on Monday, November 13th, at 11 am Eastern. You don't want to miss this!

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Transcript

Matt Pillar: 0:00

Hey business biotechers. This is Matt Pillar and before we jump in today's episode, I have a big special announcement. On Monday, november 13th, at 11am Eastern, we're taking the business of Biotech live for a one hour highly interactive web conversation with a special guest you won't want to miss. I'm planning a good 30 minute grilling of BlueSphere Bio CEO and Biotech legal Keir ,LoIacono, on legal and IP protection considerations for new and emerging biotechs. Keir is an Esquire and a veteran biotech attorney turned CEO with a ton of experience, and when I'm done with him, I'll turn him over to a select group of viewers you business biotechers who will have the benefit of 30 minutes of face to face Q&A and interaction with Keir and other members of the call. This hour will be incredibly consultative and offer great value at no cost but your time, and it's an opportunity for some face to face virtual networking with fellow business of biotech listeners who just so happen to be the coolest cats in the business. Go to the link in the show notes of today's episode to register and I'll see you there.

Matt Pillar: 1:16

If you've been following the biotech investment scene even a little bit over the past 40 or 50 years, the name Steve Gorlin might ring familiar. Steve is what some might lazily consider a serial entrepreneur, but I think that's too general and unfair a characterization of the man. It's not an exaggeration, in fact, to say he's a historically important figure on the life sciences investment scene. He's a biotech investment hall of famer who's made a lasting impact. We don't have the time to rattle off a comprehensive list of the transactions he's shepherded, but here's a quick sampling.

Matt Pillar: 1:57

He founded Highcore Biomedical, which was acquired by Agilent. He founded Therogenics Corporation and he founded Medicus Pharmaceutical, which sold to Valiant for about $2.6 billion. Then he founded Entromed MRI interventions, dora Biosciences, mimetics, conquest, which became Nant Quest, and Medivation, all of which reached $1 billion or more valuations or sold for more. Medivation, for one, sold to Pfizer for $14 billion. Most recently, steve Bacht, co-regen, where he currently serves as Executive Chairman and Chief Executive Officer. I'm Matt Piller. This is the business of biotech and here's the thing If your intent on turning everything you touch into gold, you got to have some golden rules. On today's show, the legendary Steve Gorlin is here to share his. Steve, I'm incredibly honored to have you on the show. Thank you, matt.

Steve Gorlin: 2:57

It's a privilege to be on.

Matt Pillar: 3:01

I want to get to know you a little bit and how your mind works and your thought process and your history. A little bit later on, I want to jump right into these golden rules because you shared them with me the last time we talked. They're fascinating to me. I want to jump right into those and I want to ask you to share some anecdotes or stories or examples of how you apply these rules, how you have applied these rules over the course of your long career. I'm going to start with rule number one accomplished people. Each rule comes with a bit of a brief description Accomplished people. Steve says those with a track record of success bet on the jockey, not the horse. That's something I've heard before. I don't know if you coined that phrase. If you have, people have stolen it.

Steve Gorlin: 3:48

Well, actually it was originally given to me probably 50 years a day. I think it started with Morty Davis, a DH player who was a legend in his own words. At the time, DH player was the number one underwriter in the country at the time. I think it started with Morty Davis about 50 years ago.

Matt Pillar: 4:08

Tell us about that. I guess what constitutes an accomplished player, an accomplished person to you, Winners stay winners and losers stay winners, losers, all the life.

Steve Gorlin: 4:22

It doesn't usually change. I'll give you an example of a story I like. I started a company many years ago called Therogenics. It's the company that made implantable seeds for prostate cancer. I had a CEO that came from industry and he was a very smart guy, but he was very rude. He was not polite to people. I don't like that. I had to like the people I work with. After the stock stayed around $2, $3 and I had to fire him. I fired him.

Steve Gorlin: 4:55

A couple of days later, this lady shows up in my office and she introduces herself and she says Steve, I'm a nurse, I want to be your CEO. I work in St Petersburg Florida. I work for a doctor down there. I put in these seeds and she said I know more about the company than you do. I've been to where we manufacture them. I need to be your CEO. She presented her case in seven minutes as well as anybody I've ever seen. She was articulate, good communication skills and she told me more about my company in seven minutes than I knew myself. I remember turning around and putting my feet on a condensate. Let me think about it. I said to her. You know what? You're my new CEO. Now I'm going to have to beat my board of directors or they're going to probably fire me over this, but I said you better perform. Two years later, the stock was $48. She was incredible, but she had never, ever, been a business person before. She just had a passion for it.

Steve Gorlin: 5:57

David Hung, who was the CEO for Medivation. David's one of the best CEOs I've ever run across. He was just a doctor. He's just a day-to-day doctor, but you know what he could communicate. He had tremendous communication skills and he could tell you what we're going to do and when we're going to do it and how it's going to work. The first product that David developed was a deal out of Russia for Alzheimer's disease. It failed but as a good jockey he jumped on another horse, which was a drug for refractory prostate cancer and that built that to a company for $14 billion.

Steve Gorlin: 6:36

Jonah Shatnay, a medicist I won't go on beyond that, but there's another. Jonah was my FDA attorney and I remember telling him I said Jonah, you're too damn smart to be an attorney. I hope I don't offend some attorneys, but I said you're too smart to be an attorney. I said what you need to do is we need to start a company together, and that was Medisys, which a few years later sold for $2.7 billion. But what I'm saying is none of these were business people, none of these came from industry. These, they shared one thing they shared good communication, skills and focus, and I will bring that up in more detail as we go along. I'll give you another one. I said that was the last one. There was another one.

Steve Gorlin: 7:23

I joined Patrick Soon-Shawng. I had a company called Conquest and merged it into Conquest, and I remember the first time I went out to see Patrick, everybody was walking on tiptoes around the office. Everybody was afraid of Patrick. And I walked in and I said Patrick, I said we're going to work together. Let me tell you something Everybody around here is working on their tiptoes. They're afraid of you. And I said I'm too damn old to be afraid of anybody, so if I think differently than you, I'm going to tell you. Can you understand it? And he got up and gave me a hug and from then on we had a great relationship and, by the way, patrick's very, very intelligent. He's been beat up right like everybody else in some of the biotech market, but he's a very intelligent guy, but people have to like you to make things work and you have to be focused on communication skills.

Matt Pillar: 8:18

Let me ask you a quick follow up, steve. You mentioned that first story you told. That's incredible. A nurse walks in and says hey, I've got a lot of familiarity with this product and I want to be your CEO. Obviously, it takes a great deal of trust to take that step. But to your point. The next story you told was about a doctor who didn't have any business experience. Do you have any advice, like in a situation like that where the jockey looks real good but the experience might be lacking a little bit? Do you have any advice for folks who are pulling the strings on these decisions around? Well, how do you set that person up for success if they don't come to you with all sorts of business leadership experience built in?

Steve Gorlin: 9:03

The mistakes I've made are where I pulled people from industry that had all the business experience. It's the people, it's the passion. I mean, if someone really loves the project, they will make it work. I've had a couple of failures, and both of them were where I brought in people from industry. It had experience. But what happens when you do that? They come from industry, they have a lot of assistance, a lot of people that do their work, and as soon as you hire them, they want to bring in the whole team that really did the work for them, and that's the problem I had. So you've got to be really, really cautious.

Matt Pillar: 9:54

I interrupted you. think you were going to make another point there before I interrupted you with that follow-up question.

Steve Gorlin: 10:02

What was the follow-up question?

Matt Pillar: 10:03

I think you were about to make another point about accomplished people before I hit you up with the follow-up. But if not, we can move on to Steve Gorlin's Golden Rule Number Two.

Steve Gorlin: 10:21

Yeah, that's fine, but we'll probably come back to it because she's going to hear over and over from me is focus, which I've broken that rule many times. Unfortunately, my kids haven't, but I have. And then it's communication skills and in fact, go ahead.

Matt Pillar: 10:38

Oh, I was going to say don't get too far ahead of yourself, because I planned on asking you later in the conversation about how many times you've broken these rules. Let's move on to rule number two products with high barriers to entry, strong patents and FDA approval process that would appear to be lengthy and complicated, or other barriers that keep competitors at bay. Boy, that sounds hard. That sounds like you're signing yourself up for a tough job.

Steve Gorlin: 11:04

Well, you're signing yourself up for a tough job, but I wasn't always correcting that one. Okay, Because I look at a company like Apple, one of the greatest companies in the world, and they come out with new products every few months and they come out with new ideas and they don't always worry about the patents because they're just first to market. So, unfortunately, I've never gotten into the high tech market, and I wish I had, because that rule does not apply in the high tech market. They have short product life cycles but at the same time, they seem to work if they have the good people behind them. Steve Jobs did a great job, but the present leadership did a better job.

Matt Pillar: 11:51

That's an interesting take.

Steve Gorlin: 11:53

I mean, Steve Jobs gets all the glory he gets all the glory the name slips me the CEO of Apple right now, but if you look at the performance of stocks since he came in, his performance is probably 100, 1,000 times better than Steve Jobs.

Matt Pillar: 12:09

Yeah, how does this rule products with high barriers to entry apply, specifically in the life sciences business?

Steve Gorlin: 12:17

Well, the life sciences business is extremely competitive and you've got big farmer with big money that are always looking to see how they can get around. I'm involved in another company and one of the ladies worked for one of the major companies and her sole job was to see how she could get around other people's patents. I won't list the company well, I won't list the company, but it's a Fortune 500 company but her sole job was to look at these other people's patents and see how you can get around them, and then they would come out as close to around them. So you've got to have good intellectual property, because today, when people say we're going to build a fully integrated pharmaceutical company, that's not realistic anymore. What you have to do is the cost of distribution is so expensive, the cost of manufacturing is so expensive For the small company of biotech. You build it up to where you know your product works and then you target a large company to be a strategic partner or a buyout partner.

Matt Pillar: 13:31

What are some of that role? Products with high barriers to entry you cite strong patents, you cite an FDA approval process that's lengthy or complicated, and then other bears that keep competitors at bay. Let's talk about those last two, like the FDA approval process and what other barriers might keep a competitor at bay.

Steve Gorlin: 13:53

I think you're looking at that time man. You're looking at what everybody else has in this space and it's not so much what other people. If it's a crowded space, you probably don't want to get into it. You've got to have something that distinguishes you from everybody else and so that one might not be as appropriate for this discussion. Really, because they're going to look at your patents and they're going to look at your matting instrument and also they're going to look at your law firm. Who have you got? I've got an expression the most expensive thing in the world is a cheap lawyer. That's a good one, yeah, and I've always used the most expensive legal counsel. And so, if we address that particular question, what keeps them at bay is if you have the most expensive law firm, the one that top law firms in the country they said, well, if I go after him, this is going to be very costly because of your representation. I think that probably addresses that question better than anything else.

Matt Pillar: 15:05

I think it does, and I'm going to pause you for a minute right there because you just gave me the perfect segue to make a plug for an event that I'm hosting, a Business of Biotech live event that I'm hosting on November 13th with Keir Loakano, who's an Esquire and one of the great you know, one of the good ones for sure in terms of biopharm and law. He and I are going to do a Q&A on November 13th. The link to register for this event, which is going to be an interactive Q&A my audience is going to be invited to come on screen and talk with Keir and I during this event. The link to register for that is in the show notes of today's episode. So, steve, thank you for giving me a setup to plug in an upcoming event, but it's timely. I mean, it's exactly what you're talking about going in with eyes wide open in your head up to protect your patents, protect your IP from those folks like the woman that you mentioned, whose job is to hunt her way around them.

Steve Gorlin: 16:03

And tell your attorney, friend, I really mean it. The most expensive thing in the world when you get in business is a cheap lawyer.

Matt Pillar: 16:10

Yeah, that's sage advice. You want to move on to rule number three? You're in charge, all right. Rule number three hey, I mean, if you want to circle back to any of these, I certainly don't want to rush you through them. But rule number three is long product life cycles in large product markets. Pursue technologies with long product life cycles that offer sustainable competitive advantages in large markets. Give us some examples of what that means.

Steve Gorlin: 16:42

Well, basically what you're saying is, if you spend a lot of money to develop a pharmaceutical product and then someone else captures your product very quickly, your investment's lost. So you've got to look at are you going to have this market by yourself? Are very few people competing with you? You can spend hundreds of millions of dollars to develop a product and then have a competition or a foreign company any competition a month, a month later. It just doesn't work. It doesn't. So you've got to look carefully ahead. Do I have a long cycle for this product? Does it have?

Steve Gorlin: 17:26

I think I overlap into another one which goes into large profit margins, because every CEO don't care how good you are, you make a mistake. So I always say that large profit margins cover up the inevitable mistakes that a good manager will make. And in this case, when you have these large product life cycles, you better have a large profit margin, because you are going to make a mistake along the way, whether it's manufacturing or distribution. There are a lot of challenges, so it's not an easy business, but if you have a patent and you get a product, it lasts for a long time and your margins are exceptional.

Matt Pillar: 18:17

Yeah, a lot of this might be research-based, but I'm just curious how do you go about ascertaining the large product market is probably relatively easy. You look at mature markets. You look at medical in our case, medical patient need, unmet patient needs that typically is indicative of a market opportunity. The long product life cycles that you have to take competitive pressure, even foreign competitive pressure, into account for how do you guard against that? How do you know, boy, we can really put a lock on this for a long time.

Steve Gorlin: 19:01

Well, that's where your FDA and your regulatory approvals come in. If you've got strong regulatory approvals and you have a strong patent and you have a good attorney to protect you, you're going to cover those issues. You're going to be okay. You're going to be fine.

Matt Pillar: 19:19

Yeah, yeah, I'm going to ask you. We've got more rules to go through here, but I'm curious when you're looking at an opportunity, Steve, and you're assessing the opportunity, do you methodically apply these rules? Do you think you're so far? I'm going to sit down, just Steve Gorlin and his thoughts and my golden rules on my desk, maybe some paperwork on the company. I'm going to methodically apply these rules and see which boxes I can check off.

Steve Gorlin: 19:54

I do now. Yeah, my rules developed by making a lot of mistakes over a lot of years. They didn't happen on day one, they happened over a period of years. I know your next question is going to be have I ever broken any of the rules? I've probably broken every one of them.

Matt Pillar: 20:12

I'll ask you stories about that? I'll ask you for some stories about that. That's a good point. Who was it that said wisdom comes from? Is a? Wisdom comes from experience. Oh, good judgment, good judgment, comes from experience, and a lot of that comes from bad judgment. A lot of experience comes from bad judgment. Right, you got to make mistakes to learn.

Steve Gorlin: 20:39

Was it Thomas Edison said, you know? They said you've had so many products failed. He said no, I just had that much more experience of what I found that would not work. Yeah, yeah, and that's how I found out what would work. It was very, very good.

Matt Pillar: 20:54

I just it works in this industry for sure. I mean, you've got to accept those failures, and that's what advances learning. You mentioned the large profit margins cover up mistakes. How do you go about assessing potential profit margins? Is that just sort of a formulaic thing?

Steve Gorlin: 21:19

Well, I would not get into an area where I had an error profit margin. I would look at something who's in the market, what does this product cost? What would it sell for? How long can I can protect that margin? If I don't see a substantial margin ahead of time, I wouldn't get into it. I think that's why I stuck with the pharma industry. I think that's where you see what happened with David Hung, with Medivation, on a product which is still a great product for refractory prostate cancer. Medicis was on cosmetics, cosmeceuticals and always large profit margins and they succeeded because of that. And if you make some mistakes you can recover. If you got a small margin and you make a mistake, you may not be able to recover, even if you've got a good manager.

Matt Pillar: 22:13

That's it, I'm sorry.

Steve Gorlin: 22:14

Go ahead. I was just going to say that David Hung was very agile. He jumped from a failing Alzheimer's study to a product that really worked and he focused on it. And I've seen good jockeys good jockeys that if this isn't working, they'll find a ship that they can ride or horses that they can ride.

Matt Pillar: 22:38

You just made a comment in a response a second ago about that being why you, you know you stuck with, stuck with Biopharma, stuck with Biotech, life sciences. I remember the last time you and I chatted, you began your career in some different industries, right, and maybe even maintained some investments in different industries.

Steve Gorlin: 22:59

Yeah, yeah, that's true. Actually, I started out as a stockbroker and I was very, very fortunate. I was riding with a friend on a plane and they were going to make an acquisition. He asked me about a little company and he said I got some friends that just took over this company in Southwest Africa and the management of the company has gone to jail. The Smith Broker is kind of like on the cough drops and so I said what is it? He says Brylon Mines. And I looked up Brylon Mines and this was my first million dollars, by the way.

Steve Gorlin: 23:37

I looked at Brylon Mines and the stock was at 42 cents. They had $3 a share cash in the bank. They had most of the. They had the oil and minerals from all the South which, the Africa, which is now Namibia. And I looked at it and I said, oh my God, the stock is so undervalued. I said what's the leadership? And the leadership was a gentleman who had been second in command of the Berlin Airlift and he'd come over and taken up, taken over the company and he was going to build it and he had also just made a deal with Panaroya, which was the largest mineral company in the world owned by the Rothschilds. I said, gosh, this has got to be a winner. So I started buying the stock at 42 cents. A year and a half later, it's $58.

Matt Pillar: 24:25

Yeah, yeah, that was the beginning, huh.

Steve Gorlin: 24:28

That was the beginning and I said, oh my God, this is fun. So that that was. It went from 42 cents to $58. And there's a lot of side stories to that because a lot of brokerage houses shorted it. They didn't think it was real and there were too many stories for that one, but they shorted it and, fortunately, when I saw it coming on, I had a friend who was a partner at Lehman Brothers Ray Rusmaisal and Bob Staff and I called them up and they liked it. So they they joined me as a partner and we had what happened.

Steve Gorlin: 25:07

We had the number one short squeeze in history up until a few years ago, because I had gone on the honeymoon to Hawaii and they called me. The stock had dropped from 18 to nine and I said how many shares do you control and how many shares do I control? And we between us and between management, we own more shares than we're outstanding. We started buying in stock and back then there was a. You had to deliver shares within 10 days if you got a call or you put out a business. So several companies went out of business. We did the call and we had a settlement with the. The SEC stopped trading and asked us to settle so some of the brokerage houses could get out of it. We did so. That was the first I said this is exciting, this is fun.

Matt Pillar: 25:56

Yeah, oh yeah, but did I read somewhere that you were, at least at the time, the youngest licensed, the youngest to be licensed by the SEC? Is that, did I read that Is?

Steve Gorlin: 26:08

that accurate? Yeah, that's accurate. Only for one reason though I had gotten a notice from an army to report and I was 20 years old and I wasn't old enough to be licensed. So they they found the license and they approved me because they knew I couldn't sell to. I got out of service. So so I got an honorary license because I was going in the army.

Matt Pillar: 26:33

Oh, that's all. Yeah, all right, that's a good backstory. I think I just read that as a soundbite somewhere, that's interesting. Interesting, I didn't sell anything to.

Steve Gorlin: 26:41

I was over 21, but I had my license before I was 21.

Matt Pillar: 26:45

Yeah, that's, that's awesome. All right, let's move on to rule number five, Steve Gorlin's golden rule. Number five high societal impact. I mean that seems like a direct fit with with life sciences. That's what we're all about is societal impact.

Steve Gorlin: 27:00

You know, I focused on things where, where people whether it's diabetes, whether it's cancer and our present project is, you know, active in cancer People if something's going to impact their life and change their life, they're interested in helping and and and that has served me so well because most of their. I haven't done much with VCs. I've done most of my financing with high net worth individuals and they, and for a young company, it's a pretty good way to start If you can do that, because the, the VCs will wear you out. Looking at the D, I hope I'm not hurting your clientele for the program, but VCs will go into every detail you can and if you're a small company that put the youngest guy in their program on your board who hasn't had a lot of experience, and if you think you know where you're going and you've got a passion to get there, you'll get there. So I have just I've just followed that pretty the highest societal impact and and and.

Steve Gorlin: 28:04

Because of that I've had access to most of the major medical institutions around the country and if one of my friends or investors had a problem, I've always been able to get them in If they need to get the mass general or Mayo or something like Johns Hopkins. I could usually make one call and have them in there the next day, where they may have been along waiting list. So it provided me an avenue to help my investors whenever they had a problem. And that's and it's, and we doesn't go go by that I still don't get a call from somebody. Hey, who's the who's the best one to see? In fact, I tell people if they get sick, call me first and call the doctor second.

Matt Pillar: 28:44

Yeah, it helps have friends in high places. So am I understanding you correctly when I kind of pick up this general trend that if, if, if your purpose driven to have a high societal impact, you find it, I guess, more more personal to to do business with high net worth individuals who might share that passion? I mean, is that kind of what I'm, what I'm gathering?

Steve Gorlin: 29:08

No, they have the. Yeah, they have the money to help you get started. But at the same time, they're more conscious of their health than the average person. Hey, they've got a good life, they've got good wealth. Things are going on.

Steve Gorlin: 29:24

I want to stay healthy. I've had a history of cancer in my family. I've had a history of diabetes in my family. We've had heart attacks and strokes. Who, who is the best person to each of those modalities that I can call? And fortunately, I've had the benefit of being able to guide people in that direction and help them the again.

Steve Gorlin: 29:51

But it's not just it's not. It's not just the medical, and I have guided my kids in other directions. But I have an expression that I say if skunk farming becomes popular, I'm going to be one of the first skunk farmers, because you have to be where the interest is today, and there's there's certain areas where I think of high interest today. I'm not in it, but I think I look at what the Saudis are doing, I look at what some of the big funds are doing, but I think anti-aging is going to be the hot spot coming up this next year. I mean, I think that's where people are going to be looking. People are concerned about their health, their age and I think it's going to be one of the hot spots. So if I could, if I find the opportunity to get into do my skunk farming and get into an anti-aging deal, I would do it. I mean, I think that's. That's a big area, yeah.

Matt Pillar: 30:51

Yeah, we've had a few, a few longevity and or anti-aging guests on the show. Not too long ago we had life biosciences on and I know I know there have been others, so we'll put them on notice. Steve Gorland's interested in and get behind one of those.

Steve Gorlin: 31:09

I think it's really a good one. It's off purpose, but I've always said one of the things that people get hurt on in their investments is greed. It's fairly easy to pick a stock that you want to buy, but it's a devil to know when to sell. It's more important to know when to sell than it is to buy. I'm sure a lot of people in the audience know that I've never been greedy, never tried to get the top of a sale, and I have an expression even on the businesses where I'm negotiating to sell a business my golden rule, other golden rules first check, Even if it's not exactly what I want. If it's close, I'll take it, because it may never be another check to follow.

Matt Pillar: 32:03

As manufacturers look to automate, scale and reduce risk in cell therapy process development, there are more options than ever before. Tune in each week to learn about cell processing manufacturing platforms and more. The pod is brought to you in collaboration with CITIVA, a global provider of technologies and services that advance and accelerate the development, manufacture and delivery of therapeutics, including cell therapies. Check out their resources at CITIVAcom. Backslash emerging biotech. Why do the subtext the high societal impact that this criterion translates into extraordinary successes? The statement investors give highest consideration to innovation that has exceptional societal impact. That sounds altruistic. I mean you might be easy, maybe the cynic in us we might default to. Investors give highest considerations to innovation that has a high return. Why exceptional societal impact? I guess John Yep Give you a perfect example.

Steve Gorlin: 33:19

I'm glad you asked. Years ago I started a company called Entremeg with Judah Folkman. At Harvard Children's Festival. He was the first one to develop the field of anti-angiogenesis. Well, shortly after the company started, the New York Times did an interview with Judah Folkman and they called it the cure for cancer. They said this looks like the cure for cancer. This is the stock on Friday. On Friday closed at I think, 12 and a quarter, something like that. It was 87 or 88. On Monday it was 138 on Tuesday. The high societal impact of wow, this might be the cure for cancer. What if someone came up tomorrow and said I've got something that solves type 1 diabetes period? What would happen to that stock tomorrow? What if you came up with something for the heart where you could, after a heart attack, instead of the heart continuing to decline, it could continue to regrow the heart tissue. What would happen?

Matt Pillar: 34:31

Yeah, I mean, how do you guard against the sensationalist flash in the pan impact that those kind of statements can make? Though you make a statement like that and you might get some retail investors and maybe some naive investors who make things go crazy for a minute, but all too often the reality is that those big swings are not going to connect.

Steve Gorlin: 34:57

So how can I get that?

Matt Pillar: 34:59

Yeah, I'm just curious how you guard against that, how you create that kind of energy, but in a rational way.

Steve Gorlin: 35:08

Well, you can't control that energy. When that kind of news gets out, it's going to fly. You've just got to be wise enough to know when to sell and not try to get the top of the market. Yeah, that's it. I mean, greed will grab you every time. Yeah, Greed will grab you every time. So you can't be greedy, you can't control that. These spikes that go up, they're going to come down. They don't last. They don't last and I'm tremendous. I was very, very fortunate because I got out because of one thing the CEO did and the board voted against me. I had a junior.

Steve Gorlin: 35:56

Dr Fulton had advised me to acquire a drug called thalidomide. I said why would anybody want thalidomide? I said it causes birth defects in children, he says, Steve, but it's also going to stop blood vessels growing to the tumors and feeding the tumors. I said, wow, it was an approved drug. Nobody wanted it. I bought the World Wide Rights, I think was for $200,000. I brought it back to my company, Entromed, and they were developing an anti-angiogenic and they decided to sell it. I said, well, why are you going to sell an approved drug? We just have to. Yeah, but the name is bad. They sold it to a little company at the time that was half our size, called Cellgene. Cellgene became a multi-billion dollar company on what they sold them and because of that I resigned from the board. And it turned out fortunate, because I was not on the board when the article came and I was able to sell my stock.

Matt Pillar: 36:56

Yeah, that was known when to get out. I guess the gut reaction was understandable. That was a bad word back then right.

Steve Gorlin: 37:05

Oh, it was a terrible word. Nobody wanted it. But you ask how do you see an idea? Judith Folkman showed me an egg yolk where blood vessels were growing across it and he showed me where he put a couple of drops of phyllolytamide on it and it dead, stopped those blood vessels. Just seeing an egg yolk with a little phyllolytamide on it, and coming from Dr Folkman, who was the number one person who cancer at the time, I decided to start the company.

Matt Pillar: 37:33

Yeah, yeah, that's fascinating. Rule number seven, ahead of its time, pursue dreams of the future, not only the present. These often involve breakthroughs that render market sizes and societal impact almost impossible to calculate. Skim the cream before others know it's cream. That's a good one.

Steve Gorlin: 37:55

Steve Jobs did it over and over. Yeah, he had the ideas, he had the concepts, but it took someone else to build the business. But he always went after it. Ai AI suddenly became the hot thing this last couple of years and AI companies are running. Of course, you and I know that the small companies won't succeed in it. It's too big a thing. The apples and Microsofts the big guys are going to be the winners in that one, but those represent the cream. Just grab them. Like I said, if you ask me what I think is going to be coming up, I think that people's interest a lot of you, a very wealthy community that have been very successful over the years, are getting up in age and what can we do to sustain our health and live healthy a little bit longer? And the science is driven so well right now. They are going to come up with things and they're beginning to come up with things, and I think there are going to be some big discoveries in this area and I think it's going to be a hotspot.

Matt Pillar: 39:16

Yep All right. Well, there's another hot tip from Steve Gorlin for investors anti-aging Only checks the ahead of its time box.

Steve Gorlin: 39:26

No, it definitely is, definitely.

Matt Pillar: 39:28

Yeah.

Steve Gorlin: 39:33

The last one is obviousness, and I really like that one. And I was sitting at Johns Hopkins with the president of Johns Hopkins and I was having dinner at his house and he said, steve, let me add the seventh rule for your rules. I said what is it? And he said obviousness. And I said why obviousness? He said it's so hard to start a new company with all the factors that come into it to make it work. He said if you can't write down what you've got in a half a page, this is what you've got, this is why it'll work and this is what it's going to take to make it work. If you can't do it in a half a page, don't even start it. And that became one of my rules.

Steve Gorlin: 40:26

When I looked at the current cancer company, it was obvious what the technology was, that it's probably going to work. And when you look at what other people have, if someone came up with something that's really adding life to someone in aging, it's going to be pretty obvious. And it doesn't take long to explain it. And I go back to the young lady that came to my office on Therogenics. She had her whole story down in less than seven minutes. And busy people busy investors don't want to read a 30, 40, 50-page document. If you get them in the first half page, they then will have other people look at the detail. But the obvious rule is there If you can't present what you've got in a half a page, don't start it.

Matt Pillar: 41:22

That can be a tricky one in life sciences because, especially to the retail investor community, some of the science is not obvious. I mean, maybe the mission is right. Like we want to go after cancer, we want to go after aging. That's a nicely packaged mission, but when you get into the details with a more sophisticated investor, isn't that a difficult one to convey?

Steve Gorlin: 41:47

There's not the deals I'll go into. If I can't find something in a medical space that isn't obvious and I can't explain it, you've got to explain it to the layman. You can't come out with a six, seven, 30 page document for a guy that doesn't know medicine and explain it to him. You've got to explain it to him simply. He's got to understand it. He's got to have it in a layman's language. I could give several examples of that. Again, I won't name company names, but I saw a press release going out from one company that was six and a half, seven pages long and it had words that I didn't even understand. I said no one is going to read that. I rewrote it for them. I didn't put anything in there but the words they had, but I took key sentences. I put it down to about a page and a quarter page and a quarter from a six and a half page. They refused to use it and the stock dropped in half when they let out the press release and the data was good. Data was good.

Matt Pillar: 43:01

The data was good, the message was bad, right, exactly correct. Yeah, yeah. Well, those are Steve Gorlin's seven golden rules. What would you add? When I talked to you last a couple of weeks ago I can't remember what it was we were just in casual conversation and you said something. I saw you kind of tilt your head and you said I should add that to my golden rule. What have you considered adding over the years? Anything in particular.

Steve Gorlin: 43:31

Well, just an example I keep bringing it up because it's the most important is communication. Probably, behind that is focus. I would definitely add communication skills. My son, when he was 10, 11 years old, could do magic tricks as well as anybody you saw on entertainment, but his communication skills were terrible. I mean, he could do the tricks but he couldn't present to his audience.

Steve Gorlin: 43:59

So I did a search for who was the best speech teacher in the country at the time. It was a lady by the name of Dorothy Sarnoff and related to David Sarnoff of RCA, and so I took my 10 or 11 year old son to New York. I called her up and I said you know, I'd like my son to have lessons with you on public speaking. And she said, Mr Gordon, I have a class starting and so on. So I said, Dorothy, I didn't ask for a class. I said I want private lessons with you. She said well, Mr Gordon, that'll be expensive. I said, Dorothy, I don't remember asking what the price was and, by the way, she was the one who started Teleprompter. She's the one that worked with Ronald Reagan and the people she worked with she was the best of the best and it was the best investment I ever made for my kids.

Steve Gorlin: 44:50

So my son went up there, worked with her for two weeks, came back to Atlanta, practiced, went back for two weeks and then at the end of that she gave a big cocktail party for very prominent people in New York and he was on presenting. But what was that right? But it changed his life. From then on, he could speak to an audience of 5,000 people or two people, and he would capture them and, as a result, he started several very, very successful companies. One was Cabbage City. You probably don't want me to mention anything. No, that's perfect.

Matt Pillar: 45:29

I mean yeah. So this kid, this kid founded Cabbage. I mean Cabbage, everybody knows Cabbage.

Steve Gorlin: 45:39

He sold it to American Express. I think it was about $875 million. Then he started a company, rode after that, and Rode he just sold about a year and a half ago. Let's just say it was over $700 million. I'm not supposed to say the amount, but the one thing that really made it win was his communication skills. He went out with UPS and he goes all over the country on behalf of UPS giving talks.

Matt Pillar: 46:06

Yeah, yeah. All because you invested in his communication skills At 11 years old, no less.

Steve Gorlin: 46:13

Yes, at 11 years old, and he carried with him the rest of his life and he, like I said, he can speak to 10,000 people, or two people, and he was able to translate what's in his brain to paper or verbally and I think everybody that's listening. That will carry you all your life and I would rather have my kids pay money to have my kids to go to a good speech teacher that could teach you how to communicate. I wish I had done it myself. I wish I had done it myself, but then a college degree, because that will really carry you. Yeah, and that was a success.

Matt Pillar: 46:54

Yeah, I mean you're doing a fantastic job walking us through these rules. So I mean you know your communication. You're no slouch of a communicator yourself, steve.

Steve Gorlin: 47:07

It's always people. Be careful who you hire. If you hear something good about somebody, still check them out pretty thoroughly. If you hear just one bad thing, run as fast as you can because more things will pop up. It's always people, it's always jockey and it's like I said, the people that I have engaged to run things that have good communication skills were better than the MBAs have perhaps.

Matt Pillar: 47:36

Yeah, yeah, that's incredible. Sorry, mbas, but that's the fact. I can appreciate it. When did you codify these rules, like? When did it occur to you to put these rules into effect and, as I said, start applying them to your investment decisions?

Steve Gorlin: 47:56

Well, as I think I said earlier, it started over a series of mistakes that I made. You know I'd make one mistake and make another mistake and I said well, I'm not going to make that mistake again. If somebody cuts off one of your arms, you're not going to stick out the other arm, you know. Just so, you have to learn from your mistakes and I have to give credit to a huge amount of success to Jim Menor. A man I mentioned earlier was Morty Davis, who had DH Blair. I brought him an underwriting and the first deal failed First, failed totally, and I went to apologize to him and said sorry, Marty, I brought you a bad deal and this didn't work.

Steve Gorlin: 48:41

He says everything doesn't work. Go bring me another one and I'll finance you again. And just remember the mistakes you made in the first one. I just see what happens in the next one and from there on everything starts flying. But this wonderful man, this wonderful man was able to back me after a failure. Yeah, and that, and, by the way, that failure made me look more closely at everything I did going forward from that time on.

Matt Pillar: 49:15

Yeah, you hinted a little bit earlier about breaking these rules. Can you share any? Would you be willing to or care to share any rules about specific you know I'm sorry stories about specific times that you broke a rule or the repercussions.

Steve Gorlin: 49:35

No, no, they have been repercussions and of course, if you have a failure as a public company or something, litigation is always there. But no, I can think of two situations where I hired really first class researchers to run the business. The problem is researchers want to keep researching. They forget you're supposed to develop a product and get a product to market. So beware the researcher that wants to run your business. Now, if the doctor like David Hone, who's not a researcher, is interested in building a business entirely different story. But the situations I've started where I put a researcher in charge and he wanted to get his assistance in that were really problems, because the researchers continue to research and they don't think about focusing and getting a product to market. Those have been in my career. Those are probably one, two, three deals. That was the problem.

Matt Pillar: 50:52

Yeah, yeah, Now I can see that that's a topic that we cover on the podcast quite a bit. Is, you know, folks coming out of academia with researchers with good ideas, good intentions, but no experience, you know or desire to your point wanting to build the company, the commercial aspect of it?

Steve Gorlin: 51:12

Another thing I find, and two people I've been involved with again, I won't mention other names A lot of these people think that success is buying by having a lot of bricks and mortar. I don't have bricks and mortar. I outsource everything I can, I keep my rent low, I keep my cost low and I don't not want to own a building, do not want to own a building, do not even care to own an equipment. If I can lease the equipment, yeah, keep your costs down. But I see I could name a few huge disasters right now where all they thought is my success is if I own a bigger building and a bigger building and a bigger building. Uh-uh, don't do that, yeah. And then there's one other story. Am I taking too much of your time?

Matt Pillar: 51:58

You're doing great. No, you're doing great.

Steve Gorlin: 52:01

No.

Matt Pillar: 52:01

I'll take all the time you'll give me.

Steve Gorlin: 52:05

I was on the board of another company and the let's just arbitrarily throw out a price and the stock was just say it was trading around $12 and they had an offer, a firm offer, to buy the company at 15. I said, let's take it, it's cash on the table right now he says no, I think our earnings in the next quarter will get higher. I think I can get them up and they'll pay 18. I said, no, you can't count on that. It's not wrong decision. First check that was my first check rule and he did not do that. I resigned from the board, immediately, sold my stock and it did not reach. There were some problems on the earnings that didn't reach in. The stock ended up back at $13.

Matt Pillar: 53:04

Yeah. So what's the? How would you sort of summarize the takeaway there? Is it know the good deal when you see it. Take the money when it's on the table. What's the lesson there, If?

Steve Gorlin: 53:18

you don't have to get last buck out of every deal. You don't need to get the last buck out of every deal. I can go through almost a list of companies I've known that had opportunities to sell, and some friends of mine, and the billions, and now the companies are bankrupt. Just be satisfied with life, enjoy life, go on.

Steve Gorlin: 53:41

You know, just get rid of greed, get rid of greed and as your lawyer friend, the most expensive thing is to achieve the lawyer That'll keep you out of trouble. The problem is not everybody listens to them.

Matt Pillar: 53:58

Yeah, I think I mentioned earlier that I wanted to ask you about the. I guess whether or not all these boxes absolutely need to be checked in order to garner your interest. Is there any wiggle room?

Steve Gorlin: 54:18

Yeah, I'll look at them right now. Accomplished people there's no wiggle room Much with high barriers entering the pharmaceutical industry. You better have that Long product life cycles. In large markets you can wiggle there a little bit because the yeah, you can wiggle If you have an outstanding product. Let me qualify If you have an outstanding product that's really doing good, then you might have a chance to sell the company early and let somebody else have the long product, the long problems. So, in other words, I've rarely taken a drug all the way through. If I have really good data on a phase two, something's really working, I'll let somebody else have it, because setting up a sales organization is expensive and it doesn't always work. Setting up manufacturing there are a lot of critical components to manufacturing and it's expensive. I'd rather turn that over to a big company. Yeah, yeah, okay.

Steve Gorlin: 55:28

Large profit margins that's a must for me. If I don't see a large profit margin in the deal, I'm not going to get it. But I'm not going to do it because I know I'm going to make a mistake. I know it's just inevitable. I'm going to make a mistake. My societal impact I have to just say it's that one that has served me well my whole career. It gave me something to talk about. It gave me something to talk to people of their personal health, their personal interests. That has served me real well, I think ahead of time. I think the other one, the only wiggle room really was probably in the long product life cycle in large markets. An obviousness absolutely has to be obvious to me yeah, if someone can't describe a deal to me on a half page, I'm not interested in looking at it.

Matt Pillar: 56:23

Yeah, yeah, it's been great insight. I really appreciate it. It's a terrific insight and terrific color. When we first talked, I thought these golden rules would make an interesting conversation, but I want color and you certainly came with the color in spades. I appreciate that. We're short on time, steve, so we're going to have to wrap things up here. I do appreciate you for coming on and sharing these stories with us. I'd love to have you back sometime, but in the meantime, thank you, steve. Thanks for coming on, really appreciate it. Thanks for the time. You're the best. We're honored.

Matt Pillar: 57:02

So that's the legendary Steve Gorlin. I'm Matt Pillar and this is the business of biotech. We're produced by Life Science Connect with support from Siteva, whose support for emerging biotechs is on full display at sitevacom backslash Emerging biotech Check that out. Be sure to check out the link in the show that I mentioned earlier to register for our upcoming business of biotech live event on November 13th, where you'll have the opportunity to talk IP and legal protection with me and BlueSphere Bio CEO Keir LoIacono, esquire. In the meantime. Thanks for listening.