The Business of Biotech took a trip to San Francisco for the JP Morgan Healthcare Conference, that most target-richest of environments for those of us who like talking shop with biotech builders. The results of that trip will feed the next several weeks of Business of Biotech podcast programming, and we're kicking things off with everyone's favorite life sciences CFO, Allan Shaw. On this episode, Allan shares what's driving the cautious optimism for biotech's return, pointing to factors like December's flurry of M&A activity, interest rate reductions, and easing inflation as just cause for the bullish sentiment that was palpable at the conference. We also discuss what could shift the tailwinds, namely the election year wildcard, and why biotech could benefit from a metered comeback. Come for the facts, stay for the Shawisms!
You've listened along for years -- now you can watch along, too! Go to bioprocessonline.com/solution/the-business-of-biotech-podcast, where you can put faces to voices as you watch hundreds of interviews with the world's best biotech builders. While you're there, subscribe to the #BusinessofBiotech newsletter at bioprocessonline.com/bob for more real, honest, transparent interactions with the leaders of emerging biotech. It's a once-per-month dose of insight and intel that you'll actually look forward to receiving! Check it out at bioprocessonline.com/bob!
The Business of Biotech took a trip to San Francisco for the JP Morgan Healthcare Conference, that most target-richest of environments for those of us who like talking shop with biotech builders. The results of that trip will feed the next several weeks of Business of Biotech podcast programming, and we're kicking things off with everyone's favorite life sciences CFO, Allan Shaw. On this episode, Allan shares what's driving the cautious optimism for biotech's return, pointing to factors like December's flurry of M&A activity, interest rate reductions, and easing inflation as just cause for the bullish sentiment that was palpable at the conference. We also discuss what could shift the tailwinds, namely the election year wildcard, and why biotech could benefit from a metered comeback. Come for the facts, stay for the Shawisms!
You've listened along for years -- now you can watch along, too! Go to bioprocessonline.com/solution/the-business-of-biotech-podcast, where you can put faces to voices as you watch hundreds of interviews with the world's best biotech builders. While you're there, subscribe to the #BusinessofBiotech newsletter at bioprocessonline.com/bob for more real, honest, transparent interactions with the leaders of emerging biotech. It's a once-per-month dose of insight and intel that you'll actually look forward to receiving! Check it out at bioprocessonline.com/bob!
The business of biotech is produced by LifeScienceConnect and its community of learning, solving and sourcing resources for biopharma decision makers. If you're working on biologics process development and manufacturing challenges, you need to swing by bioprocessonlinecom. If you're trying to stay ahead of the Cell or Gene Therapy curve, visit cellenginecom. When it's time to map out your clinical course, let clinicalleadercom help, and if optimizing outsourcing decisions is what you're after, check out outsourcepharmacom. We're LifeScienceConnect and we're here to help.
Matt Pillar:Biotech is making a comeback. That's the word from San Francisco during JP Morgan Week. Anyway, I'm Matt Pillar. This is the business of biotech, and I was there to hear it firsthand at what's inarguably the most target-rich environment in the world.
Matt Pillar:For a guy who likes talking to biotech leaders, I took full advantage. I racked up well over a dozen interviews with founders and CEOs and CBOs and CFOs, many of whom will feed our podcast lineup for weeks to come. These execs 201 brought facts, names and numbers to back up their increasingly rosy market sentiments. Easing inflation, the promise of favorable interest rates and December's flurry of M&A activity are just a few pieces of key evidence pointing to biotech's return. And speaking of returns, you know who else is making one Everybody's favorite biotech CFO, Allan Shaw. He was at the top of my list to catch up with in San Francisco and I'm thrilled that he made the time to make it happen. Let's give it a listen. So Allan Shaw has been far too long since he been on the show and I'm thrilled that we get to do this one face to face. So welcome back.
Allan Shaw:And it's great to be back, always great doing the show with you and, even better, doing it in person. Yeah, first time we were not going through a screen.
Matt Pillar:I know it, I know it for sure. I'm thinking I need to start taking trips out to New York to record with you, so we can do it in person, we can do it on the beach, we can do all our fishing right.
Allan Shaw:I think with technology we can really do it almost anywhere we can.
Matt Pillar:Yeah, so it's great to see you here. It's great to see you here in San Franc for JPM. When did you get?
Allan Shaw:into town. I rolled in on Sunday morning and I went immediately to a brunch reception.
Matt Pillar:Yeah right, hit the ground running. So we've been. I came in on Monday, but you've been going back to back, I'm sure, since you got here. What's the prevailing sentiment that you're picking up right now?
Allan Shaw:You know, I think first of all, just touching on what you said, jp Morgan has been and continues to be an endurance sport. You know, you really almost have to treat yourself like an athlete to get it through the week and take care of yourself and remember the hydrate. Yeah, you know. With that said, you know the sentiment has been interesting and, I'd say, really consistent across the board. You know, I'd say people are generally cautiously optimistic. You know, I would say that everyone would generally agree that the wind isn't in our face as it has been, but it's not necessarily to our back either. There's certainly reasons to be encouraged, you know, I think a lot of people have pointed to, you know, there's certainly the rally at the end of the year that turned the XBI, which was almost like 30% down, to break over as a positive, which was certainly encouraging. You know, with that said, I haven't found anyone who's kind of stood up and wave their hands saying I was the one doing all the buying. You know, I think there was a lot of short covering. So there's still, you know, but people are definitely warming up.
Allan Shaw:There's evidence that there's more and more buy side engagement. As one banker put it to me the other day, there the buy side aperture is getting a little bit wider. You know, before people wouldn't even read your emails. Now they are reading the emails, so that's encouraging.
Allan Shaw:And certainly the fact that there was over $30 billion of M&A in recent weeks has given people reason to be excited, particularly since it does suggest that it certainly reinforces the thesis that big farmer has some real pipeline issues that they're really going to have to solve these issues, given that their patent clips. They're about three, four, five years out. So there's obviously some aggressive buy side actions, I think that's, and that money gets recycled, typically back into the market. So that should again be a positive indicator and people have continued to look at that as a catalyst for the market to come back. I've heard some anecdotal information that they're expecting almost 30 IPOs this year. You know, I think that's all going to be conditional on the success of the first couple that go out. You know some of the test IPOs and if they trade well, I think you know how you're going to see people pushing the IPOs out until they break it again.
Matt Pillar:So I was going to ask is 30, do you think you know if a forecast of 30 is feasible? Is that a healthy number? Because that constant, like it's just a regurgitation of the same conversation about how you know, how we were overpopulated with IPOs and that contributed to the mess.
Allan Shaw:I think it is a healthy if we get there.
Allan Shaw:I'm not sure if we excuse me, get there, particularly in an election year, I certainly.
Allan Shaw:I think the other side of the coin why people are cautious, why people don't think we're necessarily out of the woods but are feeling better is, you know, is well, there is a prospect of interest rate cuts and Sped certainly went out there in November and actually indicated there'd be a couple this year and that really, I think in many respects triggered the short coverage that we saw in the XBI and I think it's a question of whether or not they materialize. You know we have low inflations, getting lower. It's not at the target levels yet and employment seems to be pretty good. You know people are calling a soft landing, so I'm not sure if you need interest rates to stimulate the economy. Economy seems to be working pretty well and when you look at interest rates on a historical level, we're right in the middle of a fairway. I'm not sure what all necessarily the noise is, other than people have been spoiled by free money for over a decade and I think they want their toys back.
Matt Pillar:Yeah, that's a good way to put it.
Allan Shaw:I would also say, you know, in terms of the M&A, the other side you know where they're.
Allan Shaw:While people are highly encouraged by what's what's going on, you know the FTC continually seems to get in the way of things. You know they had blocked the Amgen Horizon trade for a long time and it really seemed to be misguided. You know they had issues about the PBMs and drug pricing and how they products get bundled and rather than getting in the way of M&A, which is part of the natural life cycle of the industry, they should have been going after the PBMs if they didn't like the way that was working. So you know, it seemed to me really misguided in terms of how they were approaching it. And then they, you know they finished the year deciding to pick another battle that made no sense, which caused Santa Fe to, or Sanofi to back away from a licensing deal of all things. So you know they've got to kind of get their policy on order and I'm not sure in the, in the, with the election coming up, this is the year to expect significant rational behavior for these folks.
Matt Pillar:Yeah you, you mentioned, you know, the impact of the election year. Explain that for me, like, what is what? What sort of an impact should we expect or might we expect? Now, fair, enough.
Allan Shaw:if people can recall back to the, it was like the 20s 17, when, during the election, that Hillary ran against Trump. I think I forget what every year it was now, but if you recall that, biotech was having a pretty good run until Hillary hit the Twitter with negative pharmaceutical sentiment in terms of policy and other things, and it really put a chill in the sector and we really traded off for the second half of 2015, going into 2016. I know that we will. I tried to. I did launch an IPO during that period of time and I'll never forget that the front page of the Wall Street Journal that they were seeking for approval was IPO market closed.
Allan Shaw:His son asked me why are you laughing? I said you don't understand the damn about that happened. This is the narrative.
Matt Pillar:But we got it done, but it's that political rhetoric.
Allan Shaw:It's the platitudes of the tweets. Former biotech seems to be the politician's favorite whipping boy, which is kind of ironic when you think about the contribution and impact on it. The humanity that the industry has provided, arguably, is more profound than what all before an aid that we send and all the military stuff that we send. But nonetheless, and the negative sentiment that we get, we do bring it on when we keep it at increasing prices on products that have been around for years, annually or semi-annually by three, four percent, which is just choking the bear in the eye Right.
Matt Pillar:Yeah, it was only yesterday. It was only yesterday, at the end of the day, on that sentiment, the fact that biotech and pharma are on par in the public preview with tobacco and oil and gas. It's so interesting to me During COVID. When COVID happened, it was like there was this spike in sentiment, a positive spike, and then very quickly that evaporated.
Allan Shaw:How do you?
Matt Pillar:that's a general question, but what are your thoughts on how an industry sustains at least a semi-positive public perception?
Allan Shaw:It's certainly easier said than done. I think we need to be seen more as advocates for the patient population, as opposed to people that seem to be taking advantage of the patient population, just raising prices and then it's all part of the rebate cycle and how you get yourself positioned. The patients are losing in that situation. The PBMs and the industry are bringing it on themselves. I think as we start to look at patient engagement, holistic solutions, I could see the industry being helpful in that level of engagement. I think there's efforts now to cut out the middleman. I think the cutting out the middleman, like the PBMs and going direct, is going to allow us to reallocate things the right way, as opposed to paying the middleman for very little value at the end of the day, other than it's been the way we conduct business, like night follows day, I would say, if you take a step back, a much more holistic look.
Allan Shaw:The healthcare spend in the United States is highest in the world, yet our outcomes and mortality rates are some of the lowest ones. So effectively, we're paying more for less. I think we should be advocates for trying to make the appropriate changes in the system, because what we got right now is the sustainable. It's really broken. I think that's going to result in us taking much more of a risk-based approach to the products that we sell and, as some of these other products, become almost like services. When you're looking at gene editing and you're looking at cell therapy, you're providing services, you're providing solutions now and you're providing outcomes. I think that'll be helpful in changing the narrative, I think, probably highlighting and figuring out how we can educate people on the contributions, the lives that we're saving and the impact on people. There's a lot of beautiful stories out there. They don't seem to be out there. People aren't really aware of that, so we probably need a new publicist. But I think action speak louder than words.
Matt Pillar:I was thinking about our conversation before we started recording. Obviously, I want to spend some time talking about your perception of the markets in the industry, but with the headwind allegedly going away to your point maybe not at our back quite yet I was wondering what are you and I going to commiserate about if things get better? You're giving me plenty of fodder for that.
Allan Shaw:I don't think everybody's a winner or loser. I don't think this is necessarily you're flicking a switch and things are going to go back to the roaring 2020s. I don't necessarily anticipate that. I think people are going to be a lot more discerning. I think we still have a lot of companies that are walking zombies out there, and there's going to have to be a come to Jesus moment for them in terms of whether or not they'll be able to continue to execute. I think people have to still, I guess, take their medicine, and those who take their medicine, who skinny down and focus on what they need to focus on, will get to the other end. I think this is a time to be a bit scrappy. So, as things change, I think it's not going to go back. I don't anticipate it going back to where it was. So it's going to be a lot more emphasis on management teams.
Allan Shaw:We chatted during good times too. I remember talking about the boy bands of biotech as we were marching, putting management teams around newly formed companies and pushing them out the door. So I think it's going to get back to more fundamentals. I think people are going to put more fundamental emphasis on the quality of the management team. I think we've seen and I've said this before and I'll emphasize it again that, given the choice between a superior asset and a mid-link management team, or a mid-link asset and a superior management team, I would always take the later because they'll know how to extract value.
Allan Shaw:As a friend of mine we were talking about this on breakfast today he says you know these assets don't develop by themselves, right, and you need to be able to navigate the my rate of different aspects. You know you need to navigate the science and the proof of concept. You need to be able to navigate the manufacturing. You need to manage the accrual rates of clinical trials. You know, I've observed a fundamental difference in the way people execute on these things and I've seen them generate good results and I've seen them not generate as good results. So I think it's going to really put more of an emphasis on execution and I think for good science, for good teams, if you can execute, there'll be an opportunity there and, as we've said before, in God, we trust in data belief and it's just going to be really in back the basics.
Matt Pillar:Yeah, do you see, like, if you think about the overpopulation of biotechs, pre-bubble popping or whatever you want to call it you talk a lot about you know jockeys and executing on management. Do you see, like, the pool of talent as being in a healthy place right now, or an improved place right now, given that so many execs and founders have been battle tested, or what's your take on that Like, do you think it's a good field to jockeys right now?
Allan Shaw:You know, I think we were stressed. I mean, I may be stressed in terms of how we were populating these seats. You know, if somebody told me when I was younger, if you can't jump over the bar, you'll lower it. And I think the bars were lowered in many cases and I think that also speaks to some of the things we've spoken about in past episodes about the productivity. There was a lot more clinical failures and I think people were doing things because they could and the flow of money wasn't restrictive. So you were my partner. I'm worried about getting invalidated, I'll just do it all. And I think that the inexperience of people thinking that you know a high tide was going to keep all the boats high, you know people got caught up. So I actually see this as a period where companies who have the wherewithal this is an opportunity for them to upgrade their management teams in their organization, because I think there's still a bit of a mismatch. I think you still got a ridiculous number of companies out there that are underwater and, as I understand it, additionally, there's at least 130 companies that are trying to go public. So, even if the 30 of those that we talked about get out, what about the other folks and, as I think you touched on before, someone touched on that, now they're making reverse mergers a little bit more restrictive as well. Well, you know, I don't think it'll be a big issue, but it's just not helpful. And you know, I think the reverse mergers was one way to kind of help clean up the system. You know, the way I saw it is you can do 30 IPOs but if you got over 100, 150 companies that are broken, you know you should be able to match those up with the companies who want to go public and try to take a little pressure out of the system. But what I've also heard is, because of this new discerning environment, that there's a number of companies that have been funded by the fundamental specialist VCs who are the. Those investors are not reupping and they're going to let them kind of just hit the wall or or or take a very soft landing. So I think that speaks to the fact that, while that the bar needs to get raised, whether it's management teams, whether it's the science or the companies, I think investors have lost a lot of money over the last several years and I think they're certainly very focused on on self preservation and on that and on that.
Allan Shaw:Speaking about the financing environment, I think a lot of the deals that have been getting done, a lot of these data pipes, speaks to that. You know a lot of companies are given a lot of upside. Usually the play would be you to announce the data and do a deal and the stock would re-rate itself Because of the market dynamics. People are now entering into these data pipes. Where you bring the investors over the wall, you they get to keep the tires. See everything before anyone else. You negotiate a deal. The deal is going to not necessarily provide the same level of valuation re-rating, but you've now got the money to do what else you need to do. You've got some validating investors in your cap table and that seems to be the business right now. I think, as a subject to watch as we cautiously approach optimistically the new year, is to see whether or not those deals will be as prevalent or whether or not people can get back to do and follow on offerings without having to transact that way.
Matt Pillar:Yeah, yeah, that's right. I'm going to ask you a question about that. Like the deal structure and starting with a more scrupulous, I guess, investor base right, more discerning, as we've been saying, and then the way that deals have been structured as investors have become more disearning when cycles like this happen. What sticks, what carries on Tronch deals, for instance One.
Matt Pillar:I want to get your perspective on what's been difficult in terms of the way the deals are being done now, but I'm also curious about as cycles like this happen, do terms that happen in down cycles tend to carry on, or do they go away when things get better again?
Allan Shaw:Yeah, I think in a nutshell it's really a math supply and demand. When you have a lack of supply, it's really a buyer's mark and they can drive the terms. And I think looking at flow of funds will be really important. The return of the M&A dollars, fun flow, will dictate the demand side of the equation and that keeps people honest. When you do any sort of marketing deal, you want demand. If you can drive demand, you can drive the terms. If you don't have demand, the terms will be driven to you. So I think the terms right now are, again, I think, more in the side of the investor, but it's, I would say, there.
Allan Shaw:But nothing's guaranteed in life. So that's the risk. So what I've been seeing on these deals is that you generally get funded to an initial inflection point and then you'll put warrants on it that'll be tied to a success event. So once you have the data, the warrant can be exercised and the data should drive appreciation, which will cause that. So what people are doing? Rather than writing a check for, say, $60 million, and this is going to get you through all your clinical trials, they might write you a check For 20, that gets you to a study. If that study is good will the warrant can exercise. You can take it to the next level. So if you execute, your trials are funded. You don't execute, you're going to have other problems as well. So that's the way that people are tranching it and it makes intuitive sense, but it kind of keeps people on a short leash.
Matt Pillar:Yeah, I want to get back to. We talked about some of the, I guess, overarching global indicators like inflation and interest rates. What other indicators are you seeing that point? Either way, like we'll start with positive indicators what indicators have we discussed that you think are pointing towards improvement?
Allan Shaw:You know, I guess I would build off of the things that we've discussed. You know that the cut in interest rates is certainly good. I think the question is, is that a headache or not? So you know Jamie Dimon, for instance, when he was speaking at the conference, you know he declared that he didn't believe in the soft landing. He saw too many inflationary issues out there that will keep the fed rates higher for longer. And then there's other people saying we're an election year. You know they're going to cut the rates whether they need it or not, which is certainly disappointing from an idealistic perspective of the feds independence. But so I think the macro is going to be really important. Interest rates are going to have a profound impact.
Allan Shaw:I think the M&A activities are important and if the FTC continues to do what it does, it's going to be a Debbie downer, but I think that dynamic is helpful. I think there was an M&A deal recently that should give investors some encouragement to perhaps take a little bit more risk, and that's important about taking risk and that really correlates to the interest rates. The higher the rates, the less risk. So, for instance, the Hakun transaction the other day that went off for $23 a share. The company was hurting only as recently as maybe three months ago and they did a recapitalization at about $5 a share. So those investors that invested at five, you know they got a fourfold return in three months.
Allan Shaw:So I think you know positive returns on transactions like that are going to cause people to take a more serious look at other opportunities. Because when you're throwing the baby out with the bathwater, you know, you know there's opportunities to really create value relatively easily. So really, flow of funds, interest rates, m&a, from my vantage point those are really the most fundamental. That's what I'm looking at. That's going to drive other investors back into the space. I think there is generally more sentiment that the biotech sector is kind of hit. People calling it below has been hit. Still think it's a bit of a stock picker's club. But generally the sentiment is good and I hope it becomes more self-fulfilling as the year goes on.
Matt Pillar:Yeah, what are you? Election cycle being sort of a wild card. You mentioned its influence potentially negative. What else are you concerned about?
Allan Shaw:Drug pricing. I think the drug pricing discussions are going to just it's the postage child for all the rhetoric and I think that drives a lot of the headwinds. We shouldn't be public enemy number one, as we said earlier. It's unfortunate for that, for all the good that we do. But we're easy targets when you look at our financial statements.
Allan Shaw:The profitability of these companies are some of the most profitable in the world. So as long as those conditions prevail, I think we remain an easy target and I think we just kind of brace ourselves for that. It's noise. Most of this is just noise. So for people who understand that it's more noise than anything it's really political theater I think they'd actually represent a good opportunity because, as the fundamentals are improving, it's actually represents a really good entry point and I think people are starting to realize that there's an improvement in that. I guess a subtle metric that I would use to track the progress is.
Allan Shaw:Talking to investor relations firms, One of the questions I've been asking people is the robust nature of their meetings. Are they getting a lot of meetings for their clients in terms of small caps, large caps and I'd say it varies Small caps are not feeling as much love, and that's going to make it harder. So I'd say valuation re-rating will be something to look at too whether or not people recognize if a hall of punds trading at five and it trades at 23,. What other arbitrage opportunities are there? Yeah?
Matt Pillar:Yeah, what about scientific and technical advances? There's been a lot of conversations about all the great science and great programs that have been shelved for lack of resources. As things come back, does that like a revisiting of some of the new science and technology in this space? Does that contribute to?
Allan Shaw:Totally. The different therapeutic areas and modalities are kind of like platform shoes that go in and out of fashion. Today's fashion is kind of almost back to the future. Between radiopharma and ADCs we got back to chemo therapy and radiation, so in a new form, I would say. With the recent acquisitions of Saraval and Corona, cns is an area that people are starting to really pay renewed focus. Certainly, bms is certainly getting very aggressive there as a real focus area. Glp the whole obesity market has captivated the industry last year and they will continue to dominate.
Allan Shaw:A lot of noise, there's certainly a lot of people emulating mad and looking at oral formulations and there's different approaches. I almost cynically look at that whole hype and build that. The old GLP trade is kind of almost like similar to Tripp buying or selling Tesla In a new market. There's going to be other electric car vehicles too. But I think in terms of GLP, I think what will be interesting too is because there's incredible side effects that people haven't taken into account. When you lose that weight, you're all so losing muscle mass and then generally when you rebound and you put the weight back, you're only putting back fat.
Matt Pillar:And you lose bone density too. I understand yeah.
Allan Shaw:So I think that's still got to work its way through. I think there's better mousetraps to be had. I thought one anecdote that somebody put out there was he'd think it's going to become a vacation drug. People are going to take it a couple of months before they go away. A vanity drug? Yeah, absolutely. And a question, if you know so. I think some of the expectations may be a little bit long on that. I just don't think the durations and the penetration is going to necessarily last, but it'll be interesting to see how durable that is. I think a lot of buzz that people are looking at is AI Everybody wants to talk to me about AI?
Matt Pillar:Oh, everywhere, everybody.
Allan Shaw:Yeah, I was listening to a panel always out here. I said, you know, if you and everyone's talking about it, I better get started on this quick. And I thought one of the interesting observations I got on the panels that I listened to is that, you know, since so much of the data is in the public domain, one of the issues that we have that seems to be getting not glossed over, it's quietly not being addressed is the fact that you think negative data is not so pervasive in the public domain. People don't generally publish the negative data as much as they publish their positive data. So you know. So the algorithms and the data that we're basing a lot of these things on are we are biased to being positive and we're not learning from the lessons from our failures, which is probably even more important.
Allan Shaw:So you know, the people on the panel acknowledge that that's a real issue and I don't know if there's necessarily a great solution yet. How are you going to get people to collaborate and share all of that, and how inclusive is it is and is it representational? So that, to me, suggests that, while we're making great advances, there's still a few more things to sort out, but it's definitely going to be impactful. And the other thing that I think came out of what I was hearing was that you know, well, it's the buzz. A lot of people have been doing a lot of machine learning and a lot of in terms of discovery efforts for over a decade. So you know, it's not necessarily new, it's just again. You know, maybe it's 2.0 or 3.0 of what we're doing and we're getting better in terms of data management, but it's really seems to be like data management. Once you have data management, I think that will unlock, but right now the emphasis are data.
Matt Pillar:Are you hearing anything about the impact that AI and ML might have moving forward, like beyond discovery and design? That's where, like the use cases are right now, you know, accelerated discovery, aiding in molecular design, but when I think, like in terms of a biotech moving, you get into translational and you start moving towards the clinic, that's when things start to get a little muddy. But what AI and machine learning might contribute to, what effectively is the most daunting. You know the do or die moment, right, the clinical trials. Are you hearing anything on that?
Allan Shaw:You know there's. I guess I haven't paid as much attention to it yet, but my instinct is that it should be able to positively impact patient accruals. You know access to you know medical records you should. If you're running an AML study, you know you should be able to identify everybody who is AML. Yeah, you know you should be able to figure out better ways to recruit patients. I certainly think that you know, in terms of some of the administrative aspects of clinical trials, it could probably improve efficiency, remove some of the human bottlenecks associated with it. You know, as you're processing amendments and the protocols, that can make things much more efficient. Again, I think you need the broader infrastructure to make that work, but I think it can have a profound impact. We'll away into the medical services side. You know doctor's assistance, you know. I think that's an area where you can probably free things up. Yeah, you know, you just talk to R2D2 and get your script.
Matt Pillar:Sure, yeah, no, I mean, I think it's an important conversation. I was talking to a guy recently about AI and ML and he was positing that we don't, you know, we're not in a molecular drought Like we. There's plenty to work with where AI and ML have had an impact. Now it's time to figure out how to address the real issues. So I think it's an important conversation to have and an important technology to watch, is it?
Allan Shaw:Oh, absolutely. It can also really help in terms of helping us define what is the economic value of drugs. Right, you know that to me is the fundamental assessment is, you know, hospitalization costs, the costs of treating them, retreating them, periods of time of how long you can avoid being re-hospitalized. You know, I think a lot of these real. We can really take advantage of some real world data and quantify it to better understand what the value of the drugs are, how they should be priced and structure of it, whether it should be risk sharing and how much money goes back into the system. You know, right now people don't see this as system savings. They're saving money for their P&L or their P&L. So there's not a holistic approach. But I think with better information it can make steer, more informed decisions and getting policymakers to get to the right places.
Matt Pillar:Yeah, yeah, what haven't I asked you that I should have what? Haven't we hit on here.
Allan Shaw:Let me think.
Matt Pillar:No, yeah, we can. I can stitch this back together. We've been bumping around so I don't want to beat any ponies that are already dead. Um, I think I saw the sample fell off the last�.
Allan Shaw:Any other questions? We probably talk about the conference as compared to other years. Yeah, yeah, and we can talk about the conference itself. There's a lot of people talking about it being moved.
Matt Pillar:How many years have you attended this conference?
Allan Shaw:I've been coming here well over a decade and I made my first trip in 2023. And then I came back about 10 years later, 2003., 2003., 2003. And then I came back about 10 years later, and this is 12, 13 years.
Matt Pillar:Yeah, yeah Well, and then there was that hiatus right During COVID. I don't have a point of reference, because last year was my first JPM, last year was the first time I came, so I didn't have a point of reference like what the conference looked like Prior to COVID or you know, in the heydays. What's your assessment Like, if you take into account what you're seeing here today this year?
Allan Shaw:The conference is about. You know, I like the kid that when I come to JPMorgan I'm coming to hang out with 40,000 of my closest friends. Yeah, I'm not sure if we got the 40,000. This year the head count number seems to be a bit lighter. I thought last year we had a little bit of pent up demand, given the hiatus we had due to COVID. I think people wanted to get out and about and I didn't find it to be lighter than prior years, but it still felt like there was a little bit more intensity. This year it seemed to be less, less flow of people. I can tell you that when I was at the JPMorgan conference the the same Francis, other than when Jamie Diamond was talking it was very easy to move around in the building. That was the only time I'd look fire would be a problem.
Allan Shaw:Yeah, I would say, talking to the folks who run the biotech showcase, they indicated that the numbers was light, slight, lighter than prior years. But you know, when I heard from JPMorgan that they cut their invitations down by about 20%, those guys were doing much better. You know, I would say their numbers were almost flat, which which suggests that you know, there's still demand. People are still coming. You know, I would say that there is generally a distinction between the companies that present at the JPMorgan conference versus biotech showcase. I think the biotech showcase does something that's really great it provides access to for companies, to investors that would otherwise not have access to investors. So you know, it shows that there's still you know you'd have to drill into it deeper, but I would say, on a high level it sounds like there's a lot of companies that are trying to still engage with investors and that's outpacing maybe the headcount decline that we've seen here at the conference.
Matt Pillar:Yeah, you know it's like a cottage industry right, like there's a, there's a village of events, of receptions, of meetings, of venues. Has that grown in your, in your, you know, in your JPM tenure? Have you seen sort of that, the outward growth and all these different events, or has it been like that from the start? You know it's.
Allan Shaw:I would say that it's it's definitely been that way for a long time. Yeah, I would say that you know we got into that, but I would say the 2020 conference excuse me was really the inflection point, and you know it was just nuts. The number of different receptions, the number of different events, the number of different people. I found that I could walk down any street and I felt like my life would pass me by, the different people that you run into and at that point they were charging me for everything. I expected someone to come up to me on the sidewalk to start charging me for standing there. I would say that this year there's been little less interaction like that, but you still, if you stand in place near the St Francis, you're going to see a lot of people in a short period of time.
Allan Shaw:I think that the service providers see this as a real opportunity for them to kind of try to build their book of business. Yeah, I would say that that it's what I like about JP Morgan is. It's a great. It's a very efficient way to be able to reconnect with a lot of people in a very short period of time as well as also expand your circle of friends as well. So I've found it over the years to be a great place for doing business, whether it's your own personal business development, whether or not you're looking to raise money and connect to investors or you're trying to do strategic transactions. But because the nature of the interaction is so superficial, I mean it's really like speed dating. You know it's really.
Allan Shaw:Jp Morgan is really all about the follow up, and the success of your year, the success of your time here, is really about the follow up in terms of you know it's great you've renewed relationships, but then you want to continue to build on them and stay relevant. What the beauty is, too, is that you could see somebody that you haven't seen in a half a decade. Yeah, and it's like yesterday, and I think it's a reminder that everybody that you know sometimes you think it's been too long who's going to remember me? People remember, and I encourage everybody to reach out to people and stay and stay in touch. It's a cold, harsh world that we live in, and being able to expand those circle of friends makes a warmer place.
Matt Pillar:Yeah, do you see, like the significance of the what goes on at the Western Saint Francis, like the JP Morgan kind of nucleus? Do you see it's significance? Um, I don't see dwindling but is. I've had many conversations with biotech execs this week who haven't set foot in the western st Francis and maybe aren't even here for the you know any of the other ancillary events. They're here for meetings that they've set up. You know they're doing things on the periphery.
Matt Pillar:So does that significance kind of kind of wane at all? Or is there still a great mighty weight to to sort of ground zero there?
Allan Shaw:You know it's a fantastic question and certainly you're going to get a lot of different perspectives on it. You know from my two cents. You know it's a, it's a, it's a. Jp Morgan has become Norman Glacier for the world's largest healthcare conference in San Francisco. But, with that said, it's anchored by the JP Morgan conference. Yeah, you know, and there's been a lot of people talking about their just staying for the city of San Francisco and would love to bring it to a place where you were in jammed with a poke in the eye, for all costs, we didn't have to deal with a lot of the other social issues that are prevalent here. Yeah, but I don't think that's going to work. I mean, I think it would be great, you know, if you brought this to say, to say, orlando, if you brought this to the West Vegas. But with that said, I think you're actually going to be then marginalizing or commoditizing the JP Morgan conference if you did that, because you've got, I think, having in the same Francis.
Allan Shaw:They control the narrative. There's been a lot of history there. This goes back to hq back in the 90s, and then you know people still refer to it as the but so there's a lot of history there and I think you know for them to be able to continue to control the narrative as they do around the event. You know Jamie diamonds claiming that he's responsible for all the people that come to San Francisco. I think they're going to keep it here because I think it allows them to, like I said, control the narrative of the events their event, even if it doesn't have no inclusion.
Matt Pillar:Well, good deal. Anything else you wanted to cover?
Allan Shaw:I guess the only thing I would add is that you know, after having been in the, you know, in a what it seemed to be a war or a firefight or a storm for a couple of years, I think it's really, really encouraging to see that there's now positive, cautious optimism out there to look forward to. I don't think it's ready, we're ready to bang the drums yet, but I am encouraged. But I think there's a lot of things that we as an industry have to navigate and but I think it's back to fundamentals, yeah yeah, I mean, we don't want, we don't want the drums to bang too hard, right.
Allan Shaw:I think they were banging too loud before. I think we got to learn from what happened and but I think there's great. I mean, at the conference I was looking at the next wave of companies in the private sector and some of the science that's coming out, that's around the corner, is really really, really interesting. It's really really, really responsive and, and I think the other thing is, the industry is pivoted a little bit. You know, there seems to be much more of an emphasis on on an evolution, more to chronic disease, heart disease, and I think that's really really important because when you've looked at all the ponderance of what's been approved over the last decade, it's very concentrated and often disease. It's very concentrated in oncology and it's and I've written things in the past that said that.
Allan Shaw:You know, you know there was a lot of economic reasons for why that capital allocation was occurring, but it's nice to see, given the broad populations, that these large modalities or indications are now being addressed and I think that that's going to really make a positive impact. But it also speaks to the fact that people looking for bigger markets to invest in now that seems to be the issue and I think that speaks to the farmer pipeline and it. You know, and I say the risk on all of that, when people are investing in later stage products or larger indications, like that is the hot pot now is how do you continue innovation? And right now the emphasis on data is so important and it's kind of a chicken and the egg. How do you start something without the data? And so one of the questions I have going into the air is you know how well will we proceed in the near term with funding innovation, given that we kind of head full back so much as an industry?
Allan Shaw:I think the good news is Goldman Sachs just opened up their first fund, I think a $600 million fund. There's been a number of other continued VC financings. I think Orbi Meadow opened up a couple of funds. So you know that's posed well, the innovation. But the innovation is going to be driven from the specialists. I think it's going to be hard for people who are trying to do it outside of the specialist funds, just given the way they're dynamics. And I point to you know Peter Kaczynski wrote another piece and talking about you know his view that you know the haves and have nots and any if you look at the success of those funds and it certainly costs some spirited discussion among folks. That was certainly provocative, to say the least.
Matt Pillar:Real quick. We talked about a number of indications and markets. You know we talked about obesity. We talked about, you know, oncology. We talked about CNS. I'm curious, related to CNS, what your take is on the anti-aging space.
Allan Shaw:You know, I think this, as we see the demographic shifting, it's certainly been an area of focus. You know I've always found it very hard to describe what is anti-aging.
Allan Shaw:You know, I mean it's very subjective you can attribute a lot of products already in the market that could be arguably anti-aging. I think it's a great market opportunity because you know you go back to vanity and I think longevity is an extension of all of that. I think. You know, I think kind of almost feeds into what we're talking about before about patient engagement, because I think you know, if you're talking about anti-aging you've got to do a number of different things. I don't think there's a single bullet.
Allan Shaw:You know, I know a whole bunch of people, particularly billionaires over 60, that like to take metformin, because that's, there's been a lot of aging and life analysis on metformin. But I do think you know, if you exercise, you eat right and you know, and there is work being done there. I think it's a bit early, you know, I'm not sure if it's something I would personally get involved with, but again, if there's an articulate plan, if there's really endpoints that you can look at, and you know, I think it's an interesting area and I think a lot of people are chasing it.
Matt Pillar:Yeah, yeah, very good. Well, I appreciate your time. Allan, it's been a pleasure. Here's to 24. Here's to having you back on the show more often. We got off of our cadence so we got to get that back on the cycle. We'll be in touch on that to get the next one scheduled. But I really appreciate always getting your insight. So does our audience. So thank you.
Allan Shaw:My pleasure. It's always great to hang with you and I love doing the program with you. And to be continued.
Matt Pillar:I'm Matt Pillar and you just listened to the business of biotech, the weekly podcast dedicated to the builders of biotech. We drop a new episode with the new exec every Monday morning and I'd like you to join our community of subscribers at bioprocessonlinecom, apple Podcasts, spotify, google Play or anywhere you get your podcasts. You can also subscribe to our Never Spammy, always insightful monthly newsletter at bioprocessonlinecom backslashbob. If you have feedback or topic and guest suggestions, hit me up on LinkedIn and let's chat and, as always, thanks for listening.