Few drug discovery and development concepts are as hyped, and as such, draw as much polarity from drug developers, as machine learning and artifical intelligence. One company on the bullish end of the spectrum is Flagship Pioneering's Generate Biomedicines, which bills itself at the "intersection of machine learning, biological engineering, and medicine." To get a grip on the "generative biology" work it's doing and the AI/ML impact it anticipates in the discovery and development of therapeutics, as well as clinical trials, we sat down with veteran biotech builder Mike Nally, CEO at Generate and CEO-Partner at Flagship Pioneering.
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!
Few drug discovery and development concepts are as hyped, and as such, draw as much polarity from drug developers, as machine learning and artifical intelligence. One company on the bullish end of the spectrum is Flagship Pioneering's Generate Biomedicines, which bills itself at the "intersection of machine learning, biological engineering, and medicine." To get a grip on the "generative biology" work it's doing and the AI/ML impact it anticipates in the discovery and development of therapeutics, as well as clinical trials, we sat down with veteran biotech builder Mike Nally, CEO at Generate and CEO-Partner at Flagship Pioneering.
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 cellandgene. com. When it's time to map out your clinical course, let clinicalleader. com help, and if optimizing outsourcing decisions is what you're after, check out outsourcedpharma. com.
Matt Pillar:We're LifeScienceConnect and we're here to help the artificial intelligence and machine learning drum beats are only getting louder in biotech, and that trend will continue for the foreseeable future. When a new tech fires up the hype machine, it's our job as industry observers to suss out what's real. Who's actually adopting and applying the technology to affect outcomes in drug discovery, development and, ultimately, patient access? When virtually every biotech who's parsing a little data on a computer calls itself AI-powered, doing that sussing is easier said than done. I'm Matt Pillar. This is the business of biotech, and on today's episode I'm sitting down with the leader of one company that's decidedly applying sophisticated computational technologies to its biologic development efforts.
Matt Pillar:Flagship Pioneerings Generate Biomedicines led by ex Merck CMO of Human Health, Mike Nally.
Matt Pillar:He's using machine learning to make big use of big data and it's raising big money along the way to support the initiative.
Matt Pillar:I sat down with Mike in San Francisco to learn all about it. Let's give it a listen.
Matt Pillar:We're going to talk about a lot, but I want to start with you because when I look at your background, it's not from an early point, post academia not like it wasn't written in the stars.
Matt Pillar:You're going to be a biotech CEO. You were a financial analyst at Merck. That came fresh off of your Harvard MBA, which came on the heels of an economics degree. That's right. So that was in 2003. And in 2021, you were still at Merck. You were CMO of Human Health. So there's many questions in there, totally One of them being that's a long run to be at that company. So why did you decide to leave the comforts of a company like Merck, where you surely could have rode out the entirety of your career?
Mike Nally:It's a really great question. I think part of my own personal journey. When I graduated college, I grew up outside of New York City and I thought the path of salvation was to be an investment banker because that's what all my friends and parents did. My father had his own little business and in many respects he was the anomaly within the community that I grew up with. What was his business? He was in Sporting Goods. Oh really, yeah, he was a Sporting Goods manufacturer. He'd go over to China manufacturer and then sell to the mass merchants and it was a great business.
Mike Nally:But he was an entrepreneur through and through. But everyone else in the town were vendors and I went and studied finance thinking that's what you did, what you grew up and I think, as I stepped, back after the first couple of years I realized I was missing that sense of purpose.
Mike Nally:I was missing to what end am I doing all this work? And at least for me, the feeling of slaving away, working 100-hour weeks to making money for rich people was not how I wanted to spend my time. My best friends are investment bankers, so I don't mean any disrespect for the field, but for me personally I wanted a broader sense of purpose in my work and I was fortunate in that time to touch on the pharmaceutical industry. And when I went back to business school I went with a distinct purpose of transitioning careers. Now I was really lucky when I knew some of the folks at Merck. One of the ladies who was kind of a financial Mozart, who's Merck CFO the first female CFO of a Fortune 500 company said Mike, if you come to Merck I'll show you the whole company, and this is a lady named Judy Lilliant, and Judy basically was true to her word. Every 18 months I was doing a different sign.
Mike Nally:So I started in the company as a financial analyst doing competitive intelligence.
Mike Nally:Worked on a late-stage pipeline. Did the pre-commercialization work for a diabetes product called Genuvia. Was put into investor relations during the Vioxx trials. Went into business development. Did the sharing fund merger. So if you think about that sort of broad exposure, I'm a voracious learner.
Matt Pillar:I was going to say like you're talking about this and I'm thinking like you've got to be wired a little bit differently, you've got to be a sponge, right, I mean you've got to be a sponge.
Mike Nally:Well, I love science. I love kind of the learning process. There's so much complexity in the end-to-end business model for these large pharmaceutical companies. I mean, if you think about it, it's a miracle that we're able to come up with medicines. Yeah, and these medicines are harder than putting a man on the moon.
Mike Nally:Sure, in the scientific challenge, the manufacturing challenges, the commercial challenges, to make sure that the world has access to these medicines require really dedicated, committed professionals and as I went on those different rotations through Merck, I was just really blessed to see the end-to-end process, working with some of the best people in the industry and within any organization, why join Merck I? Thought it was two to three years.
Matt Pillar:Right, and when you were thinking like at the time, you talked about seeking not to get shocked here, but you talked about seeking a more meaningful end right, rather than getting rich and making rich people richer. What was the pharmaceutical life sciences At that time? Was that like, well, yeah, that's the place. Or why not some other philanthropic endeavor?
Mike Nally:Well, I think combining a background in business with a endeavor that, basically, was set up to improve the health and well-being of the population was something that was really attractive to me. I also love the global nature of the industry. I loved the challenges that the industry were facing. The industry's been under kind of seminal challenges for the last 25 years R&D productivity going down.
Mike Nally:You think about pricing challenges, access challenges these are things that unfortunately have undermined the reputation of what was once seen as a very novel industry and has made it on par reputationally with tobacco in the late public and the questions we have to answer and solve for as an industry are really, really profound.
Mike Nally:And as someone who loves complex challenges, as someone who loves these sort of puzzles, trying to figure out how you write the ship so that you can solve some of the world's greatest amount of medical needs. And when we talk about sense of purpose, I had the privilege of working on some of the most impactful programs, products that the industry's ever seen Ketrula, indicating our 30 different tumor types. You think about the number of lives you can impact, you think about.
Mike Nally:Gardasil for the HPV vaccine, the prospect that we can now eliminate cervical cancer from this planet, some of the HIV medicines where you're offering the prospect ultimately of stopping the transmission dynamics in HIV. But these are things that have global impact and millions of people are going to live longer, healthier, happier lives as a result of that work.
Mike Nally:And that's what's fulfilling what we do and that's why a year, two years, three years at Merck became 18. I was constantly learning. I was constantly challenged. I had mentors who believed in me in ways that I didn't believe in myself. There were jumps that I took in my career that I probably wouldn't have taken without steady encouragement. You know, junie was one mentor. Ken Frazier, merck's former CEO, was another who constantly said Mike, we want you to go to Sweden and run our Swedish business. I had basically been to Sweden for one day in my life and knew nothing about the Swedish healthcare system. It was asked to run that organization and you know those were opportunities for me to actually become much more self-aware as a professional, to learn to grow, to grow personally, with my family going to Sweden, but also professionally but also contribute to a much greater cause, and that's part of what made, you know, the 18 years at Merck so special.
Matt Pillar:Yeah, it's interesting the impact you talked about, the impact that you were able to play a part of in Merck. Often when I in specific examples, ketrude Gardasil I'm an amazing often when I talk with big bio turn biotech CEOs, they tell me that, maybe, ironically, the tipping point for them wanting to jump into biotech you know, small, nimble, agile, scrappy is because they want to feel like they have more of an impact than they did in big bio.
Mike Nally:So that's sort of an interesting dichotomy. Well, I think you have more control in biotech. You know, the litmus test that I had when I thought about, you know, leaving Merck was wherever I was going to go. I had a belief, fundamentally, I could have a greater impact on humanity, and there aren't many organizations in the world that can have a greater impact on humanity than the company.
Mike Nally:If you think about the history of the company, yeah, from the mass production of penicillin in the 50s, all the way through a series of antivirals, vaccines you know 70, 11, cdc recommended vaccines were invented by Merck the cardiovascular drugs, the HIV drugs, all the way now through an array of cancer products. It's a company that's had, you know, a huge impact on society. And you know, in the 90s Merck was the IT company. It was Fortune's most admired company seven years in a row. And that's because of an unparalleled track record of not only scientific innovation but doing good for humanity. Programs like the Mectizan donation program, which you know had basically a limited river blindness, were a huge part of what made the company a special place.
Mike Nally:And you know that is, you know, this industry at its best, where you can do good for shareholders while doing good for humanity. And that was a core part of, I think, what I learned within Merck. And you know, as I thought about going to biotech, certainly in a smaller organization, the impact of your actions and decisions. You know, at Merck you had to influence a 72,000 person organization In a biotech organization. When I joined Generate, it was 30 people. Obviously, you know each of those 30 employees had a huge impact on the success of the organization. Sometimes it was harder to see that impact in a big company. But I think the impact of the collective work of the 72,000 was enormous and you know, depending on how you're measuring, you come up with different viewpoints.
Matt Pillar:Yeah. So I mean, if listeners didn't know that your CEO partner, flagship CEO at Generate, they might think you're still an executive worker. They might think you're passionate about the work you did there. Why did you leave? You could have stayed there until.
Mike Nally:I've believed.
Mike Nally:Merck to you. It's a company that is near and dear to my heart.
Mike Nally:It's a company with some of my best friends, some of my proudest professional moments. I was really just fortunate to uncover an amazing opportunity, what I think is a generational technology. And you know, when I was at Merck one of the things that I was fortunate enough to do was lead Merck's vaccine business. Well, I was leading Merck's vaccine business. We had an early partnership with Moderna and vaccines. During that time I got to know Stefon Bunsell and Newbar Fan. So Stefon is the CEO of Moderna and Newbar is the founder and CEO of flagship pioneer and we had had conversations over the years around.
Mike Nally:You know, if I were to leave Merck, what would I want to do? And you know, over time I became increasingly convinced that the future of the industry was going to lie at the intersection of science and technology. And you know I became, you know, increasingly frustrated in many respects that the industry wasn't having enough success at changing underlying productivity curve. We've talked about it forever that in four decades in a row, industry-wide R&D birth have been going down. I think somewhat interrelated not entirely that has led to bad pricing practices within the industry. Those pricing practices have undermined patient access to medicines. That's what creates some of the reputation conundrum that the industry finds itself with them, I became the belief on why science and technology would be this potential answer.
Mike Nally:It's simply the fact that I think it's in our view. We'll just look at the fact that, despite staring at biology in the eye for all of our existence as humanity, we only know a small fraction of the majesty of biology. With the advances in technology that we were seeing all around us, we were entering an age where the combination of brilliant human ingenuity and computation and technology was going to start to help us understand the language of biology in ways that the human mind alone couldn't understand it. Fortunately, the team at Flagship was working on a company called Generate Biomedicines. Generate was founded five years ago. When I first received this call roughly three years, a little over three years ago Generative artificial intelligence was not part of my lexicon. I mean, it's still a black box to most.
Mike Nally:This team recognized that by applying a top-down approach to the language of proteins and using these sort of generative technologies, we would be able to understand that language in a way that would allow us to ultimately learn how to program novel protein-based therapeutics with desired attributes. In the 20 years I've been part of the industry, I had never seen anything like the early data. If you think about how we discover protein therapeutics today, we immunize a human and a mouse, a llama we call them plasma. We find things that stick to interesting targets and then we manipulate them in a pure trial and error process. We have no control over the antibodies our immune systems create. We then try and make them into drug-like entities. Think about the world where we say give me a molecule with this code to treat this disease. It sounds science fiction In many ways. We're not by any means there yet, but we're on a path toward that destination.
Mike Nally:This technology was helping us start on this to understand that language or proteins in really profound ways. Some of the things that we were able to do were just beyond my wildest imagination. Some of the interesting tidbits that I picked up as I was looking into the opportunity were the average protein. We have 20 natural immunosets, the average protein may be 200 immunosets long. If you think about the combinatorial possibilities of proteins, it's 20 to 200 pounds. That's atoms in the universe cubed. The search space is extraordinary. Oftentimes we think about nature as being this all-powerful, all-knowing being. The reality is that nature has always surveyed a small fraction of that search space. It's just too large. If you have a technology that will allow you to survey those oceans, you're going to find some really interesting things. We're finding that on a daily basis. These technologies are helping us understand biology better if they're helping us come up with better answers to existing conditions, but also giving us new tools now to prosecute disease in very unique ways we're going to get back to the science again.
Matt Pillar:I'm just clearly very excited about it. We're going to get back to that because I want to pause for a minute at the moment of transition. You were excited about it then and you remain excited about it. You join Flagship. You come on as CEO at Generate 2021. How aware were you that you were signing up for a post that was going to face the headwinds at that time? How aware were you that you were not on the scientific and exegesis standpoint You're coming with? Energy. I get it All of a sudden.
Matt Pillar:You're like yeah, I'm the CEO of this new company we're destined to solve all these problems, and then, all of a sudden, the whole space goes to shit.
Mike Nally:We were really lucky. If you think about the peak of the biotech market, we started with 2021. I started March of 2021. I don't think people realized that. I think people thought it was going to be a momentary blip for a while in 2021. During that period, we raised $370 million as part of our series B financing. We raised it from an extraordinary group of investors who shared our vision for the future promise of the technology. As I think the downturn started to be fully realized, we were in a very strong position for my capital.
Matt Pillar:Did you know that coming in, did you know this was risky? There's always inherent risk in joining a biotech and leading a biotech, but we're, relative to the downward curve, we're in a good position.
Mike Nally:I think this whole idea of risk is grossly overstated. Every independent biotech endeavor has inherent risk. If you think about the unmetting and the number of opportunities across the biotech ecosystem. Failure is part of our model. I think it's almost your failing for valid scientific reasons. The biology just is not going to work out. If you're giving it a shot, there's going to be plenty of opportunity on the other side, as long as you manage the business side of things Certainly in 2021,.
Mike Nally:If you thought about the biotech ecosystem, companies were stringing up last and right. Opportunity was plentiful. The risk of generating not working out to me was okay. I could do another opportunity. I think you've seen that across this ecosystem for a long time. We're in a glorious era of scientific innovation. You've heard this from, I'm sure, countless people. Science has never been better.
Matt Pillar:Science needs to be better to sustain because we've seen over the course of the last 18, 24, 36 months, a lot of great science gets shell back burner flush. You hit an important point as long as you manage the business people are the rate lender, it's not capital.
Mike Nally:Great teams are the rate lender. I think there's plentiful science and not always will the science work out. You can have an extraordinary biological hypothesis, one of the things that you learn this is part of. If you think about my time at Merck, it's like I got a PhD in this industry from Merck. The best scientific minds that we've ever encountered in life sciences are wrong 80 to 90% of the time, and I'm certainly not in that category. Failure is part of this model To me, as soon as you acknowledge that the way you manage that to a certain extent is you build an extraordinary team really very people in a cross-disciplinary manner.
Mike Nally:If you have an opportunity, you find a portfolio or platform, and part of what attracted me to the opportunity of flagship and opportunity to generate was that it wasn't a single asset, because, again, I'm not smart enough to pick the winner, but if I have a portfolio, I can then manage the odds in a very different way. In the 2010 assets, the expected value starts to become greater than one and in that sort of a world, I think, a place of the strengths of someone who has more of a business background and to me, the period of 2021,. The biggest issue that we actually encountered was delusion of talent. We saw this skyrocketing number of biotech companies, of public biotech companies, of private biotech companies, of new startups, and that created position and title inflation across the industry and the world doesn't need the sixth and seventh and eighth-in-class approach to the same problem. There was actually too much.
Mike Nally:Too many companies started and unfortunately, I think we've had to go through a pretty rough datum turn over the last couple of years and we've seen a number of those companies struggle to sustain financing through that period. But over time, that raw scientific foundation is in place, there still is a lot of capital and certainly the assets that show real clinical proof are getting funded and I think we'll see the pendulum. This pendulum swings back and forth on product versus platform.
Mike Nally:Right In 2021, it was in vogue to be a platform, largely because a platform technology in mRNA was saving the world Sure, and in 2022 and 2023, it was much less in vogue to be a platform Over time. That, oh, the RNA space still.
Matt Pillar:There's still plenty of opportunities. There's plenty of platform.
Mike Nally:Absolutely, but those things will go back and forth in terms of sentiment, and so I think for me, for the industry, this period has been one where, I think you rightly point out, some really great science will get caught up in this downturn. Some really great teams will get caught up in this downturn. Some teams will get caught up in a valuation trap in some respects where, if you raised in 2021, 2020, at the peak of the market, major down rounds would be required to sustain organizations, and that's really hard, and so it's been really a rough period. But I think, as we enter this year, certainly we now have had the two best months on record in the biotech industry over the last couple of months. That gives us a lot of green shoots as we enter 2024 to start to make a big difference again.
Matt Pillar:Yeah, you talked about the fact that you probably wouldn't have signed on for such an endeavor had it been not a single asset company. And on that perfect science, it's logical. In the platform space or the platform play, what sort of thing? You know you got a single asset. You've got to hit milestones to make. You know you got to make a money, stretch to the next milestone, get more money. You know it's kind of that leap probably. So I understand where the platform play gives you more to work with. But how does that change? Sort of the milestone picture, right Like you've still got to produce something to reach a milestone.
Mike Nally:I think, in terms of the executional rhythm that you want to instill within the company, I don't think it changes anything. There's different milestones, right? I mean, I've got to be as accountable to my shareholders as a single product. So if I say I'm going to advance the technology on X, y and Z dimension, you know the. You know I'm going to have to do some of the things that I've been doing.
Mike Nally:So I have to do that and if I say I'm going to, you know, have two programs into the clinic this year. I've got to show products on that front and so you know it just gives you more levers. And sometimes those levers, you know, when something you know runs a file, you can not you can replace it with something else.
Mike Nally:So it gives you a bit more flexibility, a bit more optionality, but I think the executional rigor has to be the same, irrespective of whether you're in a one product company or, you know, a platform organization. Yeah, I mean, that's what builds trust with your board, with other stakeholders, with your employees, for that matter.
Matt Pillar:You mentioned your 2021 series B. Yeah, so you raised the $280 million series C, so I'm hoping for some insight on that. How you made that happen, what was key to it, how it was executed.
Mike Nally:I think it was really key to what was. When we look back at what we suggest that we would do with our financing from our Series B. We delivered on milestones so we had earned the trust of all of our existing investors participating in our Series. We had 16 Series B investors and all 16 of them stepped into our Series C financing and as you can imagine, given market conditions, everyone was in different situations.
Mike Nally:They all decided to continue to put the trust in the team at Generate and that was really, really meaningful to me, to the entire organization. At the same time, we were able to attract an array of different new investors in the process. It was much. I mean, the level of diligence that went into the round was night and day between 2021 and 2023.
Matt Pillar:Yeah, that's a huge and overused term. Let's unpack that a little bit. That's one of the questions I have for you. Is you know in more of a rudimentary way to put it, like what not? Necessarily a frustrate to the way the deals are being done today, but what's different about it?
Mike Nally:Well, listen, I think you know again, I think that's a big deal, I think, of these things. You know, sometimes we hit different polls in 2021 and may have been a little loose In 2023, it was probably, you know, the orientation 2021 was how do I find a way to deploy capital In 23,? The kind of orientation that the starting point for many investors was I don't want to deploy capital, but let me, I want to look, and so you're almost finding reasons not to invest versus finding reasons to invest. Yeah, and you know, listen that that you know within. You know the round that we were able to put together the. A big key of it was our ability not only to show the tracker curve of execution but also show the enormous promise over the next 24 to 36 months.
Mike Nally:And you know, as we were in the process of raising, you know we talked about having, you know, multiple programs homegrown programs enter the clinic. These are programs that were started by generate a couple of years ago using the platform. The first one that went into the clinic was 17 months from concept to clinic. The second one was about two years. They're addressing major medical needs, their technology, their approaches that are very distinctive, you know, for the individual targets that we've gone after. You know, in many ways, you know we were able to show promise to both our existing and future investors that they don't said. You know this is a great time, yeah.
Matt Pillar:Is there a difference in your mind? I mean, obviously there are a lot of variables behind the decision to invest in a company. Yeah, like generate, any company for that matter and you mentioned the importance of the support of your existing investor base, and then you mentioned they got some new ones. Do you see any, I guess, lines of demarcation between what turned the new ones to on the generate versus those that you already had? Like, yeah, we're the tire kickers more interested in the future? Were they happy to get on board with great investors who are happy to see results over the past 18? Months.
Matt Pillar:Like what was sort of?
Mike Nally:Well, I think you know, every investor follows a slightly different form. All right. So what you said is going to be somewhat of a generalization, but the I think you know the commonalities that I would pull out right. One is you know people usually back people and you know I've been really fortunate to be able to recruit a world-class team and that team, I think, instills confidence in both new and existing investors right and but on the jacking of the horse and I think there's an element to that. I think to the horse.
Matt Pillar:We don't want to discredit the horse, we want to discount the horse, but generally they have a pretty cool space. Yeah, right.
Mike Nally:I think you know, certainly you know, over the course of the past couple of years it's become part of the common lexicon and I think we started to see you know on an individual and personal level, the transformative impact that these sorts of technologies can have. You know the chat GPT raised generative AI in the conscious and it started to show people the enormous potential. I you know, before the kind of generative AI revolution, most people thought of AI and all come or technologies as largely efficiency plays. It was about speed and efficiency right.
Mike Nally:What generative AI has shown now? Is it aids the creative process?
Matt Pillar:I can have chat GPT be a thought partner while maintaining the speed and efficiency as well, or at one hand.
Mike Nally:Yeah, all right, but the real value in our industry comes from novelty and creating the best assets. You know, if I'm a month faster than someone and I'm in fear, ultimately clinicians shouldn't use my. If.
Mike Nally:I'm a month faster and superior. I'm going to have a whole lot of use of that product. Yeah, and I think what we're finding with these sort of technologies and why I think you know part of you know you go back to your personality generative AI is a really interesting force in applying it to biology, because the early signals and some of the early clinical programs and some of the next waves of clinical programs are suggesting that we're getting better answers than historical approaches enabled, and I think that's something that if you kind of just keep pulling that thread, if you've got a capability that can give you differentiated products consistently, that's a pretty exciting proposition to get behind Right now I don't want to pull.
Matt Pillar:I had a conversation with a guy a bit earlier today and I don't want to pull words in his mouth so I'm not going to name him, but he was getting to a point around we were talking about the impact of artificial intelligence and its early impact on molecular discovery, right, and he kind of alluded to a point where he was kind of saying like to change the paradigm you talked about it earlier the costs and access paradigm. There needs to be more than faster, better molecular discovery, because things get really tight and expensive, totally complex at the clinical level. So I guess a big picture. If you look at the impact of artificial intelligence and the way that you're using it to generate, how far along the continuum does it actually do envision it making an impact on better and faster?
Mike Nally:So I would. I'll challenge that underlying premise, but let me kind of just start with the end to end. View right Artificial intelligence, machine learning, our tools, the tools to apply to all parts of our lives. They will be applied to all parts of our lives and all pieces of the drug discovery and development continuum will ultimately be transformed by these underlying technologies.
Mike Nally:Today we've found the sweet spot for our corporate company is in molecularism. We're starting to use it on target discovery approaches and we're thinking about how we can use data-driven digital data approaches in trial execution and some of the biomarker discovery. But I think in the future, consistently, humans who embrace AI co-pilots are going to explore our research alone, and that will be true across all parts of all industries.
Matt Pillar:You bring this to that point brings up an interesting conversation that I've had many times with AI for this via text, and that's this concept of especially those who maybe were born, you know, pre-ai acceptance or understanding.
Matt Pillar:I've had many conversations about the nuance of successful integration of traditional biology and computational biology. Total At a physical level, at a personal level, at a, you know, intellectual property level, that's right. So don't you manage that? A generator Like what's, what do you? Is there a challenge there? Or is it a situation where you know from the company's outset it was we're looking for these very open-minded biologists who have some computational skill? Or are you marrying two different disciplines in a, you know, throw them in a room and make them sorted out, kind of way?
Mike Nally:Well, our two co-founders who still are very active at the company, molly Gibson and Gavore Gorgon. Both are computational scientists that have studied biology, right so.
Mike Nally:Gavore was a professor at Dartmouth, but in both computer science and biology Right. Right Molly was a PhD in computational systems biology from Washington University, with a computer science undergraduate degree. These folks have, you know, done a brilliant job of creating an organization and an ethos as of an organization where our computational scientists are not in service of our experimentals, Our experimentals are not in service of our competition. We are collaborative across the domain and we embrace people who have that multidisciplinary training and the single biggest predictor of success within January is intellectual curiosity, yeah, and people who are voracious learners, who are interested in the domains that none of us are experts.
Mike Nally:In every component of this complex you know way maze that we call drug discovery, development, manufacturing, commercialization, we all are dependent on certain handoffs, but I think the people that can stretch across multiple parts of this Biological problems are really profound that we're trying to address. Biology is extraordinarily complex and unfortunately we've seen, you know, while we've had, you know, a lot of organizations with extraordinary data in individual disciplines, we've only made so much progress, right, having people that can span these different domains. I think you're going to give us a different set of answers. It's not a solve everything.
Matt Pillar:No, no, but it's certainly so. I mean, I think about it in the context of, like you know, a three year old, nine or four year old generate had the company launch with the same mindset, even three years earlier, much less 10 years ago. Right, that talent deficit that you talked about earlier would have been even more exacerbate, right yeah.
Matt Pillar:Like, in what you're doing, are you seeing improvement in terms of, you know, replicating Molly, and who else did you mention? Yeah, are you seeing, like, are you seeing improvement in replicating those skill sets down the line, not just at the founder level, all down the line? So coming out of academia.
Mike Nally:I mean there were about 100 people in the world when I started that generate. They were skilled at the intersection of machine learning and protein and cheese. We were all under it by name. Yeah, I mean it was a small niche, community, Right, Good place to be.
Matt Pillar:I think for those folks, right, but you know where?
Mike Nally:they actually all worked. Yeah, deep mind, microsoft research, facebook, salesforce all had protein teams. Yeah, that's interesting and you know, obviously somewhere within academia as well, but it wasn't a classical path of training and you know market dynamics are very powerful, supply and demand dynamics are very powerful. Let's just say, when tech enters into the bidding war for those types of talent, salaries, well, they should change Right.
Mike Nally:And so you know there has been an influx of people, you know, that are now entering these, these areas, to the point where we had a. Our ML team had a, an internship program last year, and we had five spots. We had 2000 applications.
Matt Pillar:Really yes, and these kids like it. I said kids because, I'm just these young aspiring professionals that are interested in a position like that, are they? Are they coming, these 2000 people coming to the, the, the opportunity with like?
Mike Nally:biology, phd, phd learning, math biology experience.
Matt Pillar:That's what I'm wondering, and is it if they're coming at it with that scientific background and curiosity that you would require in an ideal world and in the same, like some of our team you know, may just be brilliant mathematicians that are extraordinarily versatile.
Mike Nally:Others will be extraordinary biologists with a natural predisposition toward computation Right. Some are computer scientists. You know that you are very versatile, and so I don't think there's one single phenotype. But you know the we're really fortunate to have some extraordinary people on our team. You know our both our computational team, our experimental teams, are filled with brilliant people, and even our experimentalists oftentimes have competition, because this doesn't work. You know, one of the things that you know has been super important from the inception of generate was how do you view data, and unfortunately, in many organizations, data is power.
Mike Nally:It's my experiment, then I have the data, I see what you're getting at and you know, when you have a machine learning approach, data has to be a collective asset and you need an orientation on the experimental side that recognizes that every data point is captured to refine the computational approach, and that is not your data, it's our data, because you know the whole machine operates on that currency and so you know there's a huge cultural piece that I think is really important for these companies that are starting at this intersection.
Mike Nally:And you know, one of the debates I had for a long time with colleagues at Merck was will it be the incumbents or the insurgents that actually craft this cup of tea? I think incumbents have huge advantages, right. Whether you're attacking incumbent or you're a pharmaceutical incumbent, you know, if you're attacking, you have some of the best computational talent, you have extraordinary resources. Right, if you're on the pharma side, you have some of the best biological talent in the world and extraordinary resources. What you know these insurgent organizations can do, though, is create a culture that actually blends the best of both worlds, and I think it's really, really important that you know, in pharma, oftentimes the computational scientists are in service of the biologists, and in tech, if you have biologists, they're oftentimes in service of the technologists.
Mike Nally:In these sort of organizations, the ability to create alignment and you know, kind of a parody that you know these two one. You know it's a symbiotic relationship in many respects between you know, the computational theme and the experimental theme, and you know that is something that I think has been, you know, really, really extraordinary to watch, to cultivate, and if you're an experimentalist and you don't subscribe to, one of our five core values is around being digitally native and around how data has to be a collective asset, and if you don't subscribe to that generally, it's just not the right place for you. It doesn't mean you're a bad person.
Matt Pillar:When you say collective asset, I'm curious about your take on collective meaning. You know within the four walls, so to speak, of generate versus data being a collective asset to the industry, and where the lines fall and I'm sure it's probably both right. Yeah, but how do you like when you look at it from an industry-wide perspective? Open source data, publicly available data, which is incredibly important, Huge. How does that kind of shake out in terms of generates, approach to differentiation and competition?
Mike Nally:directly I mean. So when the company started, you know, the ratio of public to proprietary data obviously was one to zero. Right, it's all public. Yeah.
Mike Nally:And you know the reason generally it was actually found to dissolve the protein challenge in summer's facts was because there were two extraordinary public data sets. One was the sequencing revolution has given us 180 million amino acid sequences across all species. And then, number two, the structural biology community gave us an extraordinary database called the Protein Data Bank, where 200,000 high-quality, high-resolution structures of proteins were exceptionally well curated. And what that allowed us to start to do is establish the interrelationship between protein sequence and protein structure. And if you think about technologies like alcohol or, from deep mind, those in some ways were trained on these two data sets.
Mike Nally:So the ability to go from a sequence to a structure is a prediction challenge, right? And if I start to understand those two data sets I can start to make predictions around different sequences and different you know structure, structural or holding patterns. Generally it was always oriented toward adding a third leg to the stool. As a therapist companies. Sequence and structure are interesting. Functions is where the business is right. We care about how you know proteins interact, how they drive biological function, right, and unfortunately there is no public database function and there's a number of inherent limitations in the industry to create a kind of an open source functional database. Primary among them is inherent variability of measurements.
Mike Nally:So if you were to run an assay and I were to run an assay in different labs. We make it different values and, as we all know, with machine learning based technologies, the quality of data is paramount. Garbage in, garbage out. So part of what we've tried to do within the company is create proprietary data sets of extraordinarily well curated data. We use a lot of automation, we use miniaturization techniques, microfluidics to do experiments at greater volumes, so that we can. You know, when we run experiments we want to collect as much data as possible, and that's allowed the company, over the course of the last five years, to go from a starting point of 100 examples to an individual experiment, to the biggest experiment we've now run as a million defined variants and every one of those data points either biophysical, measurement or functional measurement are captured and fed back to refine the computational approach.
Mike Nally:So you know, we've now generated sequence and built into full length proteins and tested around five million proteins and all that data now is informing our models.
Mike Nally:And that's helping us now to understand. You know what does it mean to be a. You know go from a protein to a drug. You know key parameters affinity how tightly do I bind to the target Potency, right Immunogenicity All of the manufacturability and developability parameters that are really important. Those are things that are measured to actually help inform our modeling, to say, how do I optimize to go from protein to optimal therapeutics as quickly, as quickly as time, as fashion as possible? And so the data sets are accumulating and there are major data gaps that we still see, that we're making either sizable investments ourselves or we're looking to partner right.
Mike Nally:And you know, on the internal investment, we've made an investment in cryoEM microshills. So these are four. We have four cutting edge, world class high resolution cryoEM microshills. The reason we bought those were in that protein data bank. Of the 200,000 high quality, high resolution structures that I mentioned, only about 2,000 are protein-protein interactions. Most of them are pre-standard proteins and in medicine or in the pursuit of medicines you want the interaction.
Mike Nally:You understand what residues are driving function in that antibody, antigen interaction, and we decided that let's figure out how to supplement that dataset because that data is really valuable for our models. On the other side, there's a whole array of data that we're still very data poor as a company and as an industry. Part of why we did the partnership we have with MD Anderson MD Anderson Cancer Center, one of the world's busiest cancer center in the season many patients at any center in the United States was we wanted to have understandings of the drivers of certain cancer types. We understood that at a foundational level our technology would allow us to drug those targets and it's been a great partnership because it brings the data from a world-renowned organization with our unique capability to create medicines for patients and hopefully get better medicines for patients faster.
Matt Pillar:I've been trying to learn about spatial biology. Yeah Right, this is a new trend. Is that? Spatial. Are you guys part of the player? Not a huge part.
Mike Nally:We combine all components of these sort of technologies, but the reality with us, for us, is when we step back and we think about the opportunity that's before us. There are these data sets that you rightly point out that are missing. Ultimately, what we're trying to do is be able to master sequence, the function in a relationship, because if I know the sequence, the function in a relationship, what? That allows me to do is program. I can sit there and type in the code to drive the desired function. That's what if you?
Mike Nally:think about the real, long-term massive transformation taking drug discovery from the artisanal craft that is today and making biology engineer yeah, making it programmed. We're on a path toward that.
Matt Pillar:We've spent a lot of time talking about AI, and that's good. You're giving great concrete examples of the work that it's doing. I'm curious about your take on the investor appetite form because there's no doubt a curve a high curve right there's a high curve going on right now.
Matt Pillar:For the past three years, we've been talking about investor discernment. I've got all these reasons to be discerning. Why, why, right, I don't want to invest in you, I should. I'm like AI is one of those things that I feel like there are so many companies that are riding that high curve right now. That's an area where investors should be discerning. If you come out, you're coming out at a conference like this and you say, well, machine learning and AI, let's pull back covers and have a closer look. Give me some color around. How, if you're speaking to the investment community, which you are, I get a lot of VCs listening to you how they should be discerning from reality around artificial intelligence forward.
Mike Nally:Yeah, Biotechs right now. I mean I always start with the people Right. I mean I carefully scrutinize the team of the organization that we would potentially work with partner, with the people.
Mike Nally:Yeah, don't look at, we've got an act, we're outsourcing to a Look at the individuals that are actually driving that technology, and are these folks among the world class contingent in those domains? I look at the publications that they've done, neither while they're within their organizations or in prior lives, to understand the quality of their science. You know, we recently published one of our models. This is a model called from up, and it was in nature Right. So when people ask me like you know, how do I know the quality of your machine learning? You can see the major publication Right, you have a readout Right and you'll see. You know, we're really blessed with an extraordinary team of machine learning scientists. I think then you know you obviously have to look at the technology as well, because you know it's great to have great people, but if they're not translating that into a technology that that's really meaningful, then you know the technology, though, or the concept, I think you know we can all use the same words.
Mike Nally:The question then becomes the translatability, and you know, what I ultimately want to be judged by is the output. Are we creating better drugs that we could have otherwise? Yeah, and you know there are going to be a series of interim markers until we hit the real marker. Do these drugs make a difference in patients' lives? And that is, you know, the definition of success that I aspire to, that Generate aspires to. Because of the nasancy of some of these technologies, we're just early in that journey and I think, unfortunately, sometimes the long lead times in pharmaceutical discovery and development obscure progress or the view of progress. Right, the revolution is happening right now. Yeah, the outcome of that revolution, given the regulatory paradigm that we have in front of us, is maybe a decade away.
Matt Pillar:So that long lead time will remain in the interim.
Mike Nally:I don't think we clap clinical trials under the current FDA guidance in the very short term. So we're getting two clinical trials quicker. We're getting two clinical trials quicker. I mean you're taking, you know, a 10 to 15 year process coming off a couple of years. Ideally and theoretically you should be getting the better answers with changes probabilities, but again we're going to have to wait time to judge that Right. The, I think you know, will there be opportunities for further compression? Absolutely, will we find ways of compressing the clinical trial dynamics? I believe so. I believe both. There'll be better preclinical models and ways of enriching clinical trials to do that better. But you know the nature of our business right now. You know is, you know, that is the path that we have to take and these technologies should be held to the same level of scrutiny. As you know, a technology that was discovered through more traditional means.
Matt Pillar:Yeah, so I'll look at your crystal ball right Questions. Everyone hates that answer. How long before you and I are sitting here having a conversation about the impact of these technologies on clinical trials? Because that is at the inflection point that we're at right now in terms of its impact on molecular discovery and design.
Mike Nally:I think we're going to start to see impact over the next few years. Yeah, I think we'll look back in the very near future and these technologies will be pervasive in everything we do. Yeah Right, I mean you know we're just learning how to interact with the chat GPT, Do you?
Matt Pillar:have any concerns?
Mike Nally:Oh yeah, well of course I mean these are extraordinarily powerful tools. But we already have some pretty extraordinary powerful tools. These are just imbobial You're dressed up with right, that's right.
Mike Nally:And so you know, I mean like all of these things have to be pursued with due caution and due consideration. But you know, the reality is, I think the good outweighs the concerns in a pretty massive way. You know, for us, you know it's interesting. You know, one of the things that people say to me all the time is like well, mike, how do you deal with the hallucinations of generative AI? Well, in a construct where you have this tight integration of dry and wet lab, we experimentally validate everything. So the hallucinations actually are enormously powerful for our modeling Because it's iterative.
Matt Pillar:Yeah, because we learn.
Mike Nally:We learn from failure in a way that the industry's never learned from failure.
Mike Nally:And if the model is ultimately hallucinating that protein doesn't express and it doesn't work and that data is already fed back, right and so it helps us get to a better answer faster, yeah, and you know, those sort of bugs are actually features in many respects in this sort of world where you're experimentally valid, I think if you're just thinking that computation is going to solve everything, you know I greatly discount organizations in biology that think computation will solve everything.
Mike Nally:Our workforce is skewed. Everyone considers us an AIML, a drug discovery company. Our workforce is skewed toward experimentalists. We have about two-thirds of our workforce that are experimentalists. That's just because we have to validate, we have to measure, we have to generate the data. The only way to do that is through experimentation, to do it reliably For us. Certainly in the short, medium and I'd say medium to long-term, the paucity of data, functional data, the data that we really care about across a number of domains in life sciences, will lead us to a place where we are constantly needing more and more information to refine these computational approaches, to get to the best answers to the status as possible.
Matt Pillar:Yeah, it's fascinating. I'm curious about where you are. If you want to share some information on where you are right now and what the next step might be for generating.
Mike Nally:Yeah Well, I mean excitingly, our first two molecules entered the clinic in 2023. You know that is a major milestone for any company. We're extraordinarily proud that we're now starting to see the benefits in people. Those programs we think could address major areas of unmedical need. Behind it, though, we have roughly 20 programs. A number of those are in partnership. We have six in partnership with Amgen. I mentioned the MD Anderson partnership, where we're now working on three different targets.
Mike Nally:We're working with Roswell Park Cancer Center on a number of other targets. Then we have an internal pipeline for generate around 8 to 10 programs that we're working on from a proprietary standpoint. We're in this transitional state of an organization where for the first few years we were really a pure technology company.
Mike Nally:We were developing a technology. Now we're morphing into a technology company that discover drugs and that develop drugs. You're seeing a bit of a transformation within the organization to bring in some of the skills and capabilities I think from building the organization that creates some interesting cultural dynamics with what we're working through. Clearly we need the experience of seasoned drug hunters and drug developers with the pioneering spirit of the original technology developers. It's something that we spend a lot of time thinking through. Then, from a technology perspective, we're scratching the surface of application. I always say to the team the one thing I know definitively is I don't know the best use of the technology at this point. I know there are multiple multi-billion dollar applications for the technology, but where this will have the greatest impact on humanity we're still searching and that leads to a bit of a dynamic where you're constantly balancing exploration and exploitation. When you find those areas where we can make impact, how do we do more of those versus expanding the aperture?
Mike Nally:The technology is protein modality agnostic. It works for antibodies, peptides, enzymes, cell gene therapy, all our protein, those ABCs, bi-specifics. That's a good place to be Right. You have a ton of real estate to cover. Which of these will have. Which of those domains will we have greatest advantage over traditional approaches? We'll still learning. My guess is it's going to be a more complex biology. If you think about where computers routinely outperform humans, it's in complex multiparticular optimization. The more complex the biological construct in menu or stacks, I think the computer ultimately will show inherent advantage. Sure, those challenges as we go forward are super interesting. You're trying to do that while you're trying to execute on these clinical programs, bring the next generation of programs to the fore and developing a technology that I believe will ultimately change the way the whole industry creates large molecules.
Mike Nally:I don't say that lightly. We can debate how long that may be, but I think it's inevitable that over time these approaches will provide a foundationally better way of coming up with the right answer than the traditional artisanal approach.
Matt Pillar:I know we're running short on time here so I can ask you questions Well into the evening, but I'm curious about one of the things you mentioned is the cultural change of generating to a drug development company, not away from a tech but being built on a technology company.
Matt Pillar:I'm curious about how, if you're doing that, if you work leading a company that's doing that on an island unto itself, the challenge, it occurs to me might be more daunting than it would be for flagship pioneering partner CEO. How much support like how advantageous is it for you I'm not insinuating that perhaps you're snuggling drug development telling from other flagship companies but how advantageous is it for you to be part of that ecosystem?
Mike Nally:I mean, listen, it's a special ecosystem. What flagships we're doing for the bill is really extraordinary.
Matt Pillar:It's not for the faint of heart.
Mike Nally:Most innovation occurs in an incremental fashion. Most innovation from most organizations is around the edges. Flagship lives in the white spaces and even the name of the organization is highly symbolic, right Flagship, pioneering yeah. A lot of the time we spend thinking about is what does it mean to be a pioneer? What does it mean to push into new areas, frontiers? How do you orient and how do you make it inhabitable for other settlers? How do you keep?
Matt Pillar:pushing boundaries Right, the immigrant mentality I agree 100%.
Mike Nally:Every time I talk with a flagship Absolutely, and I think one of the other things that we spend a lot of time thinking about are dualities of leadership.
Mike Nally:Oftentimes we think about the world in black and white terms and every once says well, no, let's live in the gray zone.
Mike Nally:Oftentimes, what we believe is that you need polar experience, you need to be able to balance between the two poles, not in between, and it's those sort of mindsets that, I think, become super valuable in these sort of domains.
Mike Nally:And you probably have heard a new bar talk about paranoid optimism. That's one of those dualities. Sometimes we need to be paranoid, oftentimes we need to be optimistic, and rather than sitting there in between, how do we embrace both of the poles as we develop these sort of organizations? And so certainly it's really nice when you're doing things that people haven't done before and you have guides that have been on similar journeys that can help you understand from their own experiences, and the team at Flagship, as I mentioned, stefan, who is a member of the board who's created, obviously, moderna. They've been huge, I think teachers For me, for the team that generates, sharing their experiences in a very open, transparent way and, more importantly, not just the successes but the failures, because we oftentimes talk a lot about what went well, but you sometimes learn the most from the mistakes that organizations make on these sort of journeys.
Matt Pillar:Sure, it's stated in the outside it's a failure, is inherent, and if you're not taking it away from that, then that's right, that's on you.
Mike Nally:You're losing. And the team at Flagship New Bar, jeff Aba, that we're kind of, the founding team of Generate have been extraordinary mentors, ambassadors, teachers, guides. As we've gone on this journey and for someone that is coming from a big company doing this for the first time, being able to surround myself with those sort of people and a whole cohort of other CEO partners that are also doing this journey for the first time, with an array of different backgrounds- that's an enormous asset Because, as you know, you talk to a lot of folks in these sort of roles.
Mike Nally:These roles can be really lonely, and having that sort of ecosystem to pull upon is of huge, huge value and it gives you a sense of calm and massive places of uncertainty, and I'm enormously grateful for that.
Matt Pillar:Well, I'm enormously grateful for you taking time on this busy week to spend with me on the business biotech, so I really appreciate it.
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 a 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 bioprocessonline. com/bob. If you have feedback or topic and guest suggestions, hit me up on LinkedIn and let's chat and, as always, thanks for listening.