Business Of Biotech
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Business Of Biotech
Biotech Angel Investing With Yaniv Sneor
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On this week's episode, Yaniv Sneor, founder of the Mid Atlantic Bio Angels and CEO at Native State Therapeutics, explains how life science angel investors evaluate biotech startups, and offers tips for young drug developers in search of funding. Our conversation covers how to create a successful pitch, red flags for potential investors, the importance of angel investing syndicates, the sweet spots for exit timelines and funding amounts, and why it still makes sense to invest in biotech over other industry sectors.
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Ben Comer:Welcome back to the Business of Biotech. I'm your host, Ben Comer, chief editor at Life Science Leader, and today we're speaking with Yaniv Sneor, founder of the Mid Atlantic Bio Angels, an angel investor group formed in 2012 with a current portfolio of approximately 20 life sciences companies. As we do, we'll get to know Yaniv a little better at the top of our conversation, and then we'll dive into why, despite a challenging market at the moment, it still makes sense to bet on biopharma over other industries. We'll talk about the role small investors play in life sciences, the importance of exit planning for startups and early-stage companies, and behavioral best practices for biotech leaders and companies in search of funding. Yaniv is also the CEO of Native State Therapeutics, and we'll learn a little bit more about that company as well. Yaniv, thank you so much for being here. Thank you so much for having me. Thank you so much for having me. To the getting to know you piece, Yaniv, how and when did you first become interested in the life sciences industry and life science investing in particular?
Yaniv Sneor:So I studied physics in college.
Yaniv Sneor:I always had an affinity for the sciences and at some point, after selling a company, I became interested in investing and angel investing in general, and after reviewing how the process is done in multiple places, I, along with two other partners who have since retired we thought that in order to properly invest in life science opportunities, you need a lot of very specific expertise.
Yaniv Sneor:It's a very complex type of industry to diligence and we felt that if we are going to go ahead and invest in this type of asset class, we need to somehow find a way to bring together a lot of expertise around the table to properly diligence way to bring together a lot of expertise around the table to properly diligence. And so we decided to focus on life sciences, which allowed us to attract a membership that is primarily from within the industry. So, life science well, angel investors in general usually have a day job and then they meet to get together at off hours or otherwise to invest their money, to get together at off hours or otherwise to invest their money. So most of our members have day jobs within the industry pharma device companies, their consultants in regulatory, commercial, their MDs so everybody has an affinity and usually a big involvement in the life science industry in their life.
Ben Comer:How did you go out and find those experts and then bring them in to Mid Atlantic Bio Angels? Were you looking for people kind of like yourself who maybe were working in industry but had an investing interest? I'm just curious about how you identified those and then brought them into the group.
Yaniv Sneor:So we started off as three founders, as I mentioned. Two of them have since retired. We each had our own network of people. We brought them in. They brought in their network of people. Being a life science angel investor group is actually something unique. There aren't many of us around the world. There are many wonderful angel groups out there, but most of them generalize in terms of their investment strategy and very few of us specialize in life sciences. So people who are looking to invest in this asset class, people who are looking to share diligence with people who have this expertise, find us. We're out there in conferences, we talk to a lot of different people and our members introduce other members. So we're always obviously looking for additional members, but there's a lot of. It is by referral.
Ben Comer:Okay, and you just mentioned there aren't a lot of angel investment groups out there. I mean, is that part of the reason that you wanted to initially found Mid Atlantic Bio Angels in 2012?
Yaniv Sneor:There are quite a few, as I mentioned, wonderful angel groups out there. Most of them are generalists, so there are very few that invest exclusively in life science. So we're one of a handful really around the world who just look at life science, and each one of us is unique in our own way. We all have our own special investment criteria. Some of them are geographic, some of them have to do with evaluation. You know, every every group evolves based on the personality, the character of its members and what and what we want to do as a group.
Ben Comer:Yeah, yeah, well, you, I, I mentioned the group was founded in 2012. Here we are, you know, let me, let me do the math. 13 years later, what? What have you learned since then? You know, what kinds of accomplishments are you most proud of?
Yaniv Sneor:I'm sure there were some learnings that happened during that period All the time, and so that's actually one of the first things that I'm proud of. I mean, obviously, the first thing is the membership that we've been able to attract. They're wonderful people, really intelligent, really engaging, and people that you enjoy spending time with. So it's wonderful on multiple levels, very proud of the evolution of it to your point.
Yaniv Sneor:We started off as people who write our own checks and then we said, hey, how about we create an internal fund that we call a pool, that we all vote in an open vote on how we invest our money, and every time we vote, we actually have to post a statement that says why we voted a certain way, and it creates a very engaged mechanism within the group. It creates a very engaged mechanism within the group, and then you know the expertise that we built and the ability to bring all of that expertise to bear. When you're doing diligence and our investment record, you know we happen to be very picky. Despite multiple internal arguments that we should be investing more, etc. Ultimately the group behaves in a fairly consistent manner in the way that it likes to invest. I think that we make great investment decisions, very thoughtful investment decisions, and so I'm also very proud of our track record as well.
Ben Comer:Yeah, well, let's dig into that a little bit. If you could take me through the process that Mid Atlantic Bio Angels uses when considering whether or not to provide a given company with funding.
Yaniv Sneor:Sure. So it begins with the application process and the way that we present ourselves to the world. We wanted to make it as democratized as possible, so we didn't want it to be about having to have a referral to get to know our group. We wanted to make sure that anybody with a reasonable, hopefully good idea in the life sciences would be able to approach us. So we put our investment criteria on our site for everybody to see and everybody can self-select the first round, basically, and see if they meet those criterias and, based on that, submit an application to the group. We screen on a monthly basis, except for the summer, and we review every application, even companies that I meet at conferences. I tell them that I'm there to meet with them, to help them understand and help guide them as to whether they should apply to the group, because rather than just pitching to me by applying to the group, they have the attention of 10 or 15 people who are screening, who have much more expertise than any one individual like myself could have and would get a much better viewing and discussion about the potential of their opportunity. And then what we're really trying to do in that screening call is to decide, not whether it's a good or bad opportunity, but whether it's a right opportunity for us as whether we think that our group would be interested in seeing, in potentially investing in it, and whether we as angel investors could potentially be making money there. So of the 100 applications that come in, we invite approximately 20 of those to present in person and the 80 that we say no to, we tell them in general terms why not Leaving the door for them to apply to us in the future if things change, if they're able to address things? Sometimes we just tell companies you're too early, so we're happy to see them in the future if things change, if they're able to address things. Sometimes we just tell companies you're too early, so we're happy to see them in the future. So sometimes the issues could be a little bit more difficult to address. But if they're able to or address for us, if they're able to, we're happy to review them again in the future, and we have reviewed multiple companies multiple times.
Yaniv Sneor:Of the 20 or so companies that do make it through screening, approximately 10 or so move into diligence and we do have a certain threshold of the number of members committed to participating in a diligence before we decide to go into that diligence just so that we can make sure that there is actually an engaged effort. That happens once we go into there and within a week of the company presenting to us, they'll usually receive a first set of questions and those are the gating questions. We want to start with the hard questions first, the ones that would cause us to quit the diligence early on. We don't want to waste our members' time, we don't want to waste the company's time as well. So we start with those questions and then we might have calls with a company which we record for internal use. We may have internal discussions. We'll go back and forth with communications between us and that company until we either decide not to, in most cases to invest or if there still is a positive sentiment about that opportunity.
Yaniv Sneor:We will bring in the remainder of the members who are members of our internal fund, what we call a pool. We'll bring them into the diligence room and ask them to review all the information so far, which we will lightly summarize, basically to address what we've hit on and what we've touched etc. And then we'll ask them to say if there are any additional questions, if we want to do additional internal discussions, if we want to have another discussion with the company, whatever is required of them, because there's a positive sentiment, which means we want to bring it to a vote for the pool. So whatever open questions there are, whatever additional information there is, please provide it, and et cetera. So at that point we get through that and then we open the pool.
Yaniv Sneor:The votes to open it to a pool vote. The vote to open it to a pool vote. Pool vote remains open for multiple days. Everybody knows how everybody votes and whenever somebody votes, we ask them to post a statement that says why they voted the way they did. It engages everybody to be involved with the diligence, to be thoughtful, think about what the best outcome for our investment should be. And then we leave the vote open for over a number of days so people have a chance to participate over a weekend, et cetera, and review all the material and if anybody says, hey, I need more time we'll extend the vote and at that point after that, we'd make a decision.
Yaniv Sneor:Based on that everybody's discussion, We'd make a decision as to whether to invest or not. So all of those 100 companies that started at the top of that funnel fewer than one and a half would receive funding at this point. So, pre-pandemic, we were closer to three, we're closer to 1.5 now, or even lower than that. There are a number of reasons that may have contributed to where we are today, but it is what it is. We're in a scientific and numbers business and we just said all we could do is follow with that. And when we do make an investment decision, we have a co-investment sidecar fund, which is a fund for people who either don't have the time or expertise to be members of the group but somehow want to invest with us. So that sidecar fund automatically co-invests with us if the pool decides to invest as well. So we want to be able to bring to bear as much funding as possible funding as possible.
Ben Comer:I wonder if you could give me an example or two of some of those initial hard questions that help you screen out the candidates that you don't want to invest in.
Yaniv Sneor:A lot of times the issue of adoption will be a crucial issue for us. You know, will it be used, will it be incorporated in the standard of care is often a gating question for us. Also, another gating question could be scientific challenges that we need to understand more. I mean, if you are a company pitching to us, you want to pitch to us that in fact there's a great opportunity here. But we'll get to this maybe later in our discussion. We don't want to just hear a scientific discussion all the time. We want to see that there is a reasonable scientific basis and make us want to go into diligence and learn more, and make us want to go into diligence and learn more. So, as we learn more, we want to see that that scientific basis in fact can bear out in a way that would lead to an exit. And so, because many of our members work in the industry, they have an understanding of what acquirers potentially would be looking for in a company before they acquire them, what kind of data we would be looking at, et cetera. And so we need to understand that and we need to understand that it makes sense for us financially.
Yaniv Sneor:Because of our investment criteria, we try to avoid companies that will require large investment rounds in the future. We can talk about the role of our type of investors, perhaps in this ecosystem, but we need to make sure that the data is there, or could potentially be there, and that it could be reached with angel-friendly rounds, with rounds that we could participate in and make money in as well. So there are a lot of different criteria. So those happen to be the two big ones. The management team is always number one criteria. We tell companies we have day jobs, we don't want your day job. We are trusting you with our money to know what to do with it and to bring this company to successful commercial conclusion. So with that, we need people who understand the commercial process, who understand how to monetize an opportunity and not just discuss with us the scientific merits around the opportunity, but how and why they will have a wonderful exit and what are the comps that will acquire them and why and what stage. And we need to understand and buy into that.
Ben Comer:Yeah, and can you kind of ascertain that ability in leadership, or are you looking primarily at past experiences, or is a combination of both?
Yaniv Sneor:Past experience helps a lot, but if we only went on past experience, then you'd ask me a follow up question what about all these new CEOs? That might be great, and so you know, if you are able to speak to us lucidly and explain the process of how you're going to monetize this opportunity, you can show us comps, you can tell us about the discussions that you've had with potential acquirers and show us what they're looking for, which we can confirm as well internally, and we can see a clear path to an exit that makes sense to us, based on our own evaluation, then that's a credible plan and that's a credible person that provided us with that plan that we can buy into. And that's the whole idea, right. I mean, it has to be a reasonable story. It'll obviously change, because nothing is totally predictable, right, but it needs to make sense at the outset in terms of the plan for this company and how they plan to get to an exit, and we always believe that you need to start with that exit and work your way backwards, right?
Yaniv Sneor:What do these acquirers want to see in you before they buy you? How much data at what stage? And so what are the trials going to look like what's your clinical and preclinical pathway going to look like? How much time and money to get there? And then you begin to create a story and if their story makes sense to us and our background and understanding, based on our members understanding from their experience all jive, for lack of a better word then it's a good story that we can buy into.
Ben Comer:Do you encounter companies that come to you hoping to obtain funding and don't have an exit plan at all? I mean, do most companies that are progressing up through your filter have that kind of front and center, or at least have given it some thought?
Yaniv Sneor:We do encounter, every once in a while, companies of all types.
Ben Comer:Okay.
Yaniv Sneor:We do try in the discussions that we have with our companies. As I mentioned to you, we go to many conferences et cetera, and our goal is to help guide the companies, to make them decide if it makes sense for them to apply, and usually one of the first questions is how much money and time and effort do you think it will take to reach an exit? And that focuses the discussion with those kind of companies that we need and want to see that An experienced management team who pitches to us will already know that we're looking for that, because you're not pitching to scientists, you're pitching to investors, and investors want to see a return on their investment, and that would come from an exit, preferably from an M&A transaction or an IPO.
Ben Comer:Right, okay, I want to broaden the aperture here in just a second and ask some bigger questions about biotech and life sciences investing. But before I do, just to get maybe a better sense of what you're up to, is there a specific dollar amount that you're typically providing in a given investment for a company once it's progressed all the way up through the funnel successfully, and is there also a specific timeline that you're looking for in terms of an exit?
Yaniv Sneor:So I'll start with the second first. So we look to invest in companies that would have a potential exit within five to seven years. It often happens that it takes longer than that right, because that's the way life happens. But if you look for a timeline that's 10 years or longer, there's so many more uncertainties that are brought into that equation that it's difficult to make a decision in terms of a company, and we'd usually tell them you may be too early for us, but for other companies that come to us, we believe that the exit horizon could reasonably be within a five to seven year period. We would first consider an investment in them. When we have that commercial-minded person on board leading the effort, that would be the first time that we would consider making an investment, and then we would hope to participate in all the rounds, all the successive rounds, before they reach an exit, because the kind of opportunities that we want to invest in will not require future follow-on large VC ramps. So whenever an opportunity requires $30, $50, $100 million in the future, that's an area we don't play well in, because we'll be diluted very heavily and the large rounds in those future will provide their investors with preferred seats ahead of us in the bus, so to speak, when there's an exit and will also dilute us very, very heavily. So the kind of opportunities we're looking to invest in will require maybe no more than $25 or $30 million in totals before they reach an exit, and those can be raised in multiple syndicated rounds.
Yaniv Sneor:So a syndicated round is where multiple angel groups and perhaps smaller VCs all get together and put money into a round.
Yaniv Sneor:We would typically invest about a quarter million to a million dollars in a round. We have invested more, we have invested less, and then the company takes that money, goes back to the lab, hits milestones and comes back to us in a year or two and raise another round, hopefully because they've done well with their milestones and we'll be happy to invest in them again, possibly probably in a higher valuation, but it shows progress and everybody's happy. That way nobody incurs significant dilutions and you can do anywhere from two to five of these syndicated rounds and raise $5 to $10 million at each one of these rounds and all of the investors remain very happy, supposedly, and the company usually retains control of the company. They don't end up giving up control of the company, which they would in a VC round typically. So those are the kind of investments that we believe we can participate in and make money in as well make money in an exceedingly challenging market right now for biotech for a number of reasons.
Ben Comer:From an investor's perspective, what case would you make for investing in biotech right now versus other industries?
Yaniv Sneor:So, first of all, don't take all of your money and put it in biotech, please, Right? So I think it's smart to have diversification and allocation, but I think it's great to have exposure to this unique asset class, high risk, potentially high reward. If you think about biotech and anything in the medical community, there's always going to be a need. There's always going to be. You know, there are so many diseases for which we have absolutely no treatment and there are so many diseases for which we can provide better treatments, better standing of care, so there's always going to be a need. The other reason is you can do good as you do well. You know and do well as you do good. So that's a great thing. We think that not only can you benefit as an investor, but the patient's lives will be, you know, well impacted.
Yaniv Sneor:And the other interesting aspect is you can't start a biotech company with enough pizza and beer over a weekend. You know there's a certain built-in maturity into the company because of all the data that you're required to create, because of all of the other things that you have to by virtue of being a life science company. You have to do certain things and that imposes a certain maturity on you as an entrepreneur, on you as a company and, by the way, also they are investors. There's a certain maturity in the room, so we don't get these fly-by-night opportunities. We get things that have a baked-in maturity already in them and that elevates a level of discussion that we have.
Ben Comer:Right. You've described your well-assembled funnel for evaluating companies and making decisions about them. I wonder what you might say about companies that maybe don't shape up or are missing key pieces, and I don't know if it's organizational or relational or what, but maybe what are some of your pet peeves?
Yaniv Sneor:I guess, as an investor who is actively looking at a whole lot of companies working in life sciences actively, looking at a whole lot of companies working in life sciences, so there are a lot of pet fees, but a few of them. For instance, there are companies that we call it spray and pray. They just send the generic type of here, this is our company, so-and-so we're doing this, and they just send it to the website. Our investment criteria on the website. Take a minute. Read our investment criteria. See if you are actually a fit. If you spray and pray. First of all, half of them are not even life science companies, so we don't respond to them. But if you are in life science, our response will be our investment criteria on the site. Take a look at them. If you think you're a match, by all means please apply.
Yaniv Sneor:Another pet peeve is people pitch to us a scientific pitch. They think it's a poster presentation. But what you really need to pitch to us is an opportunity for us to make money. You have to pitch the exit, pitch what we're likely to make from this and why what you have is likely to be a good investment opportunity because you have the right expertise and the right science and the right market, need right, and all of those things coming together right now make us want to go into diligence, to learn more, instead of giving us a 10-minute scientific presentation which most people fall into.
Yaniv Sneor:Another pet peeve, which is sort of on a different tangent, related founders. Whether it's a husband and wife, or parent and child, et cetera. In my opinion, you will always put your familiar relationship first and your business relationships second. But when we invest, we want to make sure that the company is, first and foremost, right. I don't want to have to worry about what your Thanksgiving table is going to look like and how tense that discussion will be if you think that your spouse or child isn't doing a good enough job or something in the company, or whether you'll even feel comfortable telling them that they're not good doing a good enough job. Certain things have to be done in a company and you have to be able to hire and manage people who are accountable for those things. Um, and it's easier to do that when those people are not related. So that's another one of those yeah, I uh.
Ben Comer:There's a Pittsburgh-based company called Krystal Biotech that is led by a husband and wife in the CEO and chief scientific officer role. They got a product approved the first topical gene therapy ever approved, actually. But I remember thinking how difficult maybe a Thanksgiving might be. It's tough to mix business and pleasure. It's a cardinal rule, so that's interesting might be, you know, and it's it's tough to mix, you know, business and pleasure. You know it's it's a cardinal rule, so that's that's interesting.
Ben Comer:I also wanted to pick up on something you said previously which strikes me as analogous to something I encounter as a, as an editor and writer, which is, you know, I get a lot of pitches hundreds a day from communications and PR. I work closely with them. I really appreciate them as colleagues, but there are always a few that are just, you know, here's the phase two data readout, here's someone we added to our scientific advisory board and that's kind of it. And you know, perhaps expectedly, a lot of those I don't respond to or don't follow up on. Instead of a strictly scientific presentation, what should companies think about? How can they kind of bring you in and engage you in a way that makes you want to learn more?
Yaniv Sneor:It has to be a good story and it has to be a financial story and it has to be about how and why this company and its product and whatever it has are going to be an exciting opportunity for us to invest in, why it's going to be a large exit, why those acquirers are going to want to buy this company, why they are uniquely positioned to do that, why their science is so different than anybody else, why will they be successful where others may have failed? And that includes both the science and the management team and the timing and the opportunity. And that's what they really need to tell us. And really you need to hook us. You just need to excite us enough when you present to us for us to, as I said before, want to dive in, want to go into diligence, want to find out more about the science and the team and the opportunity and whether really there could be an exit with this amount of money and whether there really is this kind of interest in this specific market from potential acquirers.
Ben Comer:Right, what can you say, Yaniv, about the role and importance of small investors, like Angel Investors or other small investors as well, in biotech? And then maybe, if you could mention some of the limitations you know, perhaps other than being able to contribute, you know, $100 million.
Yaniv Sneor:Yeah, I think that when you look at if you're a company, you look at where your exit is and then you begin to work backwards and you create that story that becomes a financial story. When you attach numbers to that timeline and to those trials and to everything else that you need to go through, you end up with a dollar amount at the end. Right, I mean your first exit point, your second exit point. But you realize that, given the amount of data and the size and the timing of the clinical trials and everything else that you may need to do to reach an exit, if you're not from a single company, you're going to need to have traction. If you are a device company or you're working, as you know, if you're doing a diagnostics or digital health company, there's going to have to be some traction within the industry. Diagnostics or digital health company, there's going to have to be some traction within the industry. So all of those require time to show and prove adoption in those cases. So you end up with that number and that number means that you have now a set of potential investors and if that number is the 30, 50, 100 million dollars, in my opinion we are not part of that investor community because, as I mentioned, we're going to be diluted very heavily in the future. We can't put up the numbers that the VCs can and it's really not a game that we can successfully play in. And, by the way, if you're a company that needs that, you're going to end up losing control of your company. You're going to have to give up at least 51% in the very first large VC rounds and then more in subsequent rounds. But if you are able to raise smaller amounts and you're able to do that in perhaps in smaller rounds, you could appeal to smaller investors. There were these small VCs and angel groups that put in maybe up to a million or two or three. I've worked with VCs that put in maybe up to $5 million in total into a company over multiple rounds, et cetera, or even more, and then you often do maintain control over the company.
Yaniv Sneor:It's a different kind of a relationship. It's often more supportive of the management team because we, as I mentioned, we have our day jobs. We don't want the CEO's day job, we want those CEOs to be successful. We're happy to lend guidance whenever we possibly can and open our network and provide expertise, which we see is good obviously as well, but we do so with a main goal of helping that CEO and that company become successful. So it's a different kind of raise the limitations for us.
Yaniv Sneor:Obviously we can't play in those big rounds kind of raise. You know the limitations for us, obviously we can't play in those big rounds. And you know we don't have a stable of people waiting to take the CEO's job. We're not set up like that. No, we are more set up to support and nourish as much as possible the existing management team and help them become successful. Which is why it's very important for us that when we do make that investment decision, that we believe that the team has at least the basis for becoming successful. Maybe they don't have all the people in place, but they have a plan as to how to hire the right people they'll need in the future. Maybe it makes sense for them not to have them in place right now because it's too much overhead et cetera, but we want to understand that they have a plan that includes them later on when they are needed, makes sense.
Ben Comer:Yeah, and you don't necessarily need $100 million to start up a biotech company. But I wonder if there is a kind of difference in kind between a company that can successfully start up at a lower dollar amount versus someone who, out of the gate, is going to need that really large investment, and maybe you could just answer that one.
Yaniv Sneor:But if there's something unique that you like about those companies that are not asking for a huge amount of money to get started, you know, there are a variety of fields in life sciences that are going to require large trials, lengthy trials, and, by definition, that's not for us to be able to fund.
Yaniv Sneor:You're going to need, whether right off the bat or in the future, those large sums of money and that's just the reality of it in order to exit, either through acquisition or through an IPO.
Yaniv Sneor:There are areas where, especially if you're going after an orphan designation, and especially if, once you do have a successful orphan designated product drug, you can then perhaps expand the indication because there is a commonality in terms of the mechanism of action, where it could apply for one disease to multiple, perhaps more highly prevalent diseases. Those are paths that could be more efficient in terms of time and money for investors to participate in. There are other areas that we like to invest in where the area is so exciting for lack of a better word for current pharma or device companies that if you show them enough traction and or enough data, they will acquire the company and show them enough there, there, because it's an area they want to get into, an area they believe there's a potential, and if you can give them all the signals that they're looking for internally, they'll acquire you early, and that's another very good investment opportunity for us as well.
Ben Comer:Yeah, so do you help companies get prepared to be acquired and I'm asking this in part because I've heard a lot from people about the pending patent cliff and the supposed large stocks of dry powder sitting at big pharma. I think there's an expectation that M&A is going to pick up. We'll see, but is that something that you're helping companies think through or you're expecting them to kind of already have that in mind?
Yaniv Sneor:We are really there to help, but we can't drive, you know we. So when we do make an investment in the company, we try to create a number of liaisons within the group to engage with the company on a regular basis. So, rather than just sitting passively and waiting for a quarterly report, we would like these folks to reach out to the company on a monthly or quarterly basis and ask them how they're doing or what kind of challenges they have, what kind of issues are they seeing, and then either using their own expertise or going back to our group and saying who here has the ability to open these doors? Who has expertise in the following things? Et cetera, et cetera. So we try to do that more and more on an active basis. But we won't drive an exit. We're not there to do that. We want to see that management has the capabilities and has the understanding and has the ability to either have in place or to bring into the team the right people who can create that exit.
Ben Comer:Right. I wonder what your opinion is on an early stage or startup company choosing to include a pipeline drug that is buzzy, is something that the industry is focused on at the moment CNS, other therapeutic areas that are popular or are very much in the news and an area of focus for the industry. Is that a ticket kind of for a company that's successful to include a drug, let's say a GLP-1 inhibitor, in their pipeline? What do you think about that?
Yaniv Sneor:There is no golden ticket. I haven't found one yet, but I'll let you know if I do right.
Yaniv Sneor:Yeah let me know if you do. Yeah, we're still looking for it. The question is if you have a GLP-1 drug, for instance, right now or actually in development, if you're pitching it to us, the question is, when will that drug be ready or have enough data to be acquired? So what will that market look like, not now, but potentially? What will it look like in five to seven years, which is usually that development plan, the commercial as well as the regulatory and everything else before that asset will be ready for acquisition and in some cases we might think that it's an overcrowded market. I mean, I remember during COVID, everybody was applying to us and saying we have a cohort with it and we're like we're not interested in COVID.
Ben Comer:Yeah, hundreds of COVID assets.
Yaniv Sneor:That ship, for us, has sailed. Even in the beginning of COVID it was already a non-issue for us because by the time they would end up trying to sell themselves which would be now or in a few years the interest is obviously a lot lower. Interest is obviously a lot lower. So the question is what relating to GLP-1 or what relating to CNS are you doing and how does that fit with the development that we're seeing in the marketplace? And if you're going into a potentially hot field, it also means it's potentially a crowded field, especially from an IP perspective. And when companies do acquire you, they're looking at your patent estate, they're looking at what your moats are and what you actually own, and there needs to be robust enough, especially if you want to change a standard of care. So we have to look at all of that when making a consideration. If it's very easy to get around what you're doing because you're in such a crowded space, it may not be a big exit, if an exit at all.
Ben Comer:Do you think the obesity therapeutic area is overcrowded at this point? I mean, I know that there are improvements that can be made on the existing products on the market right now, but there are a whole lot of drugs in the pipeline targeting obesity. Has that reached a kind of overcrowding tipping point? Do you think?
Yaniv Sneor:I don't know if it's reached that tipping point as well. Also, there is new learning that's happening now in the industry as these drugs are being prescribed and there are side effects and there are wanted and unwanted effects of those drugs. Those wanted and unwanted effects create new opportunities that you are now beginning to see, perhaps in some of the other applications of companies trying to avoid these or trying to base what they're doing on some of these effects, and so I think it's an emerging, continuously emerging markets that we're going to see new opportunities in relating to and growing, you know, and a market that didn't really exist a few years ago.
Yaniv Sneor:right, I've seen a lot of pitches in the past for people trying to go at it in different ways until finally some major pharmas achieved some significant success there. So the reality is that everything is going to evolve from here, and every evolutionary step is going to be a new branch, and each branch will create new opportunities and challenges more kind of about the composition, or composition rather of a syndicate that you might participate in and what's maybe unique about a small investor syndicate.
Yaniv Sneor:So the interesting thing about being a small investor is that you can rarely fill in a round on your own. If we put it in between a quarter million dollars to a million dollars in a round and the round is five to seven million dollars, we need other partners in that round, companies well enough capitalized so that we want to see that those partners are there. So we are very happy to work with other syndicate partners and to be on the receiving end as well as on the syndication end. So we often work with other angel groups. We work with small VCs who specialize in the life sciences and we refer deals back and forth to each other when we see opportunities.
Yaniv Sneor:We used to when we were young, we would syndicate everything that went into diligence and then we often fell out of diligence. So we changed the way that we syndicate and now we only reach out to our syndicate partners when we actually made the investment decision. We can say, hey, we looked at this company, we diligence them, we're putting money into it. That's the best kind of endorsing that you can provide. And sometimes we get companies that say, hey, can you recommend other people we should talk to and we tell them it's not a good idea for us to do that, because the first thing the other groups will ask us is did you invest? And if we say, here's this company, but we didn't invest in them, that doesn't actually work well for you. You're better off going there without us.
Ben Comer:Right, yeah, absolutely, and I was looking through the Mid Atlantic Bio Angels portfolio. You've got companies from all over the United States. You've got a company based in France, so you're clearly, I think, agnostic about company location. As far as syndicate partners, is there anything that you would say, I guess, about where the money comes from and maybe you know, maybe, what comes with it? You know, are American dollars investment dollars different from European investment dollars, different from dollars from Asia?
Yaniv Sneor:So traditionally, what was a small VC in the US is a large VC in Europe or in other parts of Asia. And when we do work with syndicate partners in Europe and Asia, usually they want us to invest in their opportunities, but they rarely want to invest in our opportunities. The environment for startups, the talent for running companies, is different between Asia and Europe and the US, and tolerance for failure is also different between these markets. Look at a company's role as they raise money and they think of if it's a great company from the get-go, they'll go to the US to raise money right from the start. If it's a fledgling company that needs a little bit more before they have enough data, etc. Maybe we, the Europeans can get a chance to invest in them in that first round before, when they're successful, they go to the US to raise the larger and the bigger and the additional monies that they need.
Yaniv Sneor:We certainly look for an understanding from the management team of the US market. We believe that you need to be able to commercialize in the US or understand how to monetize in the US in order to reach an exit. The US is often at least 50% of the world when it comes to certain diseases or indications. So we want to make sure that the management even though they may have started in their backyard somewhere in Europe or Asia, et cetera still understands the commercial uniqueness of our US market in terms of payers. You know it's very difficult to get things adopted in the US in terms of who pays and how it goes into the standard of care, and you need to understand that and to work towards that in any kind of solution that you want to bring in. So we'd like to see that understanding and management. And then in our discussions with our foreign syndicate partners, we often see more of the parade of their companies as opposed to them being interested in ours.
Ben Comer:Right. So if a company is too early in their development for you, perhaps they should go to Europe, is what you're saying.
Yaniv Sneor:Well, I think that they have a better chance to get money in Europe if they started in Europe.
Yaniv Sneor:I think it would be more difficult for a non-European company to get funding in Europe, more difficult for a non-European company to get funding in Europe. So I think it needs to start there. But it may be too early for us and there may be an appetite for a European investor to put money into them before we are ready for them. And I want to also make sure that I state this at some point just because we don't think it's a good investment decision, it means that we don't think it's the right thing for us, but it doesn't mean that it's not a good opportunity. There have been and will be opportunities for very successful companies that we'd say no to because we think it may be too expensive or too early or too risky or whatever it is. But it just means it's not right for us. It doesn't mean it's not right for the world. It's not a good opportunity. You're trying to look for that match between the appetite of a specific group and a very specific type of company.
Ben Comer:Right, right, let's talk about your day job for a minute, which is not Mid Atlantic Bio Angels. You're the CEO of Native State Therapeutics. Can you give us a sense of, or maybe just a company overview and a little bit about, your company strategy and exit plan?
Yaniv Sneor:So you know, with all that said, Mid Atlantic Bio Angels does consume the majority of my time. It's a very jealous mistress and every available minute that I have does go towards this endeavor. It's a passion project. So, by all means, it's something that I've been doing for many years and enjoy doing. But in terms of my company which is too early for my own group, right. So I can tell you that at least I understand my own investment criteria. So I can tell you that at least I understand my own investment criteria.
Yaniv Sneor:We are going after neurodegenerative diseases and in that sector, we're going after protein misfolding diseases. There are a number of diseases where the believed mechanism of action is that some proteins lose their function and shape, for whatever reason, and those proteins make other proteins lose their function and shape and once they accumulate into secondary structures they can become toxic. That that kind of mechanism is prevalent in Parkinson's and potentially Alzheimer's as well, as well as other diseases that are more unique, which are prion diseases or frontotemporal dementias and others, and so our approach is to go after a very well. So our approach is to go after an orphan disease path where, as I mentioned before, it is a less expensive and less time-consuming path to get to market and hope to be able to show that the assets that we are developing in fact could be translatable to other, broader indications. We're still at the very early stage and have been for a while, unfortunately because of some research challenges that we've been dealing with, but that is the current approach.
Ben Comer:Hey, that's how research goes, and so I think what you're saying is your strategy is you would start off with this orphan indication, smaller indication, reach an exit with that, before you would kind of build it out into potentially larger Alzheimer's or Parkinson's disease indication, which would maybe be done by someone else at that point. Is that correct?
Yaniv Sneor:So we hope to get to an approved drug on the orphan indication and during its development we are already trying to show that in those disease models that our approach translates so that by the time we do end up with an approved asset we can go and talk to larger pharmas and say here is obviously an approved asset for an indication for which there are currently no treatments. In addition to that, the mechanism of action we think translates because of the following data and all the research we've already done in your model as in these specific models, and then hopefully that would allow us to partner and to exit.
Ben Comer:Got it. Investors, life sciences companies no one is operating in a vacuum. There are a myriad external factors that influence funds flow, all sorts of things, and so, to wrap our conversation and take a look forward, I wanted to ask about maybe one of those external factors, which is what are the risks and opportunities that you're monitoring amid the shakeup at NIH or FDA?
Yaniv Sneor:Yeah. So you know, our investment process has so many uncertainties built into it and what we try to do is to make investments into things that will reduce uncertainty and bring the opportunity forward in that kind of way. There are currently a lot of uncertainties. You know, what we're looking for are certainties or stabilities in terms of timelines. Are the reviews going to be the same timelines? Is the quality of the data and the standard of review and of approval going to be the same? How will the changing of personnel, the lack of personnel, whatever affect those timelines, et cetera? And how will pharma react to that? And how will ultimately the adoption marketplace adopt to that?
Yaniv Sneor:I mean, will there be a slowing in the approval of drugs and, if so, what happens in the marketplace? How will people be treated? Will pharma go back into more of the R as opposed to the D? And so it's very difficult to ascertain because there are so many moving parts right now and we don't know what will happen. And our investments and our processes are multi-year processes that we are looking at and our approval of certain things take time and we have certain expectations. So it's going to be very difficult for us right now to figure out what it is, but we are keeping a very you know an eye out on everything and trying to figure out how and if it will affect us in any way.
Ben Comer:Right, excellent. Well, we will leave it there. We've been speaking with Yaniv Sneor, CEO of Native State Therapeutics and founder of the Mid Atlantic Bio Angels investment group. I'm Ben Comer and you've just listened to the Business of Biotech. Find us and subscribe, anywhere you listen to podcasts, and be sure to check out new weekly videocasts of these conversations every Monday under the Business of Biotech tab at lifescienceleader. com. We'll see you next week and thank you for listening.
Ben Comer:Avantor is a leading life science tools company and global provider of mission-critical products and services to the life sciences and advanced technology industries. Avantor works side-by-side with customers at every step of the scientific journey to enable breakthroughs in medicine, healthcare and technology. Avantor's portfolio is used in virtually every stage of the most important research, development and production activities at more than 300,000 customer locations in 180 countries. For more information, visit avantorsciences. com or find them on LinkedIn, X (formerly Twitter) and Facebook.
