Transcript: Creating an Effective Biotech Pitch Deck

Presented by Dr. Schwartz on 5 May 2020  Watch the Webinar 

Pleasure to be here to talk about how to construct a pitch deck. I’m going to go over more specific of a biotech pitch deck because they’re a little different than pitching other types of technologies. Generally, if you’re starting out early, you’re going to go through early phase clinical trials, and you don’t really have the assets or the expertise to go through a four-phase clinical trial. So you’re probably never going to be profitable starting out as a small biotech company. So that’s where things are a little different. And that’s what I’m going to go over here today.

A little bit additional about me, I’m currently the CEO of a biotech company and we’re pushing an oncology asset through clinical trials. I’ve been involved in startup companies my entire life, I teach class at Johns Hopkins on how to start a company as well as basic finance at different companies. So I’ve a very big passion for starting companies, entrepreneurs, small startups.

So as we go through this, I’m going to go through different slides that I would recommend go into your decks. I’ve pitched for several other companies. I know a lot of what entrepreneurs go through and it’s not easy, and it takes a lot of work with a lot of times no reward. So hopefully by the end of this deck presentation, you may have some better insight on how to go after funding for your company.

So first off on your first slides, a big thing is to look professional, look like a legitimate company. You need a good looking logo. Don’t do something in paint brush or sketch it on a piece of paper. That may sound trivial, but it happens all the time. Make sure you’re a real company. If you waste investor’s time, and you’re not even formed yet, and then you come back, they’re not going to listen to you. Go through clean slide decks, avoid those transitions a lot of people like to use. Just make it as professional looking as possible.

So our first poll of the day is, I would like to know what industry you’re from. If some big large biotech, academia, other types of biotechs or startups. It’ll help gauge me as to maybe giving you some additional insight if there’s a bunch of startup people or a bunch of government people or academia because I’ve been involved in licensing from all those different types of entities. Oh, wow. That’s awesome.

Hello startups, my entrepreneurs. That’s phenomenal. I think there is something about 100 people in here, so that’s great. So moving forward, one of the first slides you should have with your deck is your executive summary. What does your company do? So just an example, I’m in the cancer space, so I’ll use cancer as my main examples we go through here. So you want to be company A, that’s your company name to develop treatments for cancers. You want to be more specific than a treatment for cancer because even if you go down to just breast cancer, breast cancer is one of several, probably over 10 different types of sub diseases. So it’s good to be broad but specific at the same time.

Talk about the target that you’re going after. A lot of times these… I’m in the immunotherapy space and if you throw out an immunotherapy target, people will be all excited because they’ll know what you’re going after rather than figuring out what that is in some mechanism slide down the road, so five slides from now. So that’s good. And what you’re doing to address that particular marker. So if you’re going after cancer protein one, are you a drug? Are you a small molecule, an antisense. Very briefly. These all should be very briefly what it is.

And then what’s your commercialization plan? What target indication do you want to go to through first, why is that important? If you were to say… Something you shouldn’t say is, “I’m going after breast cancer.” The five-year survival in the majority of breast cancers is about that 95 plus percentages, and it’s a very broad indication to go after. You need to go after something like a triple negative breast cancer, which has a very low survival and there are few therapies on there. So you need to really, as briefly as possible, tell them, what’s your company do, what’s the target, and what type of indication you’re actually going to go after. And this is applicable too to diagnostics as well, the pathway is just a little bit different. And I’ll try to remember to touch on those things as we go through this.

Our next slide, is the problem. Obviously, breast cancer is bad. But what are you targeting? What protein is over expressed on these cancer cells that you can go after? How does that protein actually drive cancer cell growth or do the opposite of that? You try to demodulate it in a totally different direction. It’s important to know your VC audience because there’ll be some experts in the room, there may be no experts in the room and there may be the world’s expert in the room. So oftentimes I like to be a very broad overview of the target we’re going after and not get too involved in mechanism, you will lose people in the beginning. You can always come back to these questions later on.

You should also talk about how your technology is going to solve this problem. If your technology inhibits this certain pathway, talk about how it inhibits that pathway briefly. Very, very high level at this point in time.

Next, I’d like to go into what my technology is, is it an antisense, is that an antibody, is it’s a small molecule? Again some mechanism, not too involved in the science. On the left here, I’m just trying to show an example of, this is Keytruda, it’s a new checkpoint inhibitor from one of the major pharmaceutical companies. And this is capped at the simplicity I’m looking for, is you have a tumor and you’ve got an immune cell, and Keytruda, the drug binds to these specific receptors that then allow the tumor to be killed by the immune system.

So it’s not super mechanistic, but you can get it in their heads of what your drug is actually doing. And there’s multiple, at least in this example, there’s multiple different manufacturers making Keytruda. You want to briefly say why yours is better than theirs. Is there a safety advantage, is there an efficacy advantage? Is there both? Is there a modification to it that allows it to elicit more than one type of molecule? And one thing I see a lot is the bullet at the bottom, avoid your drug can treat every disease or every cancer. People don’t believe that, and it’s generally never true. So don’t say it.

So as I said before, be specific of the indication. If there’s a chance that your drug is [inaudible 00:09:03] not just that small subset of breast cancers, and it’s applicable to all of breast cancers, you can bring that into the equation later on. But you need to be specific and focused on this or you’ll lose people, they will not believe you. So just things to keep in mind as you go through that.

The next few slides, usually two to five slides of data supporting your drug and the particular indication. This is one of your big time so wow the investors. Some brief mechanisms you can go through, if you have a gene knockdown, maybe a gene knockdown but don’t go through an entire signaling pathway of every single little detail in the signaling pathway. You will lose them. So important things like that protein that you’re going after, or that biomarker, show those data.

If you are showing decreases in tumor growth, show that tumor has regressed in an animal model or if you’re into the clinic at some point, show that as well. You can keep those complex mechanistic slides at the end for backup slides. I always keep… I’ll go through some examples of backup slides that I’ve experienced for questions that will come up that you don’t want during your main deck presentation. So it helps go through the data, and then you get to those questions as they come.

So this is an example of a survival curve that I would say is compelling. I think this is a esophageal Kaplan-Meier survival curve, one was treated with one treatment, one was not treated. As you can see, there’s about a 20% difference in survival on these patients. So that’s the kind of thing you really want to show, rather than nitty gritty complex mechanistic slides. Sorry. Okay.

And then once you get through all of your data slides, you should then get into your market size. You’re briefly going over it in slides earlier. And now that we see that you have X amount of deaths per year, what is the market for that overall indication? You want the market for breast cancer, but you also want the market of that triple negative breast cancer you have on there. And it’s another good thing to do, is that they’re in there, what are the competitors drugs? Much did they make?

So a leading drug for triple negative breast cancer last year sold eight billion, the revenues were $8 billion, and it only works in, we’ll say 5% of patients. If you believe you can work in 10% or 20% of patients, this is where you can really show the value from that particular indication. And I threw in just an example, Non-Hodgkin’s lymphoma, this is an indication I’ve gone after in the past. And this just goes to show on your left how the market for this is increasing. We also have the potential 72,000 diagnosed every year, 22,000 deaths, the overall market’s about $10 billion. I go into the… Chemotherapy’s a biggie for treating lymphomas, Rituximab is standard of care treatment. It was developed by Roche last year, I think it had revenues of about eight billion dollars.

And you want to show that that indication is your best, your quickest way to market. If there’s a bunch of competitors in that space, that might not be your quickest way to market. But when you do this analysis and you choose what your market is, it’s good to show that to your investors as you move forward. And then there’s also other mechanisms that you can use to get faster actualization with the FDA. There’s often drugs that as you can get if there’s a certain amount of patients there every year, it’s good to throw that in there because that can also help you determine how fast you can actually move this through a clinical trial rather than a clinical trial… There are clinical trials that last up to 10 years, or you can do that in the same in two to three years with different types of designations.

Next slide. And these orders can be changed depending on your current deck, but this is a general order that I usually go through. The next is your clinical pathway. You need to show your investors, how are you going to get to those data that show your drug works? Usually in small biotech, you could say commercialization, but it’s really your value inflection point of what’s going to say your drug works and some big company is going to come and buy you out? Or license the asset for you? How will you get there, what are your phase one, two, three clinical trials going to look like? This is just an example over here on the right of a very common phase one clinical trial. It’s a three by three dosing where there’s different toxicity, I mean, different dose response toxicity. So you have a low dose, a medium dose and a high dose. And do those, will that trial get you some data? It will definitely get you safety. But is there a marker in there that can show you how you could move forward with your next set of clinical trials?

Just to for statistics out there, I believe I could be wrong, I’m probably pretty close to right, in the past 10 years, I think there’s only one company with a market cap of less than $300 million that’s had a successful phase three clinical trial. So really getting through that phase two, and getting to that point where you can show a big pharma company that it works is the point where they would then come in. So it’s very important to design these and show to your investors, how you’re going to show them that your drug works. So to convince them that they’re going to be stuck in your company through a phase three clinical trial, they’re going to be acquired, we’ll say in the end of phase one or phase two. Depending on how well things go.

The next part is your funding ask. This is usually about one to two slides. You should really show them what their money is going to be used for. Remember, it’s their money, they’re taking all the risk. They want to know that you’re not going to go blow it all in your giant salary now that you have your $25 million of, let’s say series A financing. So is this going to fund clinical trials? Is there more basic clinical research to go through? Is there some IND enabling studies, toxicity studies? Where exactly will that go? How long is it going to take? And well, what that money provides, will that get you through the support additional fundraising rounds? Maybe not from one or two investors, but when you go to your series B and you have a large syndicate with multiple people. They really want to know how that goes.

It’s oftentimes good to put a graph up, this is just a graph I threw in there. So this shows, I think, this is about $15 million total. You have your total operating expenses, you need to make your drug for your IND studies, it’s going to cost 500 grand. You’re 1.5 million, we’ll say for IND enabling studies. CRS such as Charles River or Covance, just to name a couple. And then you need to make your clinical grade drug, you need time to ramp up that and your VCs do this every day. They know what they’re looking for, and they will know if you don’t know what you’re doing. So it’s always good to keep that in mind.

Next slide I’m going to go to is probably, as I say, one of the most important slides that they will get into. It’s your intellectual property. What is your patent? What is the scope of it? Is it compositions of matter of a molecule that you’ve developed? Does it include methods? Hopefully it includes both. They tend to frown upon if you only have mechanisms of use or methods of use patents. So this is very big information that they’re definitely going to be asking. Another thing is, where did your intellectual property come from? Did you license it? Different academic institutes aren’t as good as others in terms of licensing and they’re a pain. The same goes with the government, different entities within the government have different reputations within the VC world. And that also goes back to, is the IP yours? Or did you develop it at a small lab and it’s owned by you and three of your friends? Or your three partners and how exactly is that… That’s the transaction itself. How is that going to come out of all of this?

And if you look up at a lot of oncology companies, I’m not going to name any but you can see when they get through their phase one and phase two, and big companies come into these and they’re excited about the drug, they find out another company owns part of the drug, and then they have to buy them out for a billion dollars just to get that part of the drug. So this is very important and… Smart VCs will ask those questions and do significant due diligence into your intellectual property.

The next part’s your team. I think some of what I’m saying in here also goes back to how you structure your company and who you put into your company. Because that will also reflect on your presentation. Only include key people who are accessible to the company. People like big names, or people think people like big names. But if you have the, for example, if you have the Nobel Prize winner for physics, and you’re running an oncology company for a small molecule, and you put him on your board, yeah, he’s the Nobel Prize winner for physics, but he basically contributes nothing to the company.

So you really need to put the people who are key to success in these programs. People who have had previous R&D experience. Well, say if you think of me and oncology and breast cancer, it needs a breast cancer expert. If your drug is an antibody, you want an antibody expert. If your drug has an… If it’s a very novel type of chemical, it’s a new technology, you need to have the people that can push that through the IND and the early phase clinical trials for formulation. And any potential talks or even scale at manufacturing down the lines. If you just have any random person who has had experience in drug development, they’re not going to have that particular expertise. You don’t want to reinvent the wheel. Your VCs don’t want to spend their money to reinvent the wheel. So it’s best to have all those people in there.

So just an example, me. Think as the CEO of your company. I’m a former scientist at a big drug company. I’m a professor at big name schools. I’ve been CEO of other different companies and I’m a key opinion leader in the immunotherapy space. That’s a good person to have if you have an immune therapy going after a breast cancer. Bring on a Chief Scientific Officer, someone who has previously had experience at another oncology company. And if they bring on people that have science and business backgrounds, it’s also very good for showing the VCs that you know what you’re doing.

And finally, there’s your thank you slide. This might seem obvious, but it’s not in many cases. Company logo, your information. And that’s question time. And people will ask questions, they’ll probably ask questions to the whole thing. But this is when you can come to your backup slides. If they haven’t asked anything beforehand, you may go back to slides. And excuse me, yeah, this is your time to get all these questions answered and hopefully, they will ask for an NDA and move forward. So that comes to our next poll.

Just wondered if anyone has any idea what a typical phase one clinical trial in oncology goes for these days. Great. The answer, at least to the data that are out there, it’s actually around $4 million for a typical phase one clinical trial. And the reason I put this in there is it’s often difficult for your budgeting, for these VCs. But these are average clinical trial costs for a bunch of different indications, cardiovascular diseases, oncology, ophthalmology, respiratory diseases. You can see what they have… Obviously, the costs go up as you go through phases, different phases of clinical trials.

But in a typical oncology for a single indication, you have an average of $78 million. I’m not sure what the standard error is on that. So when you’re working on your budget, you need to do research on that indication to really figure out what that trial will actually cost. Lots of academic institutes will give you deals on that. You can also acquire patients for a fee from different institutes. So it’s something to look at when you’re looking at recruiting patients for that phase one clinical trial and your VCs will definitely be asking about those different things.

A lot of people recently have asked, has COVID affected VC funding? It’s been interesting watching the VC deals. In February they were down about 50% in value and 90% by volume. That actually happened in China about a month before it happened. It was really interesting though, there were so many deals that went by in late February and March. So there’s a huge surge in VC deals, more than we’re focused on secondary financing such a series Bs. And as one may expect, there is a much higher launch of infectious diseases than in other types of areas such as cancer, diabetes and liver diseases.

I thought this would be useful to some of you if you’re out looking for different VCs, but these are some of the major venture capitalists and their deal volume this year. I think up to the 8th of April. Yeah. And RA Capital is a big one. Their total deal value is about $478 million, yeah. With seven different deals. Alexandria, OrbiMed, these are all your top tier venture capitalists in the biotech space. And these are groups you would want to go after if you’re trying to get in touch with different venture capitalists. There’s a website called pitchdeck.com that you can go to and you can find pretty much every biotech VC that’s out there. So expect to pitch 50 to 80 times before you get enough people interested to pull a deal together. It’s a rough world out there to be pitching to VCs, but that’s how it is and that’s what you’re in for if you haven’t done it before.

So now I’ll go into some backup slides. These are things that I like to put in the back. These are things I’ve gotten just from experience, from what VCs ask me. Some VCs ask super complex questions. So I’ve gotten to the point where I put the super complex slides in the back just in case. Sometimes they ask off the wall questions, and I still keep those in the back of my deck. So I usually have an unlimited… I probably have 30 slides in addition to the 20 I usually keep for a deck. I usually don’t go through any of them unless someone asks a question for them.

When you’re sending your deck to VCs make sure you don’t include those slides. Common mistake from lots of people. And think of what investors are going to ask if you go to one VC, to keep notes in your head or have someone else’s with you keep notes of what they ask. So you can learn for the next time and you can get better and better. Other things that are important, detailed information competition is something they often like to see. Mechanism of action, those complex mechanism slides I mentioned before that I said don’t put it in the beginning of your slide deck, because you will confuse people. This is where you can put those. If there’s any important publications, obviously you can list them if you show data. Sometimes it’s good throw screenshots in there. Manufacturing information. If your drugs are not of typical manufacturing people, most VCs will know that and they’ll ask those questions. And I’ll show you comparable exits because in my space, it’s a very hot space right now. And people like seeing all these immunotherapies are getting acquired for billions of dollars.

So I’ll just go through a few of these and my rationale behind doing them. This is a publication. An investor once asked me, “Can your drug get into solid tumors in humans?” And the backbone of my drug has actually been shown to do that, even though at the time the drug was entering clinical trials. So this is the backbone of the drug and it showed, obviously, you don’t have to read all of this. But this is something to prove to the investor that that type of drug can get into tumors. And that answered this question and they’re very impressed when you can answer those types of questions.

This is a complex mechanism slide. I work a lot with the CD47 Immune Checkpoint. And as I tried to explain this to you right now, I probably confused everyone. And if you can explain this to VCs who weren’t familiar with this space, you confuse them. But if there’s an expert in the room, and they say, “Hey, what does CD47 interact with on a solid surface?” And you can say, “What’s some downstream signaling below hydrogen sulfide?” And you can say, “[inaudible 00:27:44].” So yeah, that’s a great slide to keep in the back just in case anyone asks those types of questions.

Within, well, say my drug space for triple negative breast cancer, it’s good to throw this in the back, where is your competition. This is just showing where the competition is in the preclinical phase where you’ve got a couple of these that are later stage clinical trials. You’re trying to give them a market landscape of what’s out there, what are those other companies. Few are better than those companies, they’ll probably go and look at those companies’ data and say, “Hey, how’s this differentiated from this entrepreneur who just pitched to me?”

In depth timelines are good as well. We’ll just say, this is an example of, we’ll receive funding in April of 2018. What is exactly your progress, and how are you going to move this to the clinic? This is a little more in depth from the timeline I showed you previously. It says, when is your IRB is going to be submitted, when are your licenses going to be done, when your study is going to be done, when are you going to submit to the FDA? These are all things that they could ask you at any point in time and it’s good to show that you’re thinking of these and what the current timeframe would be.

This is comparable exits, I mentioned that are earlier. These are just companies that… Jounce IPOed for a million, Argenx went for 1.5 million, Inhibrx was acquired by a very big pharma company by 500 million. These are immunotherapy companies. So it’s good to show them that if they’re not… There are biotech VCs that are very focused on oncology. There’s some that are not focused on oncology, and they would be willing to get into oncology. So they wouldn’t be as familiar with this space. But that’s a slide to back them up if they ask, “How big is immunotherapy at this point in time?”

And other notes that I’ll provide you from experience, confidential versus non-confidential. Most venture capitalists won’t sign an NDA, unless they’re actually interested even if they are interested, they might not sign an NDA. So be careful. If you get an NDA request, this happened to me before during the deck presentation and I love it, you should be proud of yourself because I believe you probably impressed them. And be careful when you send your deck to VCs, even if it is non-confidential, because they will send it out to all their friend VCs. And there will be a backdoor communication with them and they will gang up on you to try to get more out of you. So be careful with that as well.

Another thing I would say be willing to give up control in some degree. If you’re a CEO now, if someone’s going to give you a $30 million, they might have an expert that you would be great for a VP of R&D or a great board seat, but they will likely, if they’re giving you 10s of billions of dollars, they’ll want a board position. And so yeah, be willing to give up some control, not everything, but it’ll happen at some point in time. And it’s good to overall keep your slides to about 20 more or less, 20 minutes so you don’t bore them. Even if you have the coolest tech in the world, if you keep going on and on, you will bore them. And you don’t want to lose their attention. And I am ready for questions if anyone has any questions.

Thank you, Dr. Schwartz. Yes, we actually do have a few questions coming through the Q&A box. And we’re still accepting questions, everyone. So please plug your questions in. We have about 20 plus minutes remaining for a Q&A. So the first one we’re getting is, how valuable is it to use a professional graphic artist to make graphics? And then if so, if there’s value to that, how do you find a biology friendly artist?

Yes, I think there is value to that. Looking legit is very important. So I’ve known a lot of people that have been using, it’s like crowdsourcing your logo. Where you can, for a couple of hundred bucks, send out your ideas for your logo to all these different graphic designers. I forget the name that I typically use or that I’ve known a lot, but you can google it. Yeah. And they usually send back different logos then if you like, their particular logo, you end up paying them and they tend to do very well with science. So I think it’s a less expensive way but you can really get your idea out to 1000 different graphic designers that will do it in a way that’s budget friendly for an emerging biotech.

Yeah, talk about just a graphic design. What about video? Is that valuable because I see nowadays there’s a lot of… They do a video recreation. What are your thoughts about that?

If you can afford it, if you show your immune cell killing a tumor cell, I think it’s cool. I don’t know how much value it would have, because I assume that’s probably expensive. I know it’s generally expensive. If you’re too flashy, they’ll think you have money already. Or they may think you’re more focused on making your science look pretty. Getting into that data where you’re showing tumors progressing by 40% is a lot more compelling than a video. But I don’t think it can really hurt unless you focus too much of your time on that.

Great. Another question, people really appreciate the information you provided in regards to the cost of clinical trials. Could you share what that would be for med device in addition to drugs?

That’s dependent on what the type of device is. If you have… Again, it’s somewhat similar to an oncology, or I mean a rare disease. If there’s not a lot of patients out there, it’s going to be cheaper. Probably I can’t give you specific numbers at this point. I think our medical dev… When we ran our clinical trial, most of the patient samples we actually got for free through IRBs. So most of the cost in that we were actually having a CRO analyze the sample with our asset. So in terms of patient recruitment, it wasn’t as bad. And also, it’s definitely cheaper. You’re not treating patients, you’re not caring for the patient after they’re getting their new oncology drug. So it’s definitely a lot cheaper. And I always say the fun thing about my diagnostics experience is I’ll get to see the fruits of my labor if it works within a few years versus in oncology it could be 10 years, it could be never. So it’s definitely less expensive than your typical drug development pathway.

Great. So just to recap, everybody’s putting some feedback in regards to that company you mentioned. They said the logo crowd sourcing is called 99designs.com.

Yeah, that sounds right.

Okay, perfect. Just so we can throw it out there. Now a question from Jay, what is the purpose of a pitch deck? Most people think it’s to get investors. But is it really to grab their interest and get a second meeting? What-

Yeah, definitely.

… are your insights about that?

Yeah, it’s definitely to obtain investor interest, get an investor meeting. It’s to raise money is the end goal. We need 10s of millions of dollars to move, at least in the drug world, to move our drugs forward. Without you can always go the grant route. At some point, your grant route’s going to be maxed out by a few million dollars unless you’re extra, extra lucky. And you really need 10 to $20 million to move it through the early stages clinical trial. You can also get partnerships with large pharma, that will also require a pitch deck. So, yeah, the purpose of the pitch deck is to get money. You want to get interest in investors, you want that second meeting with them, you want the NDA and you ultimately want them to give you the money.

Great. Now what about mentioning risks and challenges in your deck?

I guess mainly because I’m in the oncology realm and most things fail, most of the VCs know there’s a high degree of risk. I think it’s like 90% of drugs fail. So that’s why they’re there and oncology is particularly risky, because… I guess my response to that, at least in the oncology world is show your benefits and show legitimate data that’s better than everything out there. I don’t know if I would go in and say, “Here’s the risk of my technology.” I think one, they should figure that out themselves or they probably wouldn’t be there. And two, that might be downplaying how, as I say how awesome you’re supposed to make yourself look. Hope that helps.

Now you talked about what people should do and not do. Now if you can give a startup five things you should not do when you’re pitching, what would that be?

Oh, five. I can give you one right now. In your intro, as I said, 20 minutes. In your intro you’re obviously all passionate here. Don’t go off in a rant about how passionate you are and how this is why you’re all there. I recently witnessed this a few months ago where someone spent 40 minutes talking about where they came from. It was literally 40 minutes. So get to the point, give the intro, get to the point. They don’t want to be there forever. [inaudible 00:38:03] think. Don’t talk about yourself too much.

I just had one at the top of my head and I totally forgot what it was. As I said earlier, be willing to give up some control. That is a biggie too. It’s a very biggie. Because they don’t want to come in and have someone that they can’t work with. And they’ll probably get that off the bat. They’ll figure that out. But if you go in there saying, “I’m CEO, I invented this. I’m the only one who can be CEO.” That’s not going to work out well. Because I can promise you if you’re a scientist and you invented this drug, that’s great. You’re smart, but you don’t know the business world. You don’t know the regulatory world. You don’t know the preclinical world that you need to get to the clinic. You’re not a physician. If you are a physician, I’ve seen this before, where the physician thinks they know everything, obviously, the PhD thinks they know everything, it just doesn’t work out well.

And another thing I would say to do is don’t get too emotionally involved in your technology. The failure rate is 90 plus percent. So at some point, if it’s not working, you’re going to have to let go. And that’s often a drain of money for a company. That’s happened countless times just publicly traded companies, you can see this happen over and over again, of when you need to give up. Another don’t, I would say is don’t, if you’re an early stage company, don’t go to a VC and say you have five drugs you want to move to a clinical trial. Even if you do have five different drugs for five different indications, focus on one and use those as, “We’ve got development pathway down the road if there is a failure.” Or, “Once we move this forward, we’re going to have these other assets to move forward as well.” So you’re not necessarily a one trick pony. So I don’t know if that was five, but it seems like five.

Great. That’s really good advice, thank you. Now in the last slide, you said don’t send a deck to VCs because they’re going to share it and gang up on you for more information.

Yeah.

If you’re not supposed to do this, what is the optimal engagement process to get a yes on funding?

I don’t believe I meant don’t send it. Did I say don’t send it? I apologize if I said, don’t send it. I meant be careful. So if there’s a company that has already invested in your target, they can use that to give to their current company that they’re funding to give them an advantage. You want to be careful about not giving up too much data, particularly for that, because you don’t want to give your competition a one up and you have some advantage that they could make their drug better. You don’t want them to do that. There’s a happy medium between sending your deck to everyone. You have to send it out. I’ve seen it happen. It’s even happened to me, I guess find some way to find out who talks to who. Or you might ought to know that while you’re giving the deck. But it has been known that they will gang up. Not necessarily in a bad way. Usually if they gang up you’ll get funded, just won’t be as great of a value in the end for you. I hope that helps.

Yeah. So now most folks are also applying for grant funding at the same time. Do you think a pitch deck is something that you should send to a program officer at the NIH, if you’re going after an SBIR? Does it help with the possibility of securing these grants?

I don’t know about sending one to the program officer. I mean, I don’t think it can hurt but I will say I’ve written lots of SBIRs and the commercialization plan within those, are very oftentimes mimics of commercialization plan in your pitch deck. I would say that the commercialization plan in your pitch deck should be a little more expensive for the SBIRs. But I think a pitch deck is a very good guide for those grants because, especially the SBIRs, they’re basically like a 10,000 pitch deck where you get three, the indication, the target, the drug. But you have to have your commercialization plan. So I think it’s a definitely a very good guide.

Great. Now how do you recommend timing your funding rounds for the clinical translation pipeline?

That probably won’t be up to you. That’ll be up to the people who gave you your first round of funding. VCs at this point, there are some that will do preclinical research. A lot of the ones… Especially the ones that everyone on that deck, that slide I sent you, usually likes things that are ready to go in the clinic. So maybe there’s some IND studies ready to do. But they don’t want to wait around for you to do drug discovery. Grants tend to be better for drug discovery. There are some VCs that will do drug discovery, you just have to find the right one.

That being said, there’s different VCs that are going to be good for you and different VCs that are not going to be good for you. Some VCs will want to give you 100 million dollars, take over the whole company, you get 1% and you have no involvement. That might be fine for you. There’s others that will give you a lower amount of money at a higher valuation and keep you involved. So you can usually look up online enough to figure out what type of VC is meant for you. There’s also some other VCs, I’m not sure if Third Rock is in that deck. But Third Rock, they don’t typically fund companies. They fund a patent at an academic institute or a government institute. So they will actually form the company themselves. So there’s also that route and there’s those types of VCs. So you got to find the one that’s good for you and fits the needs for your company as well as yourself since it’s you and the people giving you money.

Perfect. Now we have a ULP Resident joining us and they’re Damian Wheeler, shout out to Translucence Biosystems. His question today is, do smaller scale investors, angel pharma care about the same things? Will they just get bored or maybe have a greater attention level? What are your thoughts about that?

I feel like the smaller ones are more invested than the bigger ones. They tend to have smaller portfolios and they tend to throw one of their experts on the board to make sure things move along smoothly. Though it’s hit or miss, that’s my opinion. The bigger ones are the opposite. They’ll throw money at it, build, put the right people on it and hope it gets bought out. But there are big ones that care, there are small ones that care. And it goes both ways. But at least my experience the small ones seem to be, it’s more of an intimate approach and for them helping to move the company forward.

Great. Now there’s a question that wants you to elaborate a bit more on proposed pathway to commercialization or value inflection point with respect to value.

Yeah. So I’ll just use oncology because that’s what I’m in and it’s a good example. So in oncology, there are usually smaller clinical trials, there’s a death rate. It’s not like you’re treating pimples or acne. So you have to keep that in your mind. So you can usually get through your initial safety studies pretty easily. But a lot of times in oncology you can sometimes get a signal on a phase one. So out of 20 patients if you have 10 to 20% responders in the historical, data say there’s like 1%. That can sometimes be an indicator, you can also look at different biomarkers if your drug goes after a particular biomarker, and you see that biomarker has significantly reduced in those patient populations. That’s an extra added potential value inflection point.

Another thing, when I say historical, almost never do historical clinical trials of small clinical trials ever pan out in later clinical trials. So if what I just said, historic is two, you’ve got 20 patients and you have a 10%, I’d say 99% of the time that won’t show up in a phase two clinical trial. It’s possible and if you watch a lot of publicly traded small biotech companies, you’ll see stocks go up 200% because of that, even though it doesn’t really mean too much later on and are powered but if you can get a biomarker in there, in that phase one, then that helps prove that you’re at a value inflection point.

Another thing in terms of the phase one, if it’s a really hot immunotherapy target, and it’s highly differentiated than others, and your clinical data is awesome, a big pharma company could come around and acquire you. There’s plenty of examples of them even acquiring companies in preclinical stage. In a more controlled phase two study then you’ll have things like overall progression for survival, and at the end of those trials, those things are biggies, that’s when a big pharma company would probably come in. Most likely come in and take you out or support a massive series B or series C financing.

And now it’s relevant per COVID-19 environment, any thoughts about why respiratory system clinical trials are among the most expensive?

I would assume that’s… I’m not an expert in that, but I would just assume it’s because they’re all in the ICU and the ICU is probably the most expensive place to be in the hospital. That’s just my very uneducated, quickest thing to pop in my head.

Great. Now this is a question that we always get at ULP is, how do I actually get in touch with these venture capital groups? What’s the best way to engage and get in touch with them?

One is to have a network. I know that’s hard if you’re a scientific founder. You can go to their websites, and you can use our contact form, but what I’ve, at least I found best is going to the websites and finding the partner at the company who is in, let’s say oncology and breast cancer, or just the oncology guy, and try to find his email address and email him directly. LinkedIn is good too. You can try the email, you can go to LinkedIn and type in and you can connect and say, “Hey, I have an opportunity in oncology, are you interested?” You’re probably going to get out of 100, maybe 10 people respond. So don’t be discouraged if that happens, because I can promise you, that’s probably what will happen.

And another thing I do is I often present or I go to the big oncology conferences like ASCO, or ACR and the VCs are all over the place there. When I’ve presented is probably the biggest time I’ve seen people come up to me, but a lot of the networking events they have some happy hours put on by big funders and big pharma companies. And there’s people there that are, that’s what they do, they’re scouting for next tech. So build your network, go to the conferences, and as I always say, annoy people through email, on their websites, and you’ll get some and if you get one, and they want to build a syndicate, they want more than one funder in it, they will call their friends and bring them in. So it’s not just I got five out of 100 it can spiral out and you could get more.

Great. Now so the question is, will VCs take control of my company after I get the funding?

So before you get the funding, you will negotiate your term sheet. And they obviously don’t get their asset if you don’t agree to their term sheet. But obviously, you don’t get your money if you don’t agree to the term sheet. So different VCs are different, you have to be reasonable, they’re going to take a big chunk of the company, which they’re the one giving you $25 million. So you have to give that up because you’re not giving $25 million and you want this to move forward. It’s going to cost way more than $25 million. So you just have to be reasonable. You can’t think you’re going to have 50% of the company in five years after you’ve gone through 100 million dollars in funding, you’ll probably have five or 6%. But if that gets bought out for $5 billion, you’re still going to have hundreds of millions of dollars to spend. So be reasonable. Don’t think you’re going to control the whole thing forever.

Now how do you determine-

That is if you want it to move forward.

How do you determine a good VC versus the so called vultures and evil ones out there?

They have reputations that you can find online, just google it. I think another thing to do is when you get that term sheet, you’ll know. Because there’ll be some negotiations beforehand, some VCs have reputations. Just do your due diligence, look it up online, you just have to spend some time doing it. You can look at deals that have been done, and how those worked out for those investors. So it all depends on what your priorities are, and how good or how bad your tech is. If your tech is awesome, versus mediocre, you’ll get a much better deal if it’s awesome versus mediocre.

Yeah. Now what’s the number one indicator that my company’s ready to go for VCs for capital? I mean, I’m sure there’s a ton, lots of indicators. I mean, can you give us some?

I would say whatever indication you’re in, whether it be cancer or acne make sure there’s data that you have, that preclinical data set are awesome. And you need to be able to show that in comparison to what’s out there is better. In terms of an efficacy and safety advantage, both of those are very important. You have to show that there’s a market for it. It’s a pretty much basic business 101, have the best product out there. What’s the competitive advantages of my product versus the other products with the market? If there’s no other drug out there, then maybe way more ready to go to the market.

Think of it as a VC, what’s the VC looking for to move this to the market. They want something that is one, going to make them a bunch of money, but they want the shortest pathways to making that bunch of money. So is that value inflection point, and in an, we’ll just say oncology and a phase one. You’re not going to get a value inflection point in acne in a phase one. It’s not a deadly disease. There’s a very long clinical pathway to that. Just if you look up the obesity drugs that are out there, their clinical pathways are so long, they’re so expensive. None of those drugs really work anyways. So they’re frowned upon by a lot of VCs. So you need something that’s exciting. Something that your data support, moving forward, and something that VCs really want.

Great. Now is the first draft of the term sheet drafted by the VC on their end, we’re assuming?

Yeah.

Okay.

Usually. I mean, if you get to that point, I hope you already have an attorney, but you need to have a good attorney, it’ll be worth it. But yeah, it’ll usually come from them.

Perfect. So it looks like we were able to get through all the questions and we are on time it’s 1:57. So I wanted to thank you for joining us, Dr. Schwartz and sharing your insight with us. Everybody wants you to have another one. Talking about negotiating with VCs. So we need to maybe schedule, put that in the books.