Speaker 1  0:00  
Good afternoon. Welcome to Not Your Mother's biotech startup presented by Autumn. My name is Holly Lundgren autumns online professional development manager, and I'll be your staff host for today. All lines have been muted to ensure high quality audio and this webinar is being recorded. If you have any questions, you can enter them in the question and answer box at any time throughout the presentation. I want to take just a brief moment to thank our annual webinars sponsor Marshall, Gerstein, and Borun. We appreciate their ongoing support for the webinar program. I also want to welcome all of our speakers Kathy Kuh, Amir Nyberg, Kyrsten lute and Farah Gurdas. I will go ahead and turn it over to our distinguished panel at this time. Welcome, everyone.

Speaker 2  0:52  
This is Gavin. Thank you all for participating this webinar. This workshop entitled Not Your Mother's biotech was originally slated to be at the Auburn meeting, of course, and our discussion of the topic would have focused on some of the deals that are happening these days. The interesting thing is in these days of COVID-19 these days is mean something different. But we will still include some of the material that we were originally slated to include. As you all know, biotech licensing is a cornerstone of university technology licensing. It started early in 1990s, and has been pretty much the most important tech transfer effort, as the years have gone by. We have a great panel for you today, with people with three different perspectives. And I will ask each of them to introduce themselves first, and then we'll move on to discussion about what's happening today. And we'll keep going as long as you're interested in the topic. So, Amir, let's start with you. Hi,

Unknown Speaker  1:58  
I'm Jana Nyberg. I serve as the Associate Vice Chancellor for TDG technology development group at UCLA. We have a unique structure in UCLA where I'm part of the vasculature of research organization as well as a reporting line to a separate 501 C three board of directors that is comprised from distinguished business people and investors. Before that, I used to be the CEO of Jada tech transfer company of the Weitzman ECF sites in Israel.

Speaker 2  2:29  
Thank you, Amir gives us the university perspective in this discussion. Kyrsten Can you introduce yourself? Yeah,

Unknown Speaker  2:37  
sure. Um, so I'm Kyrsten Lyta. I'm partner of University Relations at Osage university partners. We're a venture capital firm that invests in startups out of academic institutions. I joined there four and a half years ago. And prior to that, I worked at Stanford University with Kathy and their office of technology licensing, and I worked there for almost 20 years.

Speaker 2  2:59  
And we have Farah girlies, one of my special colleagues.

Unknown Speaker  3:03  
Hi, my name is Cara Curtis. I am a partner in the technology transactions group at Wilson Sonsini Goodrich and Rosati. I lead that group out of our Boston office and prior to moving to Boston a few years ago, was a member in the Palo Alto headquarters of Wilson Sonsini for about 12 years. And our side of the practice focuses exclusively on life sciences companies, and a lot of those companies come to us as their licensing technologies out of universities and other research institutes.

Speaker 2  3:33  
So we have the university perspective, the investment perspective and the startup perspective here. So Amir, I know you've been extremely busy with the COVID-19 efforts, especially at UCLA, tell us what's been happening in your world.

Unknown Speaker  3:49  
So it's been almost a perfect storm. I mean, people have to continue their with their daily routine, the daily workload load while having kids and your pets in the background. We were a lot of what we do is based on working with startup companies, so we spin out around 25 companies a year on average, and all the deals that have started a few months ago are just going through so we have not seen any any any deals being lost due to the COVID 19. But we did add to that a whole new line of work related to COVID-19 either through a novel designs for PPE or ventilators, or just curation of opportunity of research that is aimed to develop new vaccines, diagnostic of therapies to COVID-19 and that obviously has to work at a very fast pace, you know, to bring it to the market and enjoy some of the funding opportunities out there. So team has been extremely busy and we're happy for it. I mean, they're generative of being stuck at home with nothing to do is much worse.

Speaker 2  5:01  
Yes, indeed KEARSON you have a broader view right now of the university startups. You're seeing what deals are being done and what financings are happening. What are you seeing?

Unknown Speaker  5:14  
Well, it's interesting. So definitely I have to say that the outreach in the last few weeks, just a potential solutions and getting those solutions funded has been really interesting from all the academic institutions. You know, deals that were kind of underway before are still getting done. So startups that were already looking at their financings perhaps were farther along and those those seem to be going forward for the most part and wrapping up. I would say that the I guess the more of the concern, perhaps is with those startups that weren't there yet, or that we're looking at their their future financings as well, when will those happen? And so people are thinking about what is really the next time that they can go out and do fundraising and and then in the meantime, how can they stretch the money that they currently have to kind of get themselves to the points that they need to get to in the current timeline, and also considering how much their employees are actually able to do the work that they're regularly doing at the startup companies?

Speaker 2  6:15  
So do you feel like it's very busy right now? Or is it slowing down?

Unknown Speaker  6:21  
Well, it's it's busy, but perhaps not in? In partially the traditional ways. There's still a lot of opportunities potentially out there, but also in the kind of rethinking, okay, what are the company's actionable items right now. So it's, it's, it's, it's some of the same busyness. But there's also some new factors coming into play about managing the portfolio companies perhaps that a fund already has, for kind of this period, that we is an unknown right now. Exactly how long that will last.

Speaker 2  6:57  
Faro. What are you hearing from our clients? Companies?

Unknown Speaker  7:01  
I think similar to what Kiersten is saying is that the deals that we had in the pipeline, and in the works, where there were already discussions or term sheets, or even agreements underway, those are all continuing. Some of them have slowed their pace a little bit, but not all of them. I think the rate at which we're seeing new financings, where there wasn't always already our relationship with the company or with the founders, through previous companies, those are slowed, but where those relationships exist, it seems that that funds are continuing to invest. You know, and they have raised their funds prior to this all happening so that the money is there. I think there's just a little more thought around what are the factors that cause the investors to be comfortable, and those are not surprising factors, you know, their people and their technologies and their relationships. But if any of those factors is missing, then things are tending to slow down a little bit, you know, on the partnering, where I do the majority of my work, it's similar, you know, all of the deals that that were underway are continuing, I do have clients that are getting new term sheets or starting those discussions. Because our clients tend to be the startup side, they are they're having those same sort of runway concerns that KEARSON mentioned, you know, how do we stretch our dollars because we know this pathway may be a little bit longer than it otherwise would have been? As, you know, partners, bigger pharma companies are becoming more cautious. And then the other thing that we're seeing, which is really actually very heartening to watch is people repurposing their skills and their technologies so that they can address COVID-19 specifically. And, you know, we're seeing new sorts of collaborations across universities, research institutions, small companies, big companies trying to move things forward quickly. And having the financial pieces that are often front and center kind of be a secondary consideration, and sometimes even absent from the arrangements.

Speaker 2  9:10  
So do we do we think that there's going to be a slowdown, though, in the future when these current deals are done? Well, why don't we think? I

Unknown Speaker  9:23  
mean, it's interesting for our practice, which tends to be sometimes counter cyclical, you know, where there are factors that influence institutional markets, capital markets, those sorts of things where you don't see as many IPOs or that sort of transaction, often those get those gaps filled by intercompany agreements, which is what we see. And so I would imagine, you know, because there is a general economic slowdown that we may see some slowing of that but I think those partnering arrangements are going to continue because there's still our pipeline needs And fund's business development funds to be spent within the companies. You know, we were sort of at a very high time in terms of the valuations of those deals, including for early technologies over the last few years. Who knows? We haven't seen this happen yet. But you could see some correction of that. Where are those prices aren't quite so high. I don't I don't know. I the deals that I'm working on, don't reflect that yet. But we're still sort of early and waiting to see, there definitely still is interest in new deals, you know, we've got new technologies, where they have multiple partners who are still continuing discussions to try to figure out what that deal is. And so I expect that there will still continue, I think the places where we've seen more slowdown are in the areas of m&a acquisitions and the like, and then the capital markets sorts of deals.

Unknown Speaker  10:54  
I think that just to comment on on what I was saying, the the slowdown is is interesting, you know, definitely, you know, when, when things in the economy slowed down, you know, biotech usually is reflective of that. You know, I think that is certainly a possibility here, however, because what is happening, you know, what is being what are the solutions are scientific solutions. And so it there, obviously, maybe those who, this is not a slowdown for within within the biotech community, because of because the solutions will be driven largely by this this sector of

Unknown Speaker  11:37  
science. And I hope is what we see is perhaps a change in investors flavor. I mean, just to tell you a story, I'm just a data point about last year, in our internal innovation fund, we had a project dealing with antivirals, and it was amazing science, but our panel of investors says nobody's investing in IP virus don't don't go down that road. And because it was very exciting, we decided to actually invest in it. Now. It's one of our hottest technologies. So first, what we will see is investors moving a little bit away from the traditional oncology gene therapies like that, and looking into areas that used to be neglected, such as diagnostics and antivirals and moving some some investment dollars into those areas.

Speaker 2  12:25  
I wonder, I wonder if this is temporary, this whole interest in in virals antivirals. And, or, you know, it might be temporary for a period of years. But I think as as one doctor told me, cancer still happens. And you know, it doesn't stop because of a virus. So I'm wondering, Amir, are you seeing companies who are coming forward or are entities that are coming forward wanting to license new technologies, not in the viral area?

Unknown Speaker  13:00  
So as as Buffon, Chris has said, we're seeing licensing agreements that were in the doing in the planning stages going forward? It's still too early to say what will happen to new technologies, especially where, where we traditionally used to hunt for new deals, the big offices, the JP Morgan, the bio, the ATM there, they're all gone. And nobody knows when they'll return. So just trying to think and reimagine how we actually do outreach, how do we build those networks, and understand where opportunities are? Everybody seems to be struggling with that concept. And we will need to see if how to rebuild our deal flow. I think right now, it's really too early to say there is a recent pitch book publication that they said they're already noticing less deals, especially early stage where VCs are now tending to support the existing portfolio companies, and not in making new investments. But you know, it's it's the same question everybody else asked. I mean, when we'll be up and around and outside of state home. It depends how long will it really take before we go back to some normality?

Speaker 2  14:17  
So I'm worried about the new normal, and I'm interested about the deal size and the kind of financials that we might be looking at in the future, even from nonviral technologies, do you think market will come down in pricing or what do you think that was frothy in these past

Unknown Speaker  14:40  
years? It has been rough, frothy. You know I think there there there may end up being some some better deals that come along. Because things were were already so Uh, doing? You know, we're having quite high valuations, et cetera. I think one thing that's good for everyone to note is that, for example, just in the last few weeks, there were things are obviously already in progress that were happening. But you know, several very large new new funds have closed their funds. So there is going to be capital in the in the future, there is there are these large funds out there. You know, and so there will be money, it is the question of where they will be putting those monies on what the valuations will, will be in the future. And I think it is really very early to kind of know exactly what that will be. I mean, we're only a few weeks into, into this.

Unknown Speaker  15:49  
I have a question for you, if I may, during 2008 crisis, I remember VCs telling us that they're afraid to call their limited partners for capital, because they were afraid that they'll tell them no. What do you mean, the industry these days? Is that phenomena happening again?

Unknown Speaker  16:07  
So I haven't seen that. So far. You know, I think people are kind of thinking about when do they want to call capital? Because, you know, is it for those, so for those of you who don't know what a capital call is, so when venture funds raise their funds, they don't get the get the money right away, they call capital as they need it from the people who've committed to, to provide a certain amount of money to the fund. And so they call the capitalist, they say, Okay, it looks like we're going to be needing this much capital for the next quarter or for the next half year or something like that. And so, if you don't have the capital right now, and you see investment opportunities you call capital from unknown. So what a New Year's question is, is, if if we're making those calls to those investors, is there a worry that some of them won't have that capital or will say, you know, not not right now, how venture funds are structured, though, is that if you don't receive the capital at that time, then that potentially can put them in default of the fund, and they potentially lose their that not only the capital you've already invested, but potentially the profits that they would potentially get out of it. So it's something that usually what your investors have already set aside that money, it shouldn't be in a risky manner that they wouldn't be able to actually make, make the capital calls when that when the calls are made. But it is something that, of course, the funds are thinking about is how often they should be calling capital right now considering the investments that they will be making in the next few to several months. And so that is something that investors I'm here to I think this is really the point of your question is, is then thinking about when we should be making those calls and how much we should be making it for considering what it is our current portfolio companies may be needing in the next few months that we had expected or not expected, or new investments that we plan to make in the next few to several months. So I'm not sure if I answered exactly your question, Amir. But that's, I think it's very early for people to know exactly how that'll happen between the LPs and the funds. But it is something obviously they're having to think about is with the capital that we currently have on hand, what are we going to need, you know, what investments are we committed to etc. And, you know, I'm curious what otherwise you've heard in your environment, Kathy.

Unknown Speaker  18:42  
So left for me on the capital call side, I mean, I think on the deal size, obviously, maybe not, obviously, the deals, the collaboration deals that biotechs enter into are often as a substitute or a complement to their venture financing rounds, right. And so if the venture financing is limited in availability, because the investors are feeling more cautious about what they might want to invest in, then the companies are going to need to turn to collaborations as an alternative to that. And they may start to think, like all market influences if the other alternative isn't there, then they may be willing to accept less for for a deal, or they may require more. I mean, it's hard to say it's all typical kinds of market influences as to supply and demand, right. But because these deals often are a complementary, or alternative to financing. That's why these deals tend to be sort of counter cyclical, so that when those funds aren't available that these fill in, you know, it'll be interesting to see and we've done a lot of very early stage platform deals in recent years that have had really high numbers attached to them and do those end up being smaller deals. are less value do they ended up being broader deals for more value? You know, I don't anticipate that we're going to see more acquisitions of these smaller companies. But if they get down to a price because they can't find otherwise, where it's attractive, you know, maybe we'll see smaller companies get scooped up at lower prices. I don't, you know, it's hard to say. But it will be interesting to see how these these funds, you know, behave over the next two years. And I think the coming couple of weeks are going to be really telling as to how to play out, you know, if the, the shelter in place, stay home sort of orders continue after the beginning of May, you know, maybe people start to think about things differently, because then the prospects of not being able to interact face to face and have those meetings that are so crucial to getting the deals done, you continue to not be had face to face for a longer period.

Speaker 2  20:52  
I mean, so it is an interesting issue, because if the relationship was started them face to face is slightly less important. And you can do these zoom meetings. But if you're starting from scratch, you know that face to face is so essential. It

Unknown Speaker  21:12  
absolutely is. It's it's I would say that for a lot of investors, us included, it's hard to make an investment when you have not already met those people face to face.

Unknown Speaker  21:24  
Yeah, and with the intercompany relationships, too. I mean, one client said, you know, you have to get them to fall in love with you first, right? Like the science, people have to fall in love a little bit before the deal goes forward. And that is sitting down and having those nitty gritty scientific conversations to see if there's a connection between the company's needs and what's being offered. And it definitely slows things down when you can't do that.

Unknown Speaker  21:52  
And I think the biggest question for us is when will research that is considered to be non essential research will be back online. I mean, right now, we're seeing an influx of new invention disclosures. But this is mostly based on work done to date. And we've researched coming basically to a half hour then some essential research activities. We don't know how, what our new portfolio will look like. And again, it's a it's a question of timing, we can we have enough, or at least the big offices have enough technologies in their pipelines to continue to work for a good number of months. But if they stayed home would continue into the summer, that will affect our future prospects and our ability to offer Buspar pipeline to investors into the future. So it's a big question more.

Unknown Speaker  22:43  
Yeah, and the same for companies to write if they're not able to generate the data that's needed to validate the technologies either for a partner for an investor, it slows all of that down. Now, a number of companies have said well, that the timing was actually not so bad, because we had outsourced a lot of our r&d to China and the the waves of not doing work have sort of not been at the same time. So they've been able to go back to those vendors in China, while they are not able to do work locally. But a lot of companies haven't gotten to that stage. You know, they need that lab time to be able to generate the initial data and the initial interest. And so those sorts of things are being slowed, as well as clinical trials, right. And then at the hospital, they're just not available to take the assets that are further along forward right now in the context of a trial.

Speaker 2  23:36  
So I'm here on the ground, or our company's just asking for renegotiation of milestones, or diligence milestones.

Unknown Speaker  23:43  
So I feel we have so many people for me to learn on the line I everything I said will be used against me.

Unknown Speaker  23:54  
So not yet, but we're actively reaching out to companies and check on their well being will be obviously will show the major flexibility. And as far as moving milestones forward. Again, it's too early. I mean, there's so much flexibility built into milestones anyway, that a couple of months of delay will not make a difference and we're not required any amendments to licenses, obviously, the longer the situation will be prolonged, the more that we will need to, to postpone and move milestones around. The one thing we are actively thinking about is what can we do as far as license fees and things like that? If we can move them, postpone them or even waive them in exchange for something else, but it's still it's still early days, it's hard to know. So the as we're under planning stages, we didn't see the phenomena we're expecting it to happen. And we're building a backlog of opportunities or solutions to these scenarios.

Speaker 2  25:03  
So just to just to be clear, are you still marketing these new technologies that are not COVID related and, you know, is everything going on as normal, basically.

Unknown Speaker  25:13  
So I'm definitely having a significant push or significant effort to COVID related technologies. Just because they, it seems where the federal government is really to make quick bets, the UC system is really willing to make quick investments. So we're definitely pushing hard on those areas. But regardless, we're we're just ramping up our online marketing efforts. We're either for webinars, video series, or just our the old fashioned nonconfidential disclosures on our website. So we're trying to use this time to build our infrastructure. So we can continue with marketing efforts, through our means, basically, through online efforts and social media.

Speaker 2  26:04  
In the broad picture, I feel like this whole pandemic has taught the public more about science and clinical trials and and what it takes to, to move technologies into the marketplace. So if there's a civil silver lining, that might be it. So I thought we would move on to the discussion that we wanted to have, in early March, which was, what are we doing? What was happening in the past years? There are some really interesting arrangements in the life sciences. And Amir, you, you all have some big tech transfer arrangements, such as the Parker Institute for Cancer immunology. We know for instance, that Deerfield has been going around to lots of universities and trying to do these big potential funding deals with a startup with the end goal in mind. So what do you think about these new arrangements and while these continue to happen?

Unknown Speaker  27:10  
So generally speaking, I think a situation where money is waiting for a good technology rather than a good technology, spending a year or two, looking for money is a good arrangement for tech transfer. And in general for the economy. It allows us to streamline and make quick decisions. It's been companies that are fully funded quickly, rather than ask our faculty to hit the road and try to do fundraising. So I like those arrangements. The question we always ask ourselves, I mean, will they stifle our opportunities will they allow opportunities that are not related to those high end relationships to flourish because there's still other things out there, and says all of those relationships are fairly new, the jury's still out there to see if an ecosystem can Can, can thrive and be active, while the tech transfer office is committed to these to these relationships. And now we'll have to see, well, these entities like deferrals and other will continue to deploy funds and actually make good on their commitment to campuses to create smaller companies and deploy funds. Despite this crisis. It's pricey, and Zuckerberg initiatives are slightly different, because there are not for profit initiatives. They also matured over time with a relationship with campuses at the beginning, they despise the of very strict kind of point of view of a closed garden that they will be able to cater to everything or their faculty are doing. I think over time, they realized that in life sciences, particularly in science, in general, collaboration is essence. So we are working with them successfully to build avenues and to allow faculty to enjoy both worlds. And so our faculty now are really happy with the way the relationship is going with piesync Institute. And we were able to get a build good rapport with them that allows us to push forward, really large licensing deals or big dollars of companies that are getting IP for a number of members tutions. What keeps me awake now at night is that many of these not for profit arrangements, actually also looking for both the sharing with future royalties that will otherwise flow back to the institutions. And if you do back on the envelope calculation, if you have two or three of these royalty sharing commitments on a single tech university may be actually losing money on their home runs. And so the economics on how to work with what used to be not for profits, no commitments and not turning into not for profits, but give us some piece of the action is something we all need. to think about and actually do an economic analysis before we do a licensing deal, taking into account all of those ongoing obligation to sponsors of research.

Speaker 2  30:13  
Some of these deals are very complicated. And one of the criticisms I've heard is that it sounds like a good, really good deal. But the fun will only choose, you know, one or two or three projects. And so, it, the impact seems bigger than it actually is. And so is there. Is there any sense of that? Or is it still really too early?

Unknown Speaker  30:39  
I think it's just giving building alternatives, right? So so some faculty would go out there, we raise money very quickly. So they probably don't need the structures, our faculty that would like to keep their job in the lab don't want to go out and spend and spend your time in fundraising, we really benefit and enjoy from these existing structure where money is waiting for for tax? So it's a question for, for us as ICs to diversify our portfolio diversified opportunities we put in front of faculty, and then we can choose from a whole menu of opportunities, rather than then keeping it to one method or another.

Speaker 2  31:23  
All right, have you been involved with some of these? And do you have an opinion.

Unknown Speaker  31:28  
So I've been involved in a couple of them. So the the NoVo ventures Broad Institute deal, it was a similar sort of broad sponsored research agreement, not lots of different sources of funding coming into the same research, but the opportunity to fund technologies that would get spun out into new coasts. And then the other one that I've been involved with was the Calico broad arrangement, which was a similar magnitude of dollars and broad spectrum of research. And, you know, those two, I think, have seen some success. And I don't view them as I mean, I view them as sort of a natural extension of more and more venture groups doing company formation. And this is an extension of how they get the technologies that go into those companies. So to me, it makes a lot of sense. If the relationship is a good one, which has to be one of, of trust in both directions, then then they can be quite productive. You know, I think, as in all biotech research, a lot of money gets spent without anything to show for it. But if you get the the one or two technologies coming out of a initial $50 million commitment that can be worthwhile, just because the failure rate is so high, generally on biotech technologies. And so, you know, just based on the handful that I've been closely more closely involved with, you know, they seem to be relatively happy with the outcome of it. And I would imagine that more of them will happen.

Speaker 2  33:00  
Pearson That I don't know how involved you would be. Oh, up would be?

Unknown Speaker  33:05  
Yeah. So I mean, obviously, we see a lot of these relationships, and new types of formation of agreements happening at universities, because we're looking to invest in in the best deals that are coming out of universities. We like the opposite. The fact that there's potentially more opportunities, there's a lot of great science out there, there's a lot of great science that doesn't get funded, there's a lot of there's a lot more scientists being created out of these universities all the time, they're producing more and more people who potentially could be making terrific things. So So you need funding to be able to, to fund them. And as we all know, funding resources need to be probably more diverse than they have been in the past. So in that respect, from from our view, more opportunities is is terrific. Especially if you look at biotech, it's very hard to go it alone in biotech to fully fund something to the point of it is actually beneficial to the patients. So even in these types of arrangements, even if someone is initially funding something and funding it solely, eventually, usually they're going to need other funders to come in and be a part of their Syndicate, as they as they raise additional funds. So overall, we think it's a positive for the communities. But a lot of it does have to do, I think really looking at the structure and what was really beneficial to the technology to people eventually who received the benefits of the technology and to the universities of course themselves and how they need to operate considering their focus is research and education. And they shouldn't be losing money on something because they go into one of these So the arrangement is, so it's it's doing what is what is best for the researchers and the technology

Speaker 2  35:07  
so far. And Amir, I wonder if you can comment on how complicated they are and how long it takes to negotiate. Because, you know, there are a lot of moving pieces in these kinds of arrangements.

Unknown Speaker  35:22  
So for what we've seen so far, these are probably one of the most complicated deeds they can imagine. And for one of those we're involved in in UCLA, we've actually had to go and work with outside counsel to help us negotiate with some of these trips, because we negotiate in advance not only a licensing deal, but also an equity arrangement, and a joint steering committee arrangement. And all these structures are something we're not accustomed of doing. So they tend to be fairly complicated negotiations tend to, to take a long time. And so from time to time, I'm thinking to myself, is it worth it? Or just is it better just work off the traditional model? If there's a technology like, we know exactly what the tech is, it's much easier to negotiate so many of the terms when you know what's on the table, rather than negotiate a framework agreement that once you find the technology, one of the parties will feel that the agreed upon in advance terms are not doing not doing him justice. So, you know, we're trying we're negotiating these deals as part of our what we see is our obligation to, to build a variety of opportunities for our faculty. But it remains to be seen if it's if it's any better than the more traditional models, or this is just a fundraising tool for VCs to say, hey, we have these arrangement with a whole number of universities.

Unknown Speaker  36:56  
So agreed, they definitely are more complicated arrangements. And on the flip side to that, I guess I would say that they also get more attention from the institutions. So they move more quickly than a license agreement might, in my experience. So I think there's there's some pushes and pulls in in different directions. And they do look a lot more like a collaboration agreement. And they're more complicated, because usually there are multiple companies that are going to ultimately be involved in addition to the fund or the initial company. And so you've got to think through, how do you bind a new CO that's coming down the line to enter into an arrangement that somebody else has already negotiated? And how do you think about how the economics should work when it really is the third party that's going to be taking the technologies forward? In addition, to as Amir pointed out all the collaborative pieces, with the committee structures, and how do you pick projects? And how does the company get comfortable that that they're going to have visibility into the scope of projects that they want if they're going to commit all of this money? Because the institution obviously wants to keep its, its scientific independence and ability to take funds from other sources too. And so there are a lot of competing interests that get amplified when when you're talking about a bigger scope of potential technologies that might come in the umbrella of these sorts of arrangements.

Speaker 2  38:23  
I'm curious Amir, at UCLA, when you enter into one of these big deal arrangements, who needs to approve besides your office? I mean, who do you consult with in the administration,

Unknown Speaker  38:37  
as I started to say, we have a fairly unique structure, we have a separate 501 C three board of directors that is comprised for very seasoned business people. So because these are major, we consider outside the scope of our normal business, we wouldn't go to that board of directors to discuss the guidance, discuss and get your final sign off on before joining one of these arrangements. And they give us know very good feedback and guidance on how to negotiate these deals. And whether it's worthwhile for the university to enter some of these deals. Specifically, specifically, basically, what are some of the factors for just mentioned? Does it block us from getting our funding? Does it create any type of exclusivity and things like that, that are very important for for a public university to take into account before into entering to these arrangements?

Speaker 2  39:34  
And curious, do you have Alliance managers you know, to try to be the liaison with particular arrangements?

Unknown Speaker  39:45  
So not yet so yeah, I mean, we've posted we do have an alliance manager. So part of these high profile arrangement required for an alliance manager to be a boots on the ground to source opportunities for For these arrangements, obviously, that will become now challenging with potential budget cuts coming to academia. So in many cases, we will expect the partners or the the commercial partners to actually find some of the salaries associated with actual management of those of those relationships.

Speaker 2  40:23  
All right, so let's move on to GAP funds. You know, most universities now have some sort of gap fund, or at least a concept of them. With budget cuts, potentially looming. What do you think about these GAP funds? Do you think one that in the past that they've been useful, and secondly, how the universities are going to think about this in the future.

Unknown Speaker  40:49  
So we have a relatively young gap fund, it's only been three years. And it's been a huge success. I mean, we already see companies exiting from the Fund. And by exiting, we're saying, it's basically project will be on financial otherwise, that within less than favorable to license out in very good valuations. So everybody's happy with those. And also, we have no number of project we exited to the need to close projects and stop spending money on them, because we didn't reach our milestones. The way I see it, I mean, if we've early stage funding going away, there'll be crucial to getting the economy back on track. Hopefully, the Chancellor's, and our funders of this type of funds will see it the same way and will not see it as free money they can cut and go back and send back to the coffers of the university. I think that'd be a very decision that will take us a long time to recover from. If anything else, I will double down on that initiative and try to replace the some of the market needs that will go away to know angels and other early stage investors that make stay away from risky investments in the short term.

Unknown Speaker  42:10  
Just going on Faro?

Unknown Speaker  42:13  
Yeah, I'd say. I mean, GAP funds are sorely needed. You know, GAP funds vary about by how useful they are. I think one of the things that I see with GAP funds that it's an issue and I know everyone's trying to deal with is people applying to GAP funds, when really they're not used to using it for gap funding. They're using it for basic research funding, rather than, you know, get they've done the basic research and they you know, they need, you know, X y&z to happen to actually make it that much more attractive to be either a startup or licensable, opportunity, etc. But I do hope that those those programs are, you know, with potentially the economic impacts that will happen and are not cut, I think they are going to be more necessary than ever. Yeah,

Unknown Speaker  43:07  
I agree. I mean, it's any opportunity to de risk the technologies before they come out is attractive to investors and to companies so that there's a better certainty that they will be able to go forward, I think that is KEARSON pointed out. So the overlay that you lose is that when a company or an investor comes in, they they hone the focus of it. So what is what will make money out of the technology. And so the direction of the research might be different if it's funded by a gap fund for the university, as opposed to coming from independent funds from that. But that said, you know, while there is a will, or some more hesitancy and investing in new technologies that aren't already in a home that investors know, those funds will certainly help to push that along that path. This is something

Unknown Speaker  43:57  
that ATF can take upon itself and as an advocacy group, work with the federal government to see if we can secure some funds for gap funding, from early stage research from to a financial opportunity with the Stimulus Act and other acts coming along as a way to perhaps as a way to convince the government to say okay, this is a way to restore their common in economy bottom up with with a whole bunch of new startup companies, where we help the government will help to reduce the risk associated with and actually solve a funding funding gap that we all think will happen in the near future.

Speaker 2  44:39  
Do you think entrepreneurs are still interested in starting new companies in this climate? I

Unknown Speaker  44:48  
think that's what we see even more entrepreneurs than ever before. I mean, we've seen losing their jobs. Many of them are super talented and they stop looking left and right and say okay, this is The perfect time for me to become an intrapreneur. And if there'll be enough money around to do that, that could be the next wave of great companies coming along.

Unknown Speaker  45:12  
I agree, I actually think that in times of the biggest stresses that we as a human population, have people figure out new ways to address those problems. And they push themselves harder than they had before. This is what we're going through right now is so different than perhaps some of those other stressors we've, you know, had in the last 100 200 years, in the fact that people are being forced to stay inside and potentially learn more in different capacities, perhaps than they have been doing otherwise. So. So I actually think this is a right time for people who are looking to become more entrepreneurial. There, so I feel very positive about it. I'm an optimist.

Unknown Speaker  46:07  
I agree. I mean, I think the entrepreneurs that we've seen, they're the problem solvers, right. And now they have a big problem to focus on. And that just sort of gets everybody's ideas turning. And I think we're seeing it in the collaborative efforts across groups, and we're seeing it in new new entrepreneurs, new inventors who are coming up with things either to solve this problem, or it's just getting the wheels turning and other problems are getting solved as a result. So I don't see it, slowing those people down at all, and took care since point maybe it maybe it just rejuvenates it.

Unknown Speaker  46:45  
I was curious, actually, because one of the questions that came in on the chat actually was about, you know, not just the entrepreneurial mindset, but the regulatory potential changes. And I don't have a good answer for this person on this question about what what kind of potentially lasting regulatory changes people might expect to see happen because of the PAM pandemic about potentially bringing new diagnostics, or emergency use therapeutics to market? I'm curious if far or a mirror Kathy, you have opinions on that I just don't feel expert enough to honestly answer that. Yeah,

Unknown Speaker  47:21  
I mean, I was on an interesting call yesterday, where we were looking at in their emergency use opportunities for drugs and for devices. And this was a conversation about a dietary supplement. But the the comment that struck me was from one of our regulatory attorneys, then she said, you know, the FDA has actually been really good, you know, really nimble in being able to respond to these requests, such that they're responding with within 24 to 48 hours to these requests for emergency use permission. Now, whether that will stay or not, I think probably depends on the outcome of those permissions and whether people get hurt or whether you know, the drugs actually work or the devices actually are effective. I think that the at least what's being churned through the legal community is that the the loosening of regulation around telemedicine and telehealth, is probably going to stay. I mean, those are the predictions is in that people are finding that is an efficient way to deliver health care that has benefit outside of this circumstance. And so that I would expect to stay. And hopefully, some of the other things will too. I mean, if it's if the agencies are still able to have a level of control, that's adequate to make sure people aren't getting hurt, but they can get access to technologies sooner. You know, I think that's a good thing. And hopefully, some of that will stay.

Speaker 2  48:56  
I wonder if we have any questions from the audience? Or do you have any last comments?

Unknown Speaker  49:03  
So one of my favorite disruptors, which we saw before COVID, was a bid to buy model where we had actually two very nice successes, where our startup company was fully funded by a strategic partner to basically complete the entire r&d process with a fixed a predetermined amount for the strategic audit to buy out, all the shareholders basically buy out the company. And we find it to be very interesting because basically, the company doesn't need to fundraise anymore. Based on their budget, they can complete their r&d cycle and have room for error and also know exactly what your exit will look like. And that has been known we're very interested in negotiation because we weren't actually negotiating with a solid company. We were negotiating directly with the strategic partner in advance, but everything is known. And so if this both these two products will be successful, we'll have everybody will have a nice equity payout, as well as a predetermined will earn royalty payments. And perhaps, that that's a model that COVID resists, can look into and do more off. Because it really solves many, many problems for several companies in biotech that are constantly looking for money and strategic collaborations.

Unknown Speaker  50:36  
It's interesting, I mean, those sorts of deals have had an interesting lifecycle, when I earlier on in my practice, they were kind of a last ditch effort for a company to figure out how to get funded because they would cap the upside on the on the company, and essentially have that company be captive to a single potential buyer, because they had a right to buy out the company. The view of those has changed over time. And some investors do like that. Because there is there is a buyer who's interested invested in the in the technology as it goes along and gets invested. And to your point, a mirror, there's funding that's there. You know, it's still a little bit of a mixed opinion, I think, because if you do, you're never going to have to hit it out of the park, sort of purchase price. That's pre pre agreed. And I think the other downside is a lot of those when you do have the option to buy, they get renegotiated at the end and the price goes down. Because they don't have another option, right. And so the company that's doing the funding often takes advantage of that circumstance. I mean, it's a rational way to do that. But that's been the outcome in a lot of those arrangements that we've seen.

Unknown Speaker  51:54  
I think one of the reasons that our founders like this model is because they are not likely to get diluted, right. So perhaps the numbers are not taking it out of the park, but they may actually end up with more because the illusion is sad that they won. So they know exactly what's their equity holding won't be at the time of exit. And so I didn't know who will make more at the end. But that's I thought it was a very interesting value proposition for founders.

Unknown Speaker  52:26  
One of the things I think that we talked about, and one of our conversations prior, prior to everything. In November, right, it was, everything's changed so much, was just about biotech IPOs, and how those have become so much different in the last 10 years or so than they used to be an IPO used to be like, boy, that's the end of the company's, you know, that's the end all be all and everything's gonna just gonna be rosy, etc. And now really, an IPO is just yet another funding step for those companies to get them to the next stage as far as their clinical trials, etc. Just how biotech Works has changed a lot. You know, even in the last 10 years, but certainly since since the 40 plus years now that it's that it's been around. People just in it's going to constantly evolve. And I imagine there are going to be certain other evolutions that happen either on the regulatory side or otherwise, as a result of this pandemic, too.

Speaker 2  53:37  
Think the regulatory side is the most interesting, because if one can race a vaccine approval through very quickly, why can't we do this all the time sort of thing? So as far as said, though, it'll depend on the outcome for sure. Yeah. So let's open it up for questions. If there are any questions, or if not, we can end this webinar.

Speaker 1  54:08  
We only had the one question so far what you covered. Those of you listening, if you have questions, you can put them either in the chat box or the q&a. We'll give you a couple minutes. A little bit of time to get those typed in while we have everybody on the line. I actually

Unknown Speaker  54:26  
saw have asked a quick question to Kathy, just as far as, as because we we talked a little bit about GAP funds, and again, not really went into accelerators and how those are working with with biotechs. But Kathy, you know, it's Stanford, we have had a couple of different mechanism, mechanisms of proof of concept and gap funding. And I'm curious about your thoughts on the success of those, both perhaps from as far as moving technology technologies along the educational process for the researchers at Stanford through Are those.

Speaker 2  55:02  
So we have, we have many little funds around campus that weren't controlled by OTL. So the spark program, for instance, had about a $50,000 grant. And I think those are fabulous. Because there, there was a pitch sort of, they picked projects and they moved them along, and they got feedback as the, as the technology was de risked. And then the OTL gap fund would would offset or they would augment that funding and provide more funding. Now. I do worry that it took longer the one year funding for Spark and then another year funding for the OTL. Yeah, fund made it at least a two year thing. The OTL gap fund was I thought very interesting, because we're very milestone driven. When the project was proposed, every quarter, the faculty had to meet with us and tell them progress about what was happening. And so they were expected to come and present. And so these were milestone driven, rather than research driven. I do think it's interesting to try these GAP funds, especially in biotech, it takes quite a bit of money to to move the needle. And we were always trying to move the needle at the end of the day, the OTL gap Fund, which ended up spending around $2 million. We were able to spin out companies and they're still existing as far as I know. So I think that was a good use of money. At the end of the day, when I left, I think that gap fund was terminated. So I don't know whether Stanford is still invested in furthering technologies through OTL. Do you have How do you pick your your projects.

Unknown Speaker  57:03  
So we have a fairly complicated process, we go out and sauce opportunity on campus for an open call for proposal. And then we have an initial screen by my team just to make sure that we don't have any IP complications, conflicting obligations. And things are just the basic tech transfer checkup list. Date is being reviewed by a peer review committee. Basically, our faculty in UCLA are giving us their opinion about how solid is designs without the proposal. And that process will rock probably eliminate about 50% of the applications. And then actually more sorry, more than that. And then we invite about 10 application for a final pitch day in front of an external advisory committee of active investors in specific areas. So we have two tracks. One is traditional drugs are number one is med tech. So we have two panels of expert investors that are just they're not decision makers, but they help us decide in which opportunities to invest. So it takes us about a year to complete this process. But we're very happy with the outcome of this combination of faculty reviewing the science and investors reviewing the opportunities from a commercial point of view. And therefore I think that's part of the secret sauce that allow us to get exits really early on from a relatively new activity in our office. And

Speaker 2  58:35  
how much is the how much does one project get approximately?

Unknown Speaker  58:39  
So it's up to $200,000. But yeah, 18 months, but many of them actually don't complete, they don't complete their entire budget. They're either exited because their investors are interested, they exited because they didn't reach their milestones, or the budget that we approved for the project. We realized that in order to reach an inflection point, we don't need $200,000 We can do it for much less. So it's up to and then it's on a case by case determination.

Speaker 1  59:17  
Yeah, we are getting a couple of questions here. How do you identify initial management teams for university startups?

Unknown Speaker  59:29  
That's a good question. I will start with that. And then I'm sure I'm Erin and Kathy can can join in. So this is the this is the million billion dollar question maybe is actually getting those initial teams in who can move this forward. When we're looking at an opportunity, we want to see typically a PII and potentially people who are involved in that lab really involved in this startup from the science side for them to have identified, hopefully some sort of experienced lead who on the business side to help them along, where you can see that they've, they have a relationship where they can, they can speak honestly, with each other where they complement each other, that they have a shared vision about how they're going to be moving forward with this company. So we typically aren't identifying the management teams themselves, sometimes we will connect people together where we see opportunities. But it's one of the hardest things as I think everyone probably out there who's listening knows, is getting those initial teams together, who can actually move that opportunity forward with the startup, and then initial team then often isn't going to be the team that's there, what three, four years down the road, but they know what their job is, and where they need to get the the technology and the company to, to move to those additional inflection points down down the road. At some of the universities we work with, they have really robust Mr. Mentor in residence, or EIR programs, where they're, they're helping those companies along potentially introducing them to other people who may be that person. In general, if you're talking to your neighbor down the street to be that business person, as the scientist, that probably isn't usually going to be the right person I did, I actually had that situation a couple of times at Stanford. And it just always, it never worked out. You really have to invest a lot of time and find that right complement to you, as the science person, to your complimenting that science side, the business side and spend a lot of time finding that right match for you. It's, as Lou who works with us always used to say it's the second most important relationship in your life after your spouse. So

Speaker 2  1:02:08  
here's an on I have been thinking about this problem for what we call them translational regions. So again, trying to find the right people, where there may not be a whole plethora of experienced entrepreneurs is really hard. So you have to reach out to alumni or people who are really maybe not even an engineer geographical region, but who can connect you with other people? It is a big, big issue for almost all startups in all regions, except for probably the coasts.

Unknown Speaker  1:02:48  
Yeah, I think we see a few different flavors so often, often, sometimes the starting team is self selected, right? So it's the PhD, the postdoc in the lab that develop the technology that wants to be the CEO, and they come out and they are the initial CEO anyway. And then to Kristin, Pearson's point, they don't always and often don't remain the CEO. And those changes can come in connection with significant rounds of financing, where the investors are requiring a more seasoned CEO. Sometimes they come at the point where they come to go public, and you need someone with public company experience. Some universities have those resources to give the companies that are that type, you know, a postdoc that really is a scientist who wants to become a business person, they may have advisory services that that have seasoned business people that are able to advise those companies as they come out. And that can be helpful as a temporary fix. But, you know, ticket point, I think usually, you end up at some point in the company's lifecycle with a with a more seasoned CEO coming in, if the company's going to continue on a larger basis. The other thing that we see are, as KEARSON mentioned, entrepreneurs and residents of various funds, they will come in and be the CEO for some period of time at the companies that they invest in. And sometimes they'll choose to stay but more often, that's kind of the role that they like is to be there during a particular phase of the company and then move on to the next company in that phase to get it to the point where it can survive more independently. And so you'll see a lot of those folks coming coming in, that are selected by the investors. And then similar to Osage, Wilson has folks that we connect to just because we we work with so many startups and and know the serial entrepreneurs who would be a good fit with a particular technology type or a particular stage of company. And so have, you know all of the company's advisors sort of played that role of figuring out the matchmaking for the right relationship to complement? The skill sets that are there?

Speaker 1  1:05:12  
Yeah, we have a question here. I think going back to the previous question, to Amir, how often does the Initiate initiate what I think we might be missing something in that one,

Unknown Speaker  1:05:29  
initiating the Innovation Fund cycle. We were when we started this, we were hoping to do it twice a year, but we realize it's just too much work, we cannot, we couldn't support it. So the cycle of one is that it's an annual cycle, because it takes us so much time to review all the application, whereby advisory panels, and actually we also work with the faculty and, and teach them how to effectively pitch the deck to investors in 15 minutes.

Speaker 2  1:06:02  
I would say that the Stanford gaps on that we had, it was about a $2 million fund. And it was much, much more informal. Basically, it was a poll from OTL. If OTF, had marketed technologies, and they felt like there was an associate who felt like, we needed to do one more experiment or be able to have a little bit of funding to make it licensable, then perhaps we would fund this project. But again, the OTL person had to identify some technology. And the faculty or the researcher involved, had to agree that they wanted to put in that effort. And so if the two came together, they would put together a proposal. Now surprisingly, at Stanford, many of the faculty didn't even want to put together a proposal, we had to pull some of those technologies out of the lab, and it wasn't an overwhelming response.

Speaker 1  1:07:06  
Thank you. Our next question for these early relationships, how important is it that the individual individuals are co loco localized?

Unknown Speaker  1:07:20  
Basically, are they in the same place. So we see a lot more of this now, where the scientist is in one area and the business people are located in a different area. And they will travel to each other. It is I would say it has become less important over time that they don't necessarily need to be in the same place. However, eventually the business will be where the business person is, it will likely be wherever the CEO slash leader is, even if the scientist, the PII or whoever it is, remains at their, their university. So that is something that happens, I would say, on a fairly regular basis that maybe the business originally is started at a certain university, then it moves to, you know, where, where the the business, the CEO, et cetera, et cetera, where he or she lives, where the the funders perhaps want the business to be located, etc. So, to me, that happens on a fairly regular basis. Now, it's something they figure out over time.

Unknown Speaker  1:08:40  
And personally, is also it's a question of timing during the lifecycle of a company, right. But I think that one of the best locations for early stage companies actually been an incubator on campus or next to campus where faculty can just go back and forth in his company and his lab. But as the company grows, as you just said, then the business people, the CEO, the investors may ask the company to upscale and or move, changes to location based on market needs and investors desires.

Unknown Speaker  1:09:14  
Think we're seeing more and more where companies in second or third tier markets, try for a long time to get people locally, and then they ultimately end up letting them work remotely. And then the next step seems to be that they open an office where that person is, if there's a critical mass in the second or third tier market. You see this even in places like Seattle, where you would think there's a big enough talent pool for a biotech, they will open up a second office in San Francisco, and Vancouver will reach down to Seattle or San Francisco, Salt Lake City will go to San Francisco or even Boston. But we're seeing more and more where the teams are not all co located. Thanks, we have have

Speaker 1  1:10:00  
two more separate questions, but they're both related to GAP funds. So I'm going to kind of ask them together. What is the source of the GAP funds at UCLA and Stanford? Is it from royalties, and also do most tech office GAP funds include peer review.

Unknown Speaker  1:10:19  
So when we did our research, I don't think most of them include the peer review. This is something that actually came as a request from our Dean's. The money that we use is half of it is coming from the chatter from royalty income, and the other half is coming from the Dean's that support a program. And so it's actually a request for peer review came from the Dean's, because they wanted to make sure that they're investing their money in solid science, and then ended up being a very good process where we get solid feedback from the peer review process about which project should move forward for the investor which reviews and which which not.

Speaker 2  1:11:08  
At Stanford, we had to get funds one, very, very old, about $2 million. And that particular fund was funded by equity cash out and I squirreled away the OTL portion of that equity. And that was about $2 million, it ended up to be a lot of money, about 1 million per project. So we only did two projects. We had a whole system there of outside, review, etc. We ended up disbanding that because it ended up feeling like we were getting the second tier projects, because the first tier projects would be able to find outside investment right away. So these would have been projects that couldn't find outside investors. So we close that one, and that was probably in 1990 or so. And then President Hennessy, the previous president gave OTL, about $2 million, just from a presidential funding, and he had originally committed $2 million per year. We didn't even spend it that fast. It ended up to take about three years for us to spend that money. And there was no peer review process and that this is the one where we had the OTL. And the faculty person had to present a joint proposal. And fundamentally, we approved many of the proposals. It was just a three person committee that decided yes or no.

Speaker 1  1:12:48  
Okay, I think that is all the questions we had. If there are attendees out there who didn't get the chance to ask your question, please feel free to reach out to me and I'll get in touch with the panel. Does any of you have any parting thoughts before we wrap it up?

Speaker 2  1:13:06  
I want to thank everybody for joining us. And I really think biotech is you know, gonna keep flourishing. So whatever time we're in now, it's just going to get better.

Speaker 1  1:13:18  
Great, thank you. On behalf of autumn I want to thank Kathy Kyrsten, Amir and FIRA for this discussion. We hope you found it informational. We want to thank you for attending Also, please remember to complete the webinar evaluation that will pop up when you close out of this session. One more thank you to our annual webinars sponsor of Marshall Gerstein and Borun. A recording of this webinar will be available within just a couple of

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