“Most scientists seem to follow a basic tenant of science that goes something like this – “Since I went through years of hard work and hell to figure this out, I’m going to take you through the whole thing and at the end I’ll show you how I got the answer”. We tell scientists to give us the answer up front and then if we’re interested in how you got there, we’ll ask. Turning it around is a hard concept but that’s often the best way to start.” Bill Young
A Conversation with Bill Young, Venture Partner, Clarus Ventures and Biotech Pioneer
Bill Young credits luck and good timing for his career in healthcare. Unlike most of his chemical engineering classmates at Purdue, Bill chose pharmaceuticals and a position at Eli Lilly in Indianapolis after graduation. His big break came following an assignment in Puerto Rico where his team transformed a bankrupt brewery into a plant to make antibiotics. Bill was recruited back to Indianapolis to serve as the technical lead for a new collaboration credited with the first recombinant, genetically engineered product – human insulin.
Lilly’s partner was a fledgling company by the name of Genentech. In 1980 Young joined Genentech about a month before its $35 million IPO – which is well remembered for its meteoric rise from $35 to $88 a share after less than an hour on the market. Initially charged with developing the processes for making new products, Bill spent 20 years at Genentech, ultimately becoming Chief Operating Officer in 1997. Seeing the early promise of personalized medicine, he left to become CEO of Monogram Biosciences, a diagnostic company focused on viral disease and cancer in 1999. About 10 years later, Bill sold the company to LabCorp and joined Clarus Ventures to focus on investing in promising healthcare companies.
We talked with Bill about the challenges of bringing new scientific ideas to market and what scientists need to do to convince a Venture Capital firm like Clarus to invest.
Think back to your early days at Genentech, what were some of the challenges of the new science?
The whole experience at Lilly and Genentech was almost out of a fairytale. We had great times and there were ups and downs. It wasn’t always an easy ride. In the early days at Genentech, we thought that biotech could do everything, so we had an Ag division and we had an industrial division. After a while we decided that making drugs was pretty time consuming on its own, so we formed Genencor and another company to do the industrial piece and licensed off the agriculture piece. We ultimately focused on drugs, and in time, on cancer, which happened rather serendipitously. Herceptin was the first oncology product, followed by many other anti-cancer products targeting specific receptor-site cancer cells.
What decision makers did you have to convince to pave the way for the recombinant DNA-based products?
I remember sending our scientists to the FDA many times to give seminars to explain how the recombinant DNA technology worked because they didn’t know. It was brand new.
One of earliest challenges we had was that – there’s a little bit of a parallel to GMOs now – people thought, “Okay, if you make these organisms capable of making a protein, you might create something dangerous. What if they get out into the environment and cause unintended problems?” So the NIH set up a committee (the Recombinant DNA Advisory Committee) to review and approve experiments with recombinant technology. If you wanted to produce more than 10 liters, you needed special approval. You had to get RAC approval to exceed that scale. And of course, anything we were doing on the process side had to exceed that scale.
A lot of work was done to try to prove these organisms weren’t harmful and convince people that producing more than 10 liters wasn’t a threat. That went on for a number of years. Based on our track record, where nothing bad ever happened, the guidelines were eventually lifted. So that was one of the first things that we had to overcome.
I remember going to those committee meetings and showing how the fermenters were specially designed to make sure that nothing could escape. It took a whole round of simplified communications and visuals to allay a lot of fear and ultimately enable the experiments to go forward.
With permission to run these experiments, what did it take to get the company focused on developing Herceptin?
In the mid 80’s one of our best molecular biologists, Axel Ullrich, working with Art Levinson, cloned the first full-length human HER-2 gene. We didn’t really know what to do with it back then. We cloned this receptor, filed a patent and put it on the shelf. Then Denny Slamon from UCLA observed that women with breast cancer who overexpressed this receptor were at risk for rapid progression of their disease. About 25% of patients have this overexpression of HER-2. He came to us with this data and said look, you really should do something about this. He talked to everybody in the company trying to get people to pay attention.
The atmosphere then wasn’t conducive. We had just had some disappointment with our TPA, (tissue plasminogen activator) and most of the focus had been on that cardiovascular product. Cancer was not as fashionable as it is now. In fact we had done a cancer trial that had failed. Targeted therapy was a brand new idea. No one had done it before. On top of that, you had to use monoclonal antibodies to attack the target and that was fraught with challenges. You needed to humanize them and make them cheaply enough in large scale. It took a lot of protein to have a decent product and a decent cost margin.
There was a lot of discussion inside the company, is this the right product? We couldn’t afford to do them all. There were not a lot of oncologists at Genentech at the time either.
Do you recall any meetings or presentations from scientists trying to convince the leadership team that this scientific approach was going to work?
There were many discussions with Denny Slamon from UCLA. I recall one where he was sitting in my office with Mike Sheppard, one of our molecular biologists. Denny showed me the data on what happened to women who over-expressed this receptor. Mike showed me data from the laboratory – mouse versions of Herceptin, early versions of the product with lines of cancer cells. For me that was a seminal meeting.
Part of the story was that my mother was diagnosed with breast cancer at about the same time. I remember talking to oncologists about how few treatment options she actually had. Most of the ones she did have made her sick and really didn’t do much for the disease. We all saw there was a huge need there. We believed we were ushering in the new science and we ought to be able to do better than the current technology. From then on I was an early supporter.
Do you recall any other factors that were influential in convincing the company that this was a worthwhile track to pursue?
We kept the scientists working in the laboratory, first to demonstrate pre-clinically that the cells could be regulated with early versions of Herceptin. The first molecule was a mouse version because we could do that faster. You could only give one injection of it because the body mounts an immune response against it immediately. You can’t give it again. But right after that we had a humanized version that we put in clinic and we started to see some results. That data kept the project alive.
Ultimately what sold this was getting clinical data that showed positive results. The science behind the drug was promising but we also needed to be able to screen women since only 25% were going to have the target and respond. That was really new. Nobody had dealt with that before. That was the first, and still the most significant example, of personalized medicine, because you were screening out 75% of the patients who couldn’t respond to the drug since they didn’t have the appropriate targets.
So once again you were breaking new ground with the screening diagnostic. What resistance did you have to overcome?
Yes, it was an entirely new way of thinking. That was the story of Genentech all along. I think the science side of the company, and many of us in Development, had confidence that this was the way to go. We encountered resistance on the commercial side of the company and from leaders coming out of the pharmaceutical industry. To them oncology was not all that exciting.
A lot of the technology that was used to make Herceptin came out of the TPA project that had not met expectations from a sales point of view. But we did learn how to make these drugs at large scale. We also learned how to humanize them so they were not rejected by the body. All of those things came together with the development of Herceptin.
Ultimately Herceptin and the screening diagnostic were successful and the product got approved. It was the first of the targeted oncology therapies. Today many billions of dollars worth of oncology drugs are sourced from Genentech. Herceptin was the first.
Think back to being an engineering student at Purdue, do you remember anything specific about how you were taught to communicate?
I remember that very well, because we weren’t. I was an English minor, but you have to remember that engineering school is pretty intense. The courses are crammed with math and physics and chemistry, and you don’t have a lot of extra time or room for communication skills. And then you get out into industry, and you find out, “Oh, you actually have to communicate your ideas?”
I quickly learned you have to break complex science down, especially when you talk to non-scientists. You have to be able to work in teams. None of those skills were taught, and I don’t think they are to a large degree today.
Well that’s where we want to focus. We really see a need at the graduate school and college level to help students understand that to make the transition effectively, you have to learn how to champion your science.
Many engineers are introverted to begin with so they have to work harder to get comfortable communicating. It’s especially challenging communicating with lay people. We have to figure out how to overcome limits of the sound bite. An example is, at a cocktail party, people say, “What do you do?” Well, bio-technology. “What’s that?” So then you explain it, and by the third or fourth sentence, their eyes are glazed over and they’re going for another glass of wine.
So it’s inherently hard to get the message across. Perhaps partly because we can’t explain things in simple enough terms, but we are often talking to people who don’t have enough background to understand even the basics. That fact has led to an interesting change in the last 10 years. Most investment firms now have scientists working directly for them. It used to be the sell-side analysts who were the technical people and they would explain it to everybody. Now all the buy-side people have their own MDs. Many have MD PhDs who have never practiced medicine but certainly understand the science. So you’re talking to your own kind in most investor cases now.
Let’s talk about your role as a partner at Clarus. Where do you find scientists go wrong in pitching your firm to invest?
Most scientists seem to follow a basic tenant of science that goes something like this – “Since I went through years of hard work and hell to figure this out, I’m going to take you through the whole thing and at the end I’ll show you how I got the answer”. We tell scientists to give us the answer up front and then if we’re interested in how you got there, we’ll ask. Turning it around is a hard concept but that’s often the best way to start.
Have you found any good analogies to help explain scientific concepts?
I recall simplifying the way genetically engineered products are made by talking about cells as little factories that make and spit out the product that you’re interested in, in a big vat. We always tried to boil it down to something people could visualize. That’s oversimplified, but it helps bridge the gap in understanding.
What advice do you have for scientists to improve their pitch to a VC?
I remember when we used to do presentations by writing on overheads. Now everyone uses PowerPoint and it’s become a bit of a crutch. We see illustrations that don’t effectively convey the actual data. People use too many words and not enough pictorial representations of the concepts they’re trying to get across. They need more images that will stick in your mind.
Many scientists often leave out the finances and the business plan. They have all the science in there, but not what it means from a business point of view. We look for people to be balanced between those two things. Be sure to include your goals, your vision, and how you started out.
Most presentations are also too long. Attention spans these days are maybe 30 minutes, plus questions. So if you have more than 25 slides, you’re probably going to lose us before you get to the answer.
As a VC, what compels you to invest?
The first thing that we look at is the quality of the people involved in the company – the CEO and the founding scientists. We’ve found many, many times that you might start out with an idea that doesn’t actually work because science is not predictable. But often, a good management team and smart people can still figure out an alternate path that can make the company work. The opposite is almost never true. So the quality of the people is the first thing we look for.
Then, if we’re considering investing in a new company with a new idea, we look for the soundness of the scientific idea. All of us have worked in companies and have venture experience so we use our own ability to judge that. Then, we get outside people to opine on whether this is truly unique and has legs. Ultimately it’s a judgment call.
The other critical thing we look for is some value-creating event in the next two or three years, not 10 years. So that might be, “I have enough data to go public,” or it might be, “I have enough data to partner my product with a larger company.”
If you don’t tell your story well in the first meeting, you don’t get a second one. We turn down 90% of the companies that pitch us. Then we do a lot of due diligence before deciding to invest. Fortunately the biotech industry is not that big. Many of us know each other so it’s easy to get background and vet people along the way.
Beyond personalized medicine, where do you see the future of medicine and new science is headed?
Herceptin is still probably one of the best examples of personalized medicine. When I became CEO at what was then a virology diagnostics company, which ultimately expanded to include oncology, I thought, “Well, this is time for personalized medicine, we should do this on all oncology drugs, and then maybe all drugs”. It turned out that there were a number of barriers. First of all, I think that no one is quite sure of what the right technologies are. Should it be gene sequencing? Should it be gene expression? Should it be proteins? Should it be mutations? Exactly what technology are you basing it on? And because there’s so much technology out there, the payers are pretty confused, so often they don’t reimburse for these things. Unlike drugs, where you can make a fair amount of money with a drug that saves peoples lives, diagnostics aren’t in the same category. The amount of money diagnostic companies have to work with is much smaller. ,There were many more barriers to making this a reality than I thought.
One very promising area today is the recognition that the immune system plays a huge role in disease. We’re already seeing some really astounding cures – and I call them cures – in cancer, in a certain percent of patients where we hype up the immune system. This is so-called immuno-oncology. This is actually a reversal of what we thought was going to work – just targeted therapies like Herceptin. Now, we know we need to do more. There need to be systems to hype up the immune system, in addition to targeted therapies.
I also think immunology will also play a role in other diseases, like neurology. It already is a big component of things like MS, but I think we’re going to learn more about that. I think this will be an important trend. There has already been a lot of work of this kind in ophthalmology and various eye diseases with drugs that cure or reduce the progression of AMD. The eye, in a way, is related to neurology, because you’re dealing with the nerves in the eye. I think that’s another hot area for investment.
Venture Partner, Clarus Ventures, A Healthcare Investment Firm
BS Chemical Engineering, Purdue University
MBA Indiana University
Honorary Doctorate of Engineering, Purdue University
Elected to the National Academy of Engineering for leadership in research, development and manufacturing of recombinant proteins using recombinant DNA technology.