This blog was written by Ron Renaud, CEO of RaNA Therapeutics, as part of the From The Trenches feature of LifeSciVC.
About three weeks ago, I attended a dinner organized by a good friend and former sell-side competitor, Dr. Yaron Werber (CBO & CFO at Ovid Therapeutics). Attendees included about a dozen former Wall Street-ers now working in the biotech industry. We were sell-side analysts, investment bankers and hedge-fund managers, and many of us had crossed paths somehow. Some of us worked together, while others were once fierce competitors. Regardless, we all had a genuine curiosity as to why the person sitting next to us left positions on Wall Street that might pay more, provide greater visibility or continue to build on some well-established healthcare franchises on the sell-side or as investment bankers.
I’ve read many articles speculating why people leave the “Street” for biotech, and thanks to Yaron and my colleagues that attended, I, too, hope to weigh in and share my observations. They are:
We’re excited about what’s happening in biotech.
Before dinner, we went around the table and introduced ourselves. As you can imagine with this kind of group, it was a lengthy exercise. What resonated, though, was the level of excitement from everyone in the room. The high level of pride as we talked about our respective organizations was immediately tangible. We had most of the hot areas covered, too – CRISPR, microbiome, RNA therapeutics, gene therapy, immuno-oncology, CNS and a few others. Some of the companies represented at the table are well-known biotech pillars, while others are less than five years old. In all cases, we were excited to share our experiences, as well as offer any advice.
We believe we can make a difference.
As we continued to chat, I was scratching my head thinking about the significant M&A transactions, well-known investments or notable stock calls that were represented by the individuals at our table. What type of person leaves a lucrative position to join a risky venture capital-backed startup or even a well-established biotech with seemingly limited upside? From what I could gather, these highly motivated people really believe they will make a difference in the lives of people suffering from a wide variety of illness. But I believe it is even more than that. I discerned an entrepreneurial spirit and a strong belief that this industry has a bright future and a desire to make the industry better.
There was no hand-wringing about pricing and reimbursement for drugs that have not made it through clinical trials. On the other hand, there was some discussion about how many of the innovative approaches to treat cancer, rare disease and neurodegeneration could change the balance of the price/volume equation. I don’t want to give the impression that this was a weekly meeting of the Sisters of Charity, but there was certainly an undertone of getting things right for patients.
Many times when I have read articles about colleagues leaving the sell-side or investment bankers joining biotechnology companies, they are often regarded as future dealmakers. At this table, we certainly did have a few dealmakers, but they were also M.D.s and Ph.Ds. who were very happy to be in an environment where those degrees are recognized and can be directly useful. Also, most of us had experience as analysts, investors or bankers with many of the most successful biotechs in our industry, as well as companies that have not been so successful. Our discussion turned to how we have benefited from these experiences. We are learning from past mistakes we have chronicled as analysts or in some cases, invested in or have been asked to fix as strategic advisors. Words like efficiency, precision, targeting, specificity and data-based decision-making were heard throughout our dinner. I felt that if only half of the optimism from this group of individuals comes to bear, our industry is in for some very good days.
We all want the industry to succeed.
Billed by Yaron as an “Ex-Wall St. Huddle,” I thought there would be much more discussion of our past careers at bulge-bracket banks, hedge funds and boutiques. However, he established the goal of the dinner immediately when we all sat down, namely to use our collective past careers to help make our companies successful, share ideas and best practices to ensure that we run our companies smoothly, share info to allow us to avoid making mistakes, network so we can find opportunities for our companies to work together to make us both more successful, and use our past experiences to make sure we fulfill our obligation to patients.
There were many ideas about how we could try to do it better than some of our predecessors in the industry, and what separated many of us even further from our Wall Street days was this focus on how to help each other out. Many of the individuals who have left the Street to join the biotech ranks are first-timers in the role of CBO, CFO or CEO. With that in mind, the established goal for this group was to make it okay to call someone else for advice in the same role at another company. This was particularly well received by our group, as sharing tricks of the trade is not a concept that translates well on Wall Street.
Understandably, we place a high value on strong technical expertise in the biotechnology industry. Successful companies are built on foundations of hypotheses tested with rigorous science forged by well trained and insightful Ph.Ds. and M.D.s. That said, I also have to believe that the continued influx of strong critical thinkers with strategic business minds from Wall Street added into the scientific mix will increase the chances of success for many emerging biotechs. What we believe we collectively bring in-house from our previous careers is an ability to objectively analyze whether the company is on the right path, whether the data supports the underlying development, and whether we are dispassionately making sound decisions that are based on hard data and facts.
We believe that the biotech industry is good.
There was also a sense that everyone around the table wanted more from their professional lives, and that fueled the willingness to take on risk. I did not sense that the move from Wall St. to biotech represented a desire for greener pastures from this group. There are no guarantees, and we are fully aware of the low probability of success. Nor was this was about being disillusioned with or bored at our previous careers; but rather this was sheer belief that we can do good and be successful doing something that is hard, but ultimately much more fun.
The ironic part is that we once again find ourselves working in another of the most derided industries (aide from finance/Wall Street): biotech/pharmaceuticals. We felt that there is a general misinformation about the biotech industry that needs to be corrected. After all, we took tremendous risks exactly because we believe in the mission of this industry and wholeheartedly disagree with the prevailing sentiment that has taken over.
Yaron said it best: it’s time to go back and roll up our sleeves now from the inside, as opposed from the outside. For many of us, it’s our first step into an operating role, and for some of us, including Yaron and myself, it’s been going back to an operating role after a long detour on Wall Street. And we’re glad to be here – in a job that hopefully will do more good in an industry that does an awful lot of good…even if few outsiders are willing to recognize it currently.
We believe that the industry is getting stronger.
Coming to think of this, it seems that this is the third immigration of outside professionals into the industry. As Jeremy Levin (formerly of NVS, BMY, TEVA and now chairman and CEO of Ovid Therapeutics) points out, in 2000-2010 many executive from the biotech industry migrated to big pharmaceutical companies resulting in changes to R&D in many of these companies. This was then followed by a migration of executives from big pharma to many small biotechs that brought much talent and credibility to those management teams and pipelines. Now we are seeing Wall Street infusing biotech companies with a whole new set of skills. We are creating a vibrant and interdisciplinary industry that is getting stronger, more sustainable and keeps modernizing its thinking. That should help continue the momentum of innovation and transformation of the industry and ensure that it is gearing itself to handle the new set of challenges that keep arising all the time.
I realize that many folks come into biotech from other industries besides the investment community and often for the same exact reasons outlined above but I would argue that many of them are “industry-naïve” and without too many preconceived notions regarding the industry. Coming into an industry that is under constant pressure and under a cloud of seemingly endless uncertainty requires a leap of faith. This was a group that seemed quite excited about making that jump. My personal reason for going back into the industry from the Street was to take what I learned from observations of the good, the bad and the ugly while I was a sell-side analyst and channel that into helping build great biotechnology companies. It was nice to spend time with a great group of people that, for the most part, did the same thing. Given the number of conversations that I have had with people still in positions on the Street that are looking to join the biotech industry, I expect this trend to continue for the foreseeable future. I am also looking forward to Yaron’s next dinner…