Venture Capital in the Life Sciences
Founder & Managing Partner
Relentless Venture Fund
In the second episode of our fourth season, our host Peter Brenders talks with Brenda Irwin, Founder and Managing Partner of the Relentless Venture Fund, about venture capital and angel investing in the life sciences, disrupting the standard of care status quo, and preventive health venture funds.
LIONA GOLFCART (LG):
From the National Pharmaceutical Congress, this is the NPC Podcast for May 5, 2021. The NPC Podcast is all about discussing and considering the purpose, process, and people of the pharma industry during the Age of Covid. Today, we'll continue the healthcare conversation by answering questions from listeners like you.
This program is presented in cooperation with Impres, Canada's next generation commercial partner. The industry is rapidly evolving, and Impres is designed to help you evolve with it. Learn more about Impres tailored best in class solutions at www.impres.com.
On today's podcast, our guest is Brenda Irwin, Managing General Partner at Relentless Venture Fund in Vancouver. Your host is Peter Brenders. But first, let's say hello to Mitch Shannon of Chronicle Companies.
MITCH SHANNON (MS):
Thanks, Liona. This week we're going to start with a musical quiz. What does this song have to do with today's guest?
All right, that's too easy. The musical clue was performed by The Ventures. And this week's episode is about venture capital for the life sciences. We're going to learn about the role venture capital and angel investing play in pharma from one of the best in that game, Brenda Irwin of the Relentless Venture Fund. Here she is in conversation with Peter.
PETER BRENDERS (PB):
Welcome to the NPC Podcast. I'm Peter Brenders, your host. In our continuing look at the purpose process and people in pharma in Canada, this episode takes a look at the financing of innovations.
So here's a spoiler. It's not government or Donald Trump that takes the risk to fund new innovation. No, risk capital comes from elsewhere. And today, we will talk with a venture capitalist and get her thoughts on the risk and financing of healthcare innovations.
Joining us from Vancouver is Brenda Irwin, Founder and Managing Partner of the Relentless Venture Fund. Welcome to the NPC Podcast, Brenda.
BRENDA IRWIN (BI):
Good morning, Peter. I love spending my days talking about innovation and health. So looking forward to this.
Well, let's start with an easy question just to set the stage for our audience and get everyone on the same page. So, what is venture investing in healthcare? Can anyone put their own money into a venture fund?
There's two parts to that answer. I'd say first of all, understanding that venture capital is at its essence, financing, and typically early stage businesses, startups, including spin out out of university labs, and venture is financing in exchange for ownership in a company. The definition of venture capital is also risk, high risk-high return. I think that that is something when I speak with entrepreneurs, that's not always understood by everyone. It's, you know, there's a lot of great businesses out there, but they may not have the risk profile for a venture investor, which is tough to explain until you get down to the nitty gritties of what fits what doesn't. But overall, the objective as a healthcare investor is, are you looking at a business that has the potential to disrupt either care, or service, or operational efficiencies while reducing costs?
That at the heart is what venture investing in health is about. Examples of it include - currently, my background, I used to be an investor in drugs, devices, diagnostics, what I call the traditional healthcare venture world. But now healthcare investing includes digital health. And biotech is quite familiar to people. And that includes new drug development. One of the areas that we've invested in also that's new around precision health, precision medicine, regenerative medicine, all of that is included in healthcare.
So just let me come to one point you talked about there, just so everyone's on the same page, when you say the potential for these investments to disrupt care, I'm assuming you're intent i disrupt in a positive way, a new way of doing something, something exciting that just challenges the status quo.
Yes, absolutely. So, the vernacular of venture can sometimes sound a bit aggressive. And it's tough when you're talking about health and improve patient outcomes. I mean, that is always at the heart of everything, improving health outcomes, but when I say disrupt and when venture investors are looking at it is you have a standard of care, but is there a better way to do it and accelerate care, for example, and we saw a lot of that in the last year with respect to how remote patient monitoring and telehealth was introduced globally, shifting from niche to being mainstream. That was very disruptive, that disrupted a clinician, a doctor's daily approach to working with patients. So that's probably a really good example of a positive outcome.
You asked about, can anybody be involved in a venture fund? The technical definition of an individual's option to be in a fund is whether or not they're a accredited investor. And that in Canada is, have you made $200,000 in the last two years? Or do you have a household income of at least a million dollars? And the reason they have that threshold, it's important because venture, again, is a risky asset class. And the assumption is, if you fall within the definition of an accredited investor, you have the potential to afford to lose the capital that you've committed in early stage investing. And that definition also applies to angel investing, which often precedes venture.
Okay, so high risk, and you mentioned a couple things about what your fund is doing. So maybe we could take a second to talk about sort of the Relentless Venture Fund. I mean, what is it that your fund's doing that might be a little bit different? Because we've heard of many different venture funds, I'm sure. But how do you differentiate venture funds?
I'm super proud of the fact that Relentless is the only fund in Canada that has an intentional focus on preventative health and objective measurement of preventative health options, but also, proactive health management, and our definition of proactive health is managing life with a chronic condition. There's nobody else in Canada that approaches venture investing and portfolio construction the way we do and part of the reason why that probably exists is it has been very difficult to objectively measure preventative health strategies, but digital health has made that more of an option now. So there's a lot of funds that are health focused, even generalist funds that will, I will say dabble and include digital health.
So, it's not about the digital health or the health tech focus of venture fund. It is we are intentional about prevention, and proactive management. And our first fund focuses also on the four most common conditions associated with aging that you can do something about, that comes back to prevention, that's diabetes, heart disease, mobility, and mental well-being. And what may be intuitive, but it's also a fact, is those conditions are also the most common comorbidities associated with aging. So that's where we started with the first fund. But as a holistic theme, we're the only ones in Canada doing prevention and proactive management.
You're listening to the NPC Podcast, I'm Peter Brenders, your host.
Okay, so everyone wants to know the war stories. So, Brenda, can you tell us about what was your greatest investment? What was your Google find, if you will? And then, maybe, you know, I'll come and ask you, what was your biggest miss, something you should have, could have, and didn't?
I will start with the win. Venture capital is a tough business. I often say it can be soul sucking day in day out ensuring that the businesses you invest in have success. The one thing that keeps me going is I'm an investor in health. Always have been since the beginning of my career. When I started originally as part of BDC's healthcare team, as I mentioned earlier, investing in primarily drug development. And in 2002, I invested at the first preferred round of Celator, so Celator, BC Cancer Agency spin out, and without going through all of the ups and downs and heartbreak that included the first compound that went through clinical trial that was a failure, the second product in the pipeline in 2016, so 14 years from the time of our original investment, completed phase three with clinical success and this was a compound liposomal reformulation of cytarabine and caunorubicin.
Celator's technology was creating a synergistic ratio of that combination that chemotherapeutic. In 40 years, the same treatment had been used for acute myeloid leukemia patients. And it was very toxic. But Celator's products had clinical success, took 14 years, replaced the seven plus three regimen. And the joy for me, first and foremost, there is a new therapeutic on the market that's an option for 60 to 75-year-olds with AML. The financial success of that is two months after the clinical success, Celator was acquired by Jazz Pharmaceuticals for $1.5 billion, you know, from a numbers perspective, I can tell you between $140 and $170 million had been invested from seed to exit in the company, and they exited for $1.5 billion.
So when I'm asked what my success is, I always focus on the fact that there is a new drug on the market to treat the elderly with AML. Makes me weepy every time I think about it, because it's why you get into the business of healthcare investing.
Alright, well, let's come down to the miss then. You said there's the challenges of being a venture capitalist and just managing what you've invested in. But like, there's got to be a lot of stuff coming at you. What came at you that you thought, “geez, you know, I should have done that one, because that would have been another 10x return.”
I'm going to reframe the question, Peter, in terms of not so much about what I missed, but where I didn't get support to make an investment I desperately wanted to make. And that would be Aspreva.
So in, and I believe it was 2000 was the first time I met with Richard. And I spent two years, two years trying to get the deal done, two term sheets. They ended up getting a great group of angel investors out of Vancouver, did the deal on the back of my term sheet because I was trying to bring them in. That's the unfortunate pain of that as well. But the reason I couldn't get support is there was no precedent for the model of Aspreva. So you couldn't look in venture capital and see, “oh, how did this team, super smart team, experienced team pull off this deal with this one pharma company, where they had the financial rights to all of the upside for using this product in a new indication?” It hadn't been done before.
And so you were making an investment in people, it wasn't their product, it wasn't their research house, it wasn't their IP, the entire business of Aspreva, was built on the back of a pharmaceutical partnership, that it's never been repeated since because the numbers that were showing up and I can remember it like it was yesterday, and when I was presenting it to my team, it's like “look at this, they are going to get this x percentage of revenue of all global sales, and they don't have to prove it is specific to their application of the drug.”
So for me, that is a deep wound, because Aspreva went on to be a wild multibillion dollar success. And no venture capitalist in Canada went into that deal. I was the only one. So when they were successful, which is also a fun fact, because other funds knew I was trying to do the deal. I was getting all these accolades, like all these emails, like oh, my gosh, Brenda, your career is made, what a win. Didn't have dollar in it.
Sorry to open up the wound on that one. Feeling bad now. Let's look at something a little bit more current. So you go through the pandemic, what has the pandemic done in the investment world? And how has it changed? Are there things you're missing? How do you screen opportunities in a virtual world?
You know, the biggest thing that I miss is serendipity. Right? When you go to conferences, and whether you're speaking or you're listening, you're mingling, I miss the serendipity of connections, and you can't create that on Zoom, can't create that virtually. And I also would like to say that I'm pretty good at working the room, so I can see and I like watching who's interacting with who, and then going and sort of merging in conversations, because deals get done in these conference halls. And there is an energy that you can pick up on when you've been doing this for so many years. Venture capital is a relationship business. So missing those moments to develop those relationships organically, is a big deal, because it's the best way to find co-investing partners.
You're listening to Brenda Irwin, Founder and Managing Partner of the Relentless Venture Fund.
So, let's talk about when stuff actually does make it through. And it's not serendipity or maybe it is serendipity. But when you start to see something, that you think, “hey, you know what, this might make for an interesting investment.” And you mentioned the beginning venture capital, it's a risk business out there. So you're wired to take a risk. But how do you do that assessment? How do you do that risk assessment when you're looking at something that is totally new? You hear disruption, but how do you assess that?
Every VC will give you a different answer in terms of the step by step process. But I would hazard to guess that every VC is thinking risk mitigation. You always have risk. But where can you mitigate the risk?
So when you're making an assessment in the early stages, for me, it's back to the people business. So I'm going to give most people the benefit of the doubt that they're super smart, way smarter than me in their domain. And they should be because I'm not a domain expert. I'm an expert generalist. So I give them the benefit of the doubt of being the experts. But I will drill down very quickly into their understanding of their competitive ecosystem. So the dynamic and the interaction that I have with entrepreneurs at the very beginning, really bubbles to the surface pretty quickly in terms of how they respond to where they exist in the ecosystem among their peers. Because that can be pretty contentious. And it's pretty easy for me as a red flag early on, everybody has competition, and it's how do you understand where you stack up against them? Are you a superior strategy? Or are you a nice-to-have bonus feature? Venture capital does not do nice-to-have, again, coming back to the disruption.
So conversations, coachability, I'm an early stage investor, which means Cs and series A, we don't make an investment and go away, we make an investment and start working with entrepreneurs to help build value. So the coachability is important. And it's not, I know more, it's can we work together on moving this business forward. And then from a technical risk mitigation - is what is the expertise of the team? It used to be in the early days of my venture life, we would look at how many PhDs there are in the room. And that actually affected the valuation of a business as well as the risk mitigation.
The other area from early risk mitigation for me is, have they been able to get the attention of their customer? Do they know who's gonna pay for the product and the technology, the solution? And have they already established connections with them? That's a big deal. And coming back to even drug development companies, has this team managed to build a group that has been able to get the attention of decision makers and potential partners? And pilots are a good example of risk mitigation. If there are strong pilots with meaningful potential long term partners. That's another big check in the box.
Okay so, let's talk about sort of the money for investment out there. I mean, we've all read how hot biotech healthcare life sciences has been, in this past year, perhaps record levels of investments. So tell us about the prospects to invest in? Are there prospects for all this interest, and if you could access more money, are there still opportunities to be found?
The great thing about being a health investor is the need to improve health care is never going away. It's never going away, there's always going to be a need. And it is even heightened now, because of increased life expectancy, increased health care costs, because people are living longer.
And the other underpinning, even for the Relentless Fund, is the accelerating of the aging population. So every single day, I believe the status in the US at least is 10,000 people are turning 65 every single day. It's unprecedented. So you have this aging population, longer life expectancy, so longevity in the longevity economy, investors are finally paying attention to it. And so you need to address continuity of care. And areas that we're looking at to address the aging demographic and chronic disease management is, you know, behavior change. So from prevention, Can you change behavior to mitigate risk of developing diabetes or heart disease? Predictive Analytics, one of the companies we're looking at now, is actually doing an exquisite job of predicting the progression of CNS conditions. So the so-what of having identified an ability to be predictive around the progression of a CNS condition is that a clinician and the whole healthcare ecosystem can manage individuals differently and objectively.
So healthcare, the demand for healthcare, and growing healthcare has always been there. And maybe it's accelerating on this one. But I recall for years entrepreneurs lamenting the paucity of dollars going into life sciences and healthcare. Investors just stayed away, like real estate look great, you know, natural resources, IT - all kinds of things.
So what's changed or is, you know, is life sciences healthcare investment? Is that the new belle of the ball? Has the world changed? Will we continue to see more money? I mean, you hinted at, I think you hinted at when I heard you talked about the Relentless First Fund, so I'm thinking okay, there must be a second fund. Is this the new direction? We're gonna see more money going into healthcare and Life Sciences?
Absolutely. So the difference is - entrepreneurs couldn't find money before. It was super tough, like even three years ago, for health tech companies to find money. And the reason we are growing and launching to a much bigger fund is liquidity. So 20 years ago, the markets dried up. So Relentless, like any other healthcare fund, you get your money from limited partners and primarily institutional partners, or institutional limited partners, they have to see the potential for liquidity. And liquidity comes either in through MNA, or through the public markets. Well, the public markets dried up in the early 2000s. And there were tons of clinical failures. So the institutions ran away, and biotech was getting zero love.
The difference in the last couple of years, particularly the last 18 months in Canada, there have been wild successes and clinical success and public offerings, but also companies that have been public. The valuations have increased exponentially, and those translate to returns to limited partners, and the cycle begins in terms of interest rate. They want to get into the market. For digital health and health tech, where we're invested, the IPOs, the mega deals, the fact that the tech giants are coming into digital health, are all very good proxies for where we are and where we're headed. It's a very exciting time to be in health tech. And I don't have to be as scrappy as I was three years ago to get people's interest.
There's the line of the day, it's a very exciting time to be in health tech.
Okay, so we talked about aging and the demand, we talked about that there's a whole new interest in money going into healthcare, it's the exciting new area. But is it only aging, like what about millennials and their interest in terms of new technologies and the convergence of technologies? What about mental health we hear so much about? Are these hot areas too?
Mental health is one of the four pillars of our current fund. And last year was unprecedented in terms of demand for the millennial population to access care through technology. And the remote experience, the virtual care experience, is something that is resonating with the millennial population. And that demand is also only going to increase, which is also going to, in my opinion, I think force, the continuation of a hybrid care model.
And while some may say “oh, because of the aging population, or the older demographic, they're going to prefer going back to an in-person care model.” Hybrid care is definitely going to be the model moving forward. And a lot of that will be because of the demand of the younger population. And it's why, you know, for Relentless, we're eager to grow and put more capital to work and get that second fund launched.
We look forward to your success in bringing more capital to help healthcare innovations. You've been listening to Brenda Irwin, Managing Partner of the Relentless Venture Fund on the NPC Podcast. Thank you for listening.
Thanks to Brenda and Peter. Check out Brenda's website at relentlesspursuitpartners.com.
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One week from today is the National Pharma Congress Spring Webinar on May 12. You'll hear from Brian Heath at Amgen, Marissa Poole of Sanofi, and Eileen McMahon from Torys. On the theme of navigating pharma's post-Covid roadmap. Registration's free, go to www.pharmacongress.info and sign up.
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I'm Mitch Shannon of Chronicle Companies here in soaking wet Toronto. Your producer is Jeremy Visser. Our announcer is Liona Golfcart. The musical theme is performed by the NPC Podcast Orchestra under the direction of Maestro Christoph Millbrook.
Stay safe. We'll see you next week at the National Pharma Congress Webinar. And we'll talk to you again next week on the next NPC Podcast.