By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
Removing his Stetson, Tony Brazzale steps to the podium. The president and CEO begins his 15-minute PowerPoint pitch for why you should consider investing in Gordian Biotechnologies, his second biotech start-up. It’s the kind of presentation that’s being given formally and informally throughout San Francisco during the week of Jan. 12, 2015, as the city hosts both the 33rd Annual J.P. Morgan (JPM) Healthcare Conference and the 2015 Annual Biotech Showcase.
Brazzale is seeking funding for his company to develop a new generation of beta-lactamase inhibitors to allow existing antibiotics to once again be effective against drug-resistant pathogens. Although his schedule is tight, I convince him to share 15 minutes for an impromptu interview. My goal is to talk with someone who has been there, done that, and then share their insights with any of our readers who daydream about starting their very own biotech but have yet to take the plunge.
What’s Holding You Back From Taking The First Step?
Many Americans talk about their desire to be self-employed, but only about 6 percent of the population ever act on their longing. What is holding people back? Perhaps it is the often-cited statistic of 80 percent of start-ups failing within the first 18 months. “Don’t let this number scare you,” says Brazzale. “It [failure] is actually probably closer to 93 percent in biotech.”
Like many entrepreneurs, Brazzale is used to living on the brink of going out of business. So far he’s managed to keep Gordian going for a full year on a $50,000 investment. He says if you’re going to ask people for money to support your new venture, the most important thing you can do is conduct a comprehensive market analysis. That market analysis should include an industry description and outlook, information about your target market (e.g., distinguishing characteristics of potential customers, size of primary target market, growth forecasts, pricing, gross margins), and a competitive analysis (e.g., strengths, weaknesses, barriers to entry, regulatory restrictions).
“You need to do a market analysis to figure out if your idea is (A) a problem in search of a solution or (B) a solution in search of a problem,” he states. “You need to make sure there is a problem. Then, you need to make sure your idea has the potential to solve whatever that problem is.” Brazzale uses Gordian Biotechnologies as an example of this process. He explains that he started out as a bench-level chemist in antibiotic drug discovery. “In the 1990s we knew antibiotic resistance was a fastgrowing problem that got worse when pharma moved to the blockbuster model and began developing lifestyle drugs and abandoning efforts in antibiotic discovery and development,” he says. Though he knew there was a problem and an unmet medical need, it wasn’t until he was working with the University of South Florida’s Tech Transfer Office (TTO) on a totally different project that he became aware of a possible solution. “They asked for my opinion on an asset within their portfolio described as a nonbeta-lactam containing, noncovalently bound, reversible beta-lactamase inhibitor [BLI] with activity against resistant bacterial strains. Looking at the data, I was fairly confident that this ‘had wheels.’ Then they asked if I was interested in forming a company around the portfolio and running with it.”
That led to the prerequisite negotiations around exclusivity, terms, and licensing, all of which ended up being the easy part of setting up this new company. Brazzale soon discovered that funding would become his biggest challenge. “It’s important to recognize that if a TTO is overvaluing an asset, it is often hard to raise money from the bottom of a hole, because the value is created by the company working on the development,” he says. “Make sure you are working in partnership with your licensing officer, and maintain a positive relationship with the TTO.”
He adds that one of the biggest mistakes biotech start-ups make is confusing the company’s value as being the drug. “The clinical value your product brings to patients, and once marketed, returns to investors — that’s your value,” he explains.
Step Two, Build Your Staff
Once you have completed your market analysis, Brazzale says the next step is to surround yourself with people who are smarter than you. “You want people who are experts in the areas where you are weak. You need to understand just enough about what it is they do to be able to translate this information between knowledge silos.” Brazzale refers to this as playing to your strengths. One of his strengths is public speaking, a skill that comes in handy when seeking investors. “If you can’t present and hold the attention in a room without people falling asleep, then you need to find someone who can, because you will be doing this [i.e., marketing, presenting] — a lot.”
How do you find good people? Brazzale says this is where networking comes in. For example, when he needed a CFO, he tapped Peter Gordon, whom he had worked with at his previous company, Melanovus Oncology. He filled other positions with more past colleagues and from recommendations from people he trusts. In 2000, he took a big step in building his professional network when he became a member of the younger chemists committee of the American Chemical Society (ACS). In 2010, he took on the role of public relations chair for an ACS technical division. His advice is to take on similar opportunities to build your network.
How Are You Going To Finance It?
Of course, there is no single answer to how much money you’ll need to start a biotech. The same is true for how to finance your new company (e.g., bootstrapping, friends/family contributions, outside investors, etc.). The more important question, according to Brazzale, is how much money will it take for the risk line to fall below the market line. “That’s when you most likely get acquired or licensed,” he attests. “But this requires a healthy appetite for risk; it’s not for the faint of heart. Investors want you to sweat to see if you’re just involved or if you’re committed.”
For Brazzale, the model is simple: If you’re going to fail, fail fast, and fail cheap. Conversely, if you’re going to succeed, do so quickly and inexpensively. The way to do either is by reducing risk through good science, conducted by a good team that can generate good data, while wisely using investors’ money. For example, when Brazzale was getting started, he used a website called fiverr. com. “Anything for five bucks, though you will have to pay for the premium services,” he says. This is where he went to get the company logo designed. For his first trip to a show, he wanted to be sure to have professional-looking business cards with an email address that didn’t have the domain name of gmail or aol, but gordianbio.com.
Where To Find The Funds
There are three key conferences Brazzale believes should be on the calendars of every biotech start-up. The first two are the aforementioned JPM Healthcare Conference and the Annual Biotech Showcase. The third is the Redefining Early Stage Investments Conference put on by Life Science Nation in Boston in September. “I found that one to be phenomenally helpful,” Brazzale says.
He adds that sometimes you don’t even have to pay the often pricey registration fees that accompany industry conferences to still get the value out of them. “Last year when I was forming Gordian, I didn’t register to attend any of the conferences, but I went anyway and networked in the lobbies because everybody I knew was going to be there.” In fact, being in San Francisco in January 2014 was pivotal to building his board (via in-person meetings) and further strengthening his network.
In addition, he suggests finding a conference that’s relevant to your therapeutic area. “Some investors only invest in one therapeutic area.” If you have therapeutic expertise, volunteering to moderate a session or serve on a panel can lower your costs. If this is not an option, be sure to register early to get the early-bird rates.
"The clinical value your product brings to patients, and once marketed, returns to investors — that’s your value."
President and CEO of Gordian Biopharmaceuticals
Another tip from Brazzale on finding investors is to read The Halo Report, produced by the Angel Resource Institute. “Eighty-five percent of angel investment happens in the angel’s backyard, so you need to have some focus on your local angel groups.” You can find many of these groups through online searches. But be aware that many angel groups or angel forums are composed of service providers. Brazzale notes service providers as being very important as they are often the trusted advisors to investors. “If you want to get to an investor, it’s easier to go through an introduction from somebody they trust as opposed to just cold calling.” That being said, Brazzale says you’ve still got to be willing to do some cold calling.
Taking the plunge into starting your own biotech is certainly not easy, nor for everyone. But if you do, Brazzale suggests you consider adopting a mindset similar to that of the Spanish explorer Cortés, who upon reaching the New World is credited with burning his ships as a means of motivating his crew. “Investors are leery of people who are only half in and don’t want to work with people who don’t have any skin in the game.” In other words, if you want to get your “skin in the game,” you need to have a no-turning-back mentality when starting your own biotech.
ARE YOU PREPARED TO SELL THE SIZZLE OF YOUR SCIENCE TO INVESTORS?
Shortly after concluding my discussion with Tony Brazzale, president and CEO of Gordian Biopharmaceuticals, out of the corner of my eye I see Jim Hamby, Ph.D., VP of business development for Ash Stevens, a CMO exhibiting at the 2015 Biotech Showcase. I invited the former Pfizer medicinal chemist with over 25 years of industry experience to share his perspective on what he looks for during investor presentations. “A lot of times it’s the technical part that stands out to me,” he says. “Do I think it is an important product? Is there a commercial demand for it? Is it something that has solved a big problem? Is there a big unmet medical need? Is it a totally novel idea? Do they have a first-in-class something, with solid-looking science, that’s going to beat whatever is out there? Those are the things I look for.”
Hamby admits he pays close attention to the science. “Scientists are very detailed and can ask questions that get into the nitty-gritty to understand the technology,” he explains. “It’s totally different at investor conferences where you usually have a CEO, head of business development, or chief scientific officer often presenting everything in its best possible light.” According to Hamby, investors place a great deal of emphasis on the quality of a biotech’s leadership team. And while he agrees that demonstrating capable leadership is important, he says not to overlook the significance of being able to credibly present the quality of your company’s science. “A few years ago, I was at a meeting where a presenter was saying they had this orally active antisense therapy,” he recalls. “No one has ever been able to make these things orally active, and here is this person standing up there saying they had. And yet no one was asking how this was possible. So I raised my hand and said, ‘How did you solve this problem, because for years in the industry people have been struggling with this?’ And he said, ‘Oh, the technical guys did that.’” According to Hamby, someone from a large pharma came up to him after the presentation to thank him for asking such a good question.
Here is an important point for biotech start-ups to understand when giving presentations to investors — the phrase “sell the sizzle, not the steak” was coined by stockbrokers, not advertising or marketing folk. Because this is how investors think, you must be able to sell the sizzle of your science in small digestible pieces so investors can understand and get excited about your company. Compare what you are trying to do to an everyday product or technology the majority of the audience can relate to. Expect the unexpected, such as someone asking a highly technical scientific question. If these kinds of questions are outside your area of expertise, be sure to have someone waiting in the wings who can address them. However, even if it is your area of expertise, you might not have enough time to answer it effectively. In those instances, it never hurts to ask people to meet you after the presentation for additional clarification and questions. By doing so, you’ll never have to dismiss questions with an answer like, “Oh, the technical guys took care of it.”
HOW TO MAXIMIZE YOUR TIME — AND MONEY — AT TWO KEY BIOTECH SHOWS
Tony Brazzale, president and CEO of Gordian Biotechnologies, believes every biotech start-up CEO needs to attend the JPM Healthcare Conference and the Annual Biotech Showcase in San Francisco. But he says only do so if you have a very strategic plan, and that starts with booking your hotel room early. “You don’t need to stay in an expensive hotel,” says the budgetconscious CEO. “If you work the show right, you will be in your room only in the middle of the night, anyway.” Further, Brazzale says don’t be above using public transport or sharing cabs, as either provides the opportunity to practice your pitch while saving you money.
He suggests you start scheduling meetings for JPM right after Thanksgiving. And for the Biotech Showcase, as soon as the partnering system opens up, start doing your research and request meetings. “Often you get the name of the company or person but not enough information to know if you should be bothering them or not. There are some people who will only invest within 10 square miles of a city or a certain disease area,” he reminds. Many of the partnering systems are blinded. “Sometimes you’re getting emails, sometimes not,” says Brazzale. “Try to direct people to contact you outside the system so that if there are no meetings available within it, you can find another good time to meet.” You also will find yourself scrambling to try to figure out what receptions are happening and which to attend. You want to make sure you choose the ones that give you the greatest opportunity to network with the people you need as investors or partners. “If you’re not conducting six meetings or more a day, you’re not having success.”
And where do you hold these meetings? Some hotels will rent meeting table space by the hour. However, there are other options, such as Lefty O’Doul’s Restaurant & Cocktail Lounge, which is right across the street from JPM. According to Brazzale, you can keep a table at Lefty’s as long as you keep buying drinks.
TIPS FOR BUILDING YOUR FIRST BIOTECH BOARD
When building your biotech board, Brazzale has three tips. “Keep the board of directors small,” he says. “Because investors are going to come in, and they’re going to want a board seat, assuming they bring in enough money.” He attests to having gained this wisdom from his experience at Melanovus. His second tip is not to put anybody on your board who’s not going to bring value in one way or another. “Some will bring money, others expertise, but all should bring a rolodex of contacts that can choke a horse,” he says. Finally, figure out how you are going to incentivize your team, either through equity or payment. “Having a really good incentive program for your board gives people confidence there’s going to be a payout at the end of it, especially if they are coming in for equity,” Brazzale states. “Then as the CEO, your job is to get out of their way, while making sure they are all working together.”