Episode 26 | Launching and Growing a Biotech Startup - Part 2

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Podcast Guest Speakers

William Bozza, Ph.D.

William Bozza, Ph.D. serves as a Program Director, managing a portfolio of oncology startups (SBIR & STTR awardees) to facilitate small businesses in technology commercialization for cancer diagnosis and treatment. Dr. Bozza is currently leading the center’s efforts on the Small Business Concept Award for early-stage high-risk/high-reward technologies that target rare and pediatric cancers.  He is also taking the lead on the program’s Peer Learning and Networking Webinar Series to help SBIR companies learn from peers and facilitate collaboration. 

Brittany Connors, P.M.P.

Brittany Connors, PMP, serves as the Director of Investor Relations at NCI SBIR. She has worked at NCI SBIR in various roles since 2013, playing a major role in the center’s Investor Initiatives program. She has maintained a vast network and works with more than 70 industry-leading investors and strategics each year to review the NCI SBIR portfolio and to select companies to attend and pitch at events like BIO.

Lu Alleruzzo, M.B.A.

Lu Alleruzzo, M.B.A. is a co-founder and the CEO of Immunophotonics. He received a bachelor’s degree in bioengineering and an MBA with a management emphasis from the University of Missouri–Columbia. He is presently an Entrepreneur in Residence for BioGenerator in addition to serving on the board for a commercial enterprise that generates $15M in annual revenue. Prior to employment at Cerner as well as HP and World Wide Technologies, Mr. Alleruzzo developed a surgical training device and conducted research at the Dalton Cardiovascular Research Center. 

David Anderson, Ph.D.

David Anderson, Ph.D. is the Chief Scientific Officer of Immunophotonics. He received his Ph.D. in Immunology and Microbiology at the University of Missouri-Columbia School of Medicine and completed a postdoctoral fellowship in Cellular and Molecular Immunology at the University of Colorado Anschutz Medical Campus. Dr. Anderson has held academic positions at the University of Colorado Health Sciences Center and The Scripps Research Institution. He has organized, chaired, and spoken at international conferences focused on discovery and development of novel anti-inflammatory/ immunomodulatory and cancer drugs. Dr. Anderson has refereed articles for peer-reviewed journals, has an outstanding record of scientific publications and presentations (35 peer-reviewed publications and over 50 presentations/abstracts), and has received several research awards and 10 patents for his innovative research. He built and managed innovative drug discovery and development companies acquired by Celgene Corporation, Cypress Bioscience, Roche, and Nalo Therapeutics (Samsara BioCapital). 

Programs referenced in this episode

Investor Initiatives 

Episode Transcript

BILLY BOZZA: Hello, and welcome to Innovation Lab, your go-to resource for all things biotech start-ups, brought to you by the National Cancer Institute’s Small Business Innovation Research SBIR Development Center. Our podcast hosts interviews with successful entrepreneurs and provides resources for small businesses looking to take their cutting-edge cancer solutions from lab to market. I’m Billy Bozza, a program director at NCI SBIR, and today’s host. In this episode we continue our discussion with Immunophotonics’ CEO, Lu Alleruzzo, and CSO, David Anderson on launching and maintaining runway for a biotech start-up. Without any further ado, let’s dive back into the conversation.  

BRITTANY CONNORS: So let’s dive a little deeper into investor fundraising. I know we’ve hit on a couple points now. But just generally, we can start with what are the types of different investors for smaller versus larger fundraising realms. What are they looking for and how do you understand what they’re looking for. And David, I know you mentioned the cycles of the industry, so how does that affect what these investors might be looking for at any given time? 

LU ALLERZZO: Yeah, so in terms of, this is a broad question because you could talk about it at different stages. So every single stage has a different investor network, as we’ve alluded to before, and you want to focus your network building on the next stage that’s coming ahead. So if you’re just starting out, angel investors, incubators. You know, you’ve established yourself, you have proof of concept, then you’re targeting more high net worth, you’re targeting venture funds, institutional investors. 

In the clinic, you're definitely targeting institutional investors or ultra high net worth individuals, people that can raise $3, $5 plus million dollar checks at a time. In terms of building those relationships, something that I have personally found, is that they’ve been on the jockey as much as they’re betting on the science. 

So as David was saying, you’re making these transitions, completely different paths. You know, you’re changing terminology. You’re taking that feedback very quickly and adapting. So making sure that your leadership team is solid and they know what they’re doing, but when you have those interactions with these different investors, you’re building that personal relationship because ultimately, they’re going to be able to be looking to you for success or failure. 

And you want to have people in your corner that when you’re failing, they know that failure is a part of the process. And they say okay, you know, what do we need to do to right the ship? What direction do we need to go to make this as effective as possible. Or, you know, they’re out, and that’s okay, too in certain circumstances. So you know, I can talk about, I don't know if you were looking to talk about different groups within that, but that was just very big picture. 

DAVID ANDERSON: Yeah, I think one thing that interests me a lot, and I feel like you’ve had a lot of success with, is the high net-worth individual group. I feel like a lot of people might not realize how impactful reaching out to those folks are. So how do you go about finding these people?

LU ALLERUZZO: Yeah, it’s interesting. It’s become more and more of a trend that ultra-high net-worth families and individuals are not necessarily investing through institutional funds or venture funds. Now let me be very clear. I think there’s a lot of value in venture funds and institutional funds because they provide deep experience in what you’re trying to accomplish. So I very much think there’s tremendous value in that. 

But to your point, we have been very successful in building networks and starting with an anchor point in different communities. And when you build a network, you’re adding credibility after credibility, so you’re adding layers of credibility. And as you’re expanding your network, you’re able to interact with people that have been there and have done that and have built tremendous businesses. 

So, for example, we have multiple billionaires that have been very fortunate to be investors in Immunophotonics. And you meet those individuals quite transparently where you would least expect. So, I’ve fortunately gone off and just forced an interaction with pretty much every single one of these individuals and that has led to follow-up conversations. Basically they’re 30 second interactions and you better have your 30 second pitch down perfectly because in those 30 seconds, you either captivate their attention or not, because these are not traditional people. 

They’re looking for very specific things and sometimes you’ll get their attention; sometimes you won’t. But you want to come across clean, crisp and clear with what you’re trying to accomplish. And if you capture their imagination and their attention, they will give you more time. And when I say more time, it’s the flip side of it. It’s not just hey, you know, give me the next pitch and I’ll write a check. But when these people get involved and they write a check, they also want to be much more intimately involved in your company. 

So I would be remiss if I didn’t say a number of these ultra high net-worth individuals are not communicating with me on a daily or multiple times a week to understand the progress of the business and how we’re continuing to move things forward. And that’s just some of the strings that come attached with those types of relationships. 

DAVID ANDERSON: Yeah, so one of the things, again, I already said this, but you need to know kind of where the investor, whether it’s a typical VC, high net worth or a pharma company, what are they interested in? And you can find that out by looking at their websites, looking at deals they’ve done, meeting with them at conferences. But if they’ve already done five AI deals, I don't know that they’re going to want to do another one. So you need to kind of understand what their interests are. They do like to double down in certain areas. So just because they’ve done a deal in a certain area doesn’t mean they won’t. 

But you kind of have to understand what their interests are. And we already talked about, there are cycles. Sometimes drug discovery platforms are huge and people will invest in new technology to find drugs rather than investing in developing a drug. And right now we’re kind of just moving, we’re still in the we want drugs cycle. I mean, the further along you are, the better. The more de-risked your asset is, the better. 

New platforms are now starting to come back, especially AI platforms and R and Ais. So there are different technologies that are getting funding, but you kind of have to understand the climate and the appetite of investors for what you’re offering. You can eliminate a lot of no thank you’s by not going to everyone, but selecting those that you have a higher probability of meeting what they’re looking for. 

LU ALLERUZZO: So to answer your question also, I was just thinking about Brittany, there’s obviously a lot of events that you can go to. You all go to a number of those events. And I think it’s important to be present where there is going to be those, where those interactions will exist. The challenge is, you can’t just rely on the partnering system, especially for a lot of these organizations or individuals. You know, they’re getting 500 requests. So don't be discouraged when no one responds to you because they responded to two of them and they’re taking those two meetings and then they’re going and then they’re looking for where those interactions, and they’re open to those interactions. So you have to put yourself out there. I don't care how you do it, but you have to put yourself out there and create the opportunities yourself because they’re not going to come to you. 

The second thing I would add is don't be discouraged when you don't get a response or someone says yeah, I’m really interested; here’s my information. And you follow-up three or four times, they don't get back to you. Still maintain your plan and your process for building that communication channel until they tell you to stop. 

Because I have found, it’s been very, very interesting, especially with the ultra high net-worth individuals, they are traveling the world. They’re invested in multiple businesses. They're building their empire. They’re counting their chips. When they get a chance to breath and look at their emails, they follow-up on the ones that are interesting. 

So I’ve had four or five, six, emails go unanswered, even with some funds, that do get back to you and have actually read your emails and have maintained the information associated with those emails. Not just going back to them and saying – hey, what’s up? I haven't heard from you. No, you’re saying hey, I wanted to update you. These are the things that we’ve accomplished over the last month. Obviously I’d love to keep you apprised of our progress. You expressed an interest. It would be fantastic to maintain this engagement and understand your perspective of these milestones. So you keep an appropriate friendly tone. You don't get discouraged and you just keep building those relationships.  

BRITTANY CONNORS: These are requirements we hear all the time. People say that they want more data, they go back, they want more data. So how do you manage that, and how early should you even start having these conversations? It is, you know, that feedback, is all feedback still good?

DAVID ANDERSON: Yeah. I mean, you’re right, they always want more data. You’re never quite there. But you know, you got to open the door and get your foot in the door and say, here’s what we’re doing, here’s where we are. And if they say, well, we need to see this next step, keep that door open and achieve the next step. And while you’re doing that, you want to sell them on your vision, your overall vision. Your team, as Lu already said, a lot of times people will bet on the jockey, you know. Is there a member of your team that’s been there and done that? And that includes some of your KOLs, some of your scientific advisors. You want to build a network of expertise that makes your company, even though it may be virtual in some ways, a powerful company with a lot of prospects, a lot of promise.

BILLY BOZZA: One follow-up question there, does it depend on indication, does it depend on target, does it depend if there’s monotherapy responses? Does the requirement of data shift a bit depending on some of these things, technology class as well?

DAVID ANDERSON: I would say yes to all of those. I mean, if you’re like the third generation of a specific drug, that’s going to be a harder sell because unless you’re dramatically improving on what’s out there, people are going to say, well we really don’t need that. And yeah it may work and it may be good, but do we really need another, you know, kinase inhibitor X? Obviously you’re going to get a lot of resistance when you say, well, I’m going to cure Alzheimer’s, or prevent Alzheimer’s. Okay, you show me. 

I mean, and there, you’re going to maybe have to get even into the clinic because what do the animal models mean? I mean, so it’s, every therapeutic area, every program that you may want to take forward, whether it’s a platform company, a diagnostic, or a drug company, they want more, they want proof. They want to see a de-risk program. So, having them say, no, we need more, is not a bad thing as long as you could say, well, what if we do this? They’ll say, yeah, we want to see that. You kind of start to negotiate what they will want to fund and keep that dialogue open and say, okay, we’ll be back. And you come back with a new data, and keep that dialogue going. Sometimes that seals the deal, sometimes it doesn’t.

LU ALLERUZZO: And don’t forget, those organizations are changing too. It’s not just, you know, not that they’re moving the goalposts that they used to, but maybe they let go of the champions and now you have to build new champions.

DAVID ANDERSON: Yep.

LU ALLERUZZO: And we haven’t really talked about champions too much, but champions are absolutely critical at every single institutional model biotech player.

DAVID ANDERSON: Right.

LU ALLERUZZO: Because they need to be speaking about your technology on an ongoing basis, and standing behind it whenever there’s an opportunity. And if they shoot at ten opportunities maybe they get one.

DAVID ANDERSON: Yeah. Yeah, I thought of a Ben at a company, ready to put down the terms of the deal and got news that, oh, that company just got bought by company X. The deal’s off. I mean, so, you can put a lot of work in, and meet all the goals, and still it falls apart. But then we went out and we found new potential partners and eventually got a deal. So it’s a tough business, not only just doing what you have to do to be successful, but getting partners, getting investors. There’s all kinds of reasons why it won’t work. But if you give up, you’ll never succeed. You’ve got to keep going. Believe in what you’re doing, follow the plan. You know, follow the science and have fun.

LU ALLERUZZO: And Brittany you brought up one question about is, can you go out too early? And unfortunately the answer to that question is, yes, you can. There comes with negatives by going out too early. However, I have found that the pros significantly outweigh the negatives. So, maybe I’ve burned a few bridges, which is fair and probably true because I’ve gone out too early and I’ve told the story and the story’s changed. 

But at the same time, building a history with these different potential partners I think has been more valuable for the ones that have sunk their teeth in and have wanted to see, why are you changing, why are you developing? And they want to see data-driven decisions. So as David was saying, following the science. At every step of the way you’re designing your program based on the data that you most recently received, combined of course with what you know about your drug. 

So I think it comes with pros and cons, and institutional folks will certainly tell you, you can go out too early, but I think you have to gauge that yourself and I would say put yourself out there. I think there’s more opportunity to come from putting yourself out there. There’s more unknown unknowns that are worth it.

BRITTANY CONNORS: Great. No, that’s great. And I think the putting yourself out there is so important. But what about people who lean more introverted? Did you always feel comfortable contacting people and knocking on doors, or did you develop that skill? And what advice would you give people who might lean towards the introverted? 

LU ALLERUZZO: Immediately get a partner. I mean, that’s a very simple answer. I mean, the bottom line is you cannot, my opinion, can you be successful with an introvert? Absolutely. But to build the business, you need someone that’s willing to do that, put themselves out there. So whether it’s someone that doesn’t have the skillset, but you think you can help them mature into it because you don't have the capital or resources. 

I think investing in students, but a student that has a long-term vision and an interest in partnering with you for the long-term is incredibly valuable. Of course, the dream scenario is just going to recruit someone that was a public CEO of a biotech and they want to go out and do it, but that’s not an easy thing to find. So be practical, but immediately you need to have someone that’s willing to go out and tell your story and go to conferences, force those interactions. Reach out to these people. Hear no 10,000 times and still be able to just say alright, let’s take the feedback we heard and keep moving forward. 

DAVID ANDERSON: Yeah, certainly selling a story takes a certain skillset. And if it’s a science-based company, obviously the scientists know the most about it, but a lot of times they’re not the best presenters or they’re not the best face for the company. So you kind of have to know the people that you want to put out front versus the ones that you can’t put out front. And it’s not a slap against them; it’s just recognizing what the company needs and who can best serve that task, especially when you’re the outside face going to investors, going to pharma companies, presenting the story and trying to persuade them to come onboard. 

LU ALLERUZZO: Agreed.

BRITTANY CONNORS: That’s great, thank you so much. And just to wrap up this investor section, I will just mention that at NCI SBIR we have an investor initiatives program. And so my job is to continually attend these conferences that we’ve been talking about and meet new investors and partners and let them know about our portfolio. So once you come into our portfolio, we’re constantly spreading that information to our network. And I will say we have a pretty expansive network. 

And then once a year we actually bring in about 80 people from that network to review our portfolio and to give eligible companies for this program feedback that they can potentially use to maybe pivot. And then part of this program is also, you know, if you’re selected based on this review, we actually send you to events like BIO and we’ll pay for your presentation piece and help you with any kind of networking that you might need. And so in that way we’re trying really hard to help our portfolio companies try and make these connections and establish some of these early relationships. 

LU ALLERUZZO: And investor feedback is just like your SBIR feedback; it can be all over the place. So you just have to take some of it with a grain of salt. And as David was saying, just continue to be driven on what you believe is the best path forward for making a difference in the world. And these programs have been amazing, so thank you for allowing Immunophotonics to be a recipient. I know it was peer-reviewed and decided on other people, but we really appreciated those opportunities. 

DAVID ANDERSON: Absolutely. So let’s talk about setbacks and failures. What are some of the biggest lessons learned from your experience in Immunophotonics, or even earlier in your careers? I know that’s a big one.

DAVID ANDERSON: I’ll start. I’m older than Lu. I’ve had a lot more learning experiences. One of the things, and again, it’s back to follow the science, I’ve been told by certain big pharma companies that the ideas we were presenting just couldn’t be done. They claimed the science was off. This reason you couldn’t do it, that reason you can’t do it. But we believed in what we were doing and we followed the science. We did the experiments that they said wouldn’t work. We didn’t go back and rub it into their faces; we just kept moving ahead. And eventually we found partners, actually multiple partners, for a technology that a high falutin’ chemist, and I won’t name the company, they don't exist anymore, but they said we couldn’t do it. 

And rather than folding up and walking away, it’s almost like emboldens you to go out there and prove you can do it. But again, it wasn’t a naïve thing, it was we knew the science, we believed the science. We already had evidence we could do it, but yet they said we couldn’t, but we did. So that’s a lesson learned. Again, it’s following the science and believe in what you’re doing and let the science tell you you can’t do it, and not somebody that doesn’t understand necessarily what you’re trying to do. 

LU ALLERUZZO: That’s great, Dave. And I think along that journey you probably at every corner encountered what most people would perceive as failure. Ideas don't work out, you get rejections, feedback, just like I think every entrepreneur has. Immunophotonics is no different. And so understanding or accepting that just like in science, it’s easy to say in science, failure is a part of the process. While you’re building a business, failure is also a part of the process, just like it is with science and you’re going to figure out your best path from those failures. 

The other side, I would say, is manage burnout. Burnout is a real thing for your team, for yourself. And you have to create opportunities for people to recharge and reinvigorate themselves and be able to put 100 percent in. Because you don't want people operating at 20 percent and just checking the box when they’re preparing regulatory filings, when they’re answering regulatory questions. One simple mistake can lead you down a five, ten-year journey of problem-solving that didn’t need to even be there. So you need to create an opportunity, I have found, to be very successful in this is recharge your team at the right time and know when to recharge your team that makes a big difference in your output. 

DAVID ANDERSON: Another lesson, I’m a scientist, so I didn’t think I’d ever say this, cash is king. You have to have money to do the work. And one of the greatest avenues is through the SBIR grants. It really allows you to find funds that not only allow you to do the experiments, but as I already said, it validates to some degree what you’re trying to do in the outside world’s eyes. And so having that avenue is important. 

And the other part of that is try to keep ahead of the curve. You know, you know there’s a lot of experiments to do, a lot of regulatory requirements that are very expensive, so you have to kind of keep ahead of that curve. If you run out of funds, then you basically stop. And you don't want to get to that point where your runway closes down. You want to be able to project into the future, what do we need to do, when, and how much do we need to do it then and you manage your cash as you move forward. 

LU ALLERUZZO: That was awesome. I was going to use that line, cash is king, so I’m glad (unclear).

DAVID ANDERSON: I took your quote away. 

BILLY BOZZA: No, not at all. I think we should do some questions from the audience now, if that sounds good to you all. 

LU ALLERUZZO: I think that’s what we were hoping for the whole time. That’s the most important piece. 
DAVID ANDERSON:    As long as they’re not hard questions. 

BILLY BOZZA: We will say. So Brittany and I will alternate the question asking. I’ll kick us off here. This one is about raising money and funding rounds. How often is it dependent on multiple investors? Can there be more than one significant investor in a funding round?

LU ALLERUZZO:    I would say it always should be more than one significant investor in a funding round. If you tie yourself to a single partner unless you’re perfectly aligned, which most likely you won’t be as things continue to develop, you’ll put yourself in a very difficult situation. So you want to make sure you have optionality and partners that see things differently. Because I ultimately also believe that having those difference of opinions leads to the best decision. Now the truth of the matter is typically you’ll go out and you’ll talk to a large number of groups, but you’ll have one individual that’s going to lead the round or a venture fund that’s going to lead the round and you build everything around them. 

And it could happen that you end up closing with just a single investor. In that circumstance, you just want to make sure that you’re balancing the structure of the organization to, you know, provide the optionality that’s needed as you’re moving forward with an organization. And I’d say most of the players see that. So most people don't want to be in single control. They recognize that when people, pharmas try to develop their own technologies, they haven't been as successful as I think people perceived originally in discovery. And that’s because you need that company dynamic, that academic dynamic to ultimately find the best path forward in the end. 

BILLY BOZZA: Crystal clear. So the next question is, in this case, the person asking the question has secured some NIH grant funding and now they’re wondering when is the right time to look at other investor funding sources that potentially could be dilutive. 

LU ALLERUZZO: Last week.  
  
DAVID ANDERSON: As soon as possible. It always takes longer than you expect to raise funds. So when you got money, start using it wisely, but start looking for the next round. 

LU ALLERUZZO: If you don't have a team member in your company that’s building those networks and building a network and going out and sharing your story right now, I would say you should do that immediately. 

DAVID ANDERSON: It definitely takes a lot more time than you ever expect to raise the next round. And the other thing is, the climate may change you know, in six months. So when the window’s open, you know, you go through it because it can close unexpectedly and then you’re left with no way to go forward, and cash is king. 

BRITTANY CONNORS: You should title it ‘cash is king.’ Okay, and kind of piggybacking off of that one a little bit. So after receiving a good score that was not funded through NCI, can we use that information to raise funds to de-risk the program or should we bootstrap and reapply for NCI SBIR? And I think re-apply could also be resubmit. 

DAVID ANDERSON: I would definitely resubmit, but I would use whatever you’ve put together as far as your rationale and your plan to go out and try to raise funds through other avenues. 

LU ALLERUZZO: I agree. 
DAVID ANDERSON: I’ve had grants that were definitely turned down, whether they were SBIR or NIH that resubmission got them funded. So if you believe in your idea, it’s worth going another round. 

LU ALLERUZZO: And I would add on to that. Once you have that constructed story, turn that into a short presentation. And depending on where you are, I would guarantee that there’s incubators. You should be interacting with those incubators as a first step. Because they might be able to provide resources for supporting SBIR rewriting or a grant writer, like David was talking about earlier. That can be tremendously valuable. And a lot of states also have state programs to provide capital for grant writers, companies, biotechs. 

DAVID ANDERSON: I even think you could use your information you receive from the NCI to say here’s what they said we need to do, so I want to raise the funds to do that. That could be a means to put your program together and go out and try to raise funds around that program, as well as resubmit. 

LU ALLERUZZO: Agreed.

BILLY BOZZA: As a program director, we always encourage our applicants to resubmit. We run success metrics on that and there’s always higher on the resubmission. So willing to respond to the peer review comments, getting some guidance and support from program staff that can really help in boosting peer review scores. 

BRITTANY CONNORS: And going back to data a little bit, what kinds of data are investors seeking, especially in periods of low investments?

DAVID ANDERSON: Clinical data. I mean, the bottom line is the further along you are, the more chance that you are able to get an investment, especially a significant investment. So yeah, keep de-risking the program. Keep advancing it. Keep showing you made milestones, you’ve achieved milestones. That’s what the story is all about. That’s what you need to convey to people. 

LU ALLERUZZO: And I think your advice before, David, was helpful in the sense of first obviously prove that your technology does what it says, what you believe it can do.

DAVID ANDERSON: Yes.

LU ALLERUZZO: And then the next time is outlining the regulatory path to get to the clinical trials, and then focusing on the research that you can even do in an academic setting that start moving the needle against those regulatory requirements. So yes, of course you need to have GLP Tox studies done, but that doesn’t mean it’s not, you can’t do safety studies in your own lab or research lab, collaborating labs that validate the path that you’re going down. Those things can be perceived as incredibly meaningful. So just take the resources, the network that you’ve established and do what you can to keep moving the needle forward and prove that you can do what you want to do and you say you can do, and then the second is moving towards the clinical programs. 

DAVID ANDERSON: And that’s where a clear development plan is so important. Not only do you know what studies need to be done if you’re following the guidelines, but how much is that going to cost you? And you don't need like three months of tox to start some programs. You may only need seven days or ten days. So understanding what’s required and how much that is going to cost you will show you where you’re going to get and that is a story you can tell investors. Because a lot of times investors think they know everything. 

I’m not trying to put them down, but they will say oh, you need GLP Tox, you need carcinogenic studies. You need all these studies. Well, no you don't for phase one. You don't need it for getting into the clinic for certain indications. So knowing that not only tells you what you have to raise, but it also I think it should generate some confidence in investors, hey, these guys do really know what they’re doing and that helps bolster your story and your credibility. 

BILLY BOZZA: This looks like a good one and probably tough to answer. So how do you determine what’s fair in equity when partnering with an inventor? I don't know what side that question is, but your perspectives.

DAVID ANDERSON: Well, I mean, Lu probably can answer this more. I mean, I’ve been an inventor. At companies you get a dollar and a thank you. If you’re like an academic, then it depends on the institution. But if you fully own a patent or invent something, I’m going to let Lu talk about this. I mean, it depends on the value. I mean, it could be a part of what you’re trying to do, or it could be the whole shebang. It could be the drug. So it all depends on the perceived value and then how much it’s going to cost to get there, what that might be worth. That’s my answer.

LU ALLERUZZO: I would say nobody looks in the rearview windshield. So everybody is looking through that front windshield and it depends on how involved and how critical those parties are in the next step. That’s the truth.

DAVID ANDERSON: Yeah.

LU ALLERUZZO: And I know it’s hard to hear. But if you’re going to be a hands-off inventor and you’re going to expect a team to take your technology forward as aggressively as you can, you should reset your own expectations on ownership then. If you’re going to be intimately involved and an equal partner, well that makes sense. And so I think it’s all forward-looking. And then when investors get involved, it gets much more – it’s actually not much more complicated; it’s much more clean from an okay, who’s going to drive this to the next milestone and the value inflection that we’re going to create over that time period and who’s going to be creating that value inflection. Those are the people that are rewarded and deserve to keep the whole process moving.

DAVID ANDERSON: And another way to handle it that I think is fair is it could be based on achieving certain milestones. 

LU ALLERUZZO: Absolutely.

DAVID ANDERSON: Because it really does generate more and more value, it should pay the inventor more and more. If it doesn’t generate the value, then they get less. But I think that’s a fair way to handle that. 

LU ALLERUZZO: Yeah. And I will say I’ve been involved in the formation of a few other companies and it is a discussion that should happen upfront on day zero. So the people that you bring around the room that you want to start this company together, what is the one year, five year, ten year plan look like in terms of okay – and you can use generic numbers, but we’re going to raise this amount, we want to dilute this. So you get an idea of what the dilution actually looks like over that time period before a realistic time for an exit. 

And just accepting that on day zero and then going into it with eyes wide open and being forward looking as an inventor or as a founder, and accepting the dilution that’s going to come. Ultimately [unclear] your asset as find as you can to, again, benefitting society, which I think is the ultimate goal. Yes, we all want to make money and do well, but the ultimate goal we’re all in this for is to make a difference. 

DAVID ANDERSON: Yeah, and I think being transparent and open all the way through the process is key. 

LU ALLERUZZO: Yeah.

DAVID ANDERSON: So that the person that’s saying what do I get, they know what they get. All along it’s not a surprise at the end. 

LU ALLERUZZO: Yeah, agree. 

BILLY BOZZA: This is a good question. I skipped down to the bottom here. So how challenging is it to convert an investigator initiated IND into a commercial IND? Either of you have experience in doing that?

LU ALLERUZZO: Well, I’ll tell you that’s, first off, whether you do an investigator IND or a sponsored IND, that certainly, there’s lots of different opinions on that front. The bottom line is if you can go with a sponsor-driven program, it’s much more accepted by the agencies and you can stand behind them in a more powerful way. That being said, you know, I believe investigator initiated INDs have a very valuable place for biotech companies. 

It is a strategy that once you get to the point where you can open an IND, even if you don't have the money for clinical trials, you should go into that, but be aware that as stringent as you are on the sponsor-driven program, you should try and be on the investigator IND program because things that happen there can have just as equal implications for your organization. 

In terms of converting it, it’s a process. So it can be done. Obviously it has to be at an appropriate stage. So you finish phase one and you want to move into a sponsor-driven phase two portion or a phase one-two, you know, you can go through that process. But you’re halfway through phase two and you make it a sponsor-driven program, it’s going to be looked at very differently. So you want to try and make that decision as quickly as you can. 

In terms of a cost standpoint, yeah, obviously you’re looking at multiples in terms of the cost implications when you get to a sponsor-driven program. The sponsor has to cover the insurance, the regulatory requirements. It has to be the agent that’s communicating with your regulatory bodies. Has all the safety data, controls the safety database. I mean, there’s a lot that comes into account with that. But it’s not a process that you should be wary of if you have the capital or the partners that want to do that. 

BILLY BOZZA: Excellent, great. 

DAVID ANDERSON: Yeah, I’ve had experience with that. It really depends on the quality of what the investigator did. If they did good quality work, even if they don't have all the records, like maybe the FDA would require, it can be repaired. But sometimes it’s such a headache because they just did not keep good records that it may be too expensive and it’s better just to do it over again, especially if it’s still early, phase one. As Lu said, you get more into phase two, longer down the pipeline, then it’s a lot more expensive and maybe more difficult to repair. 

LU ALLERUZZO: And it’s really a shame that investigators don't use the free tools for data management and data capture that exists in universities. I mean, it’s a very simple, a Catch-22 word. But it is a fairly straightforward process to leverage those tools that are already available in most academic institutions and adds orders of magnitude to the study that’s going on. And if you want to make changes, like the change in this question, you can certainly do so and use your passion. 

BRITTANY CONNORS: So this one is a little bit of an example from somebody, but I feel like it might apply to other people on this call. So they said – we have preclinical data showing the ability to stop colorectal, triple negative breast cancer and malignant melanoma. This involves custom produced antibodies for each tumor. We have leveraged new technology for rapid manufacture of small batch antibodies and have delivered to a patient. Phase one trial approved by FDA, but too risky for investors because it is not a single tangible product. So now they’ve hit a risk wall and don't know where to go from there. So do you have any recommendations on possible next steps? 

DAVID ANDERSON: Well, my recommendation would be to talk to the pharma companies, not investors. If they’re like antibodies, those are near products. That’s my opinion just without knowing more details. That if you have a drug candidate that you already have efficacy or safety in humans, that’s more in the purview of a pharma company. Investors, again, there could be some that would be interested, but I would think talking to pharma companies that have antibody drugs already in those therapeutic areas would be the most likely ones to want to pick this up and take it forward. 

LU ALLERUZZO: The only thing I would say is widen your net. If you hit 100 investors, that’s ten times too little. If you’re telling me you’ve gone to 1,000, 1,500 investors across the U.S. and Europe because they are there, then unfortunately you’re going to have to rely on other mechanisms to fund this, whether it’s grant opportunities or maybe target specific family offices or move towards non-profit organizations focused on those disease states. You’re going to have to go a different avenue. But increase your net. I mean, if you’re seeing efficacy and you believe in that efficacy, it makes a difference in patient lives, you should keep pushing. 

BILLY BOZZA: Yeah, depending on stage of development or what type of the next work is, if it’s additional preclinical or clinical, the SBIR program can fund some of those things. Our phase two award is a $2.25 million dollar award and we do fund early stage clinical trial work, components of it, anyway. You can always reach out to our office. We’ll put on at the end of this last slide as our staff level email box and you can always reach out to a program director, too.

DAVID ANDERSON: Yeah, the area of antibody drugs, I mean, it’s huge. I mean, the BI-Specifics, the ADCs. I mean, it’s growing and growing and growing. And by the way, at one point in my career a consultant said monoclonal antibodies won’t work. They’ll never be drugs. So again, believe in what you’re doing. Some of the pharma companies have their own venture funds and maybe those would be better targeted than traditional VCs. 

BRITTANY CONNORS: Great. So when writing SBIR grants, who should we address when writing the application? Should we address the scientific review panel or focus it on entrepreneurs? Should it be more like an R01 or a business plan? Did you have any sort of strategy when approaching your SBIR applications? 

LU ALLERUZZO: Is this for us? 

BRITTANY CONNORS: Yes.

LU ALLERUZZO: Wonderful.

BRITTANY CONNORS: I think we can all agree that it’s probably more business-focused, but did you ever get any feedback, I guess, that would have prompted you to tailor your application in different ways? 

LU ALLERUZZO: I mean, without question we tailor it to the feedback we received and I’d say 50 percent of the feedback was scientific. So it’s very clear that you want to be tailoring your actual research activities to the scientific community and to your peers that are going to be evaluating the research that you want to go down. But you need to demonstrate, at least this is our strategy, that what you’re trying to achieve does move the needle in moving your technology towards the clinical trial and towards future investment support to ultimately gain market access. So I think it’s fairly straightforward in terms of leaning towards the business and vetting your business strategy. So if you take a generic commercialization plan and you hope that that’s going to be sufficient, I would say that’s probably not going to work out well. 

DAVID ANDERSON: Yeah, I think that even though you may have incremental steps in the science that the final outcome of that grant needs to show it has some significant value in moving the needle on the technology. Or if it’s a drug candidate, that drug candidate, that you really are making a difference with the funds you get. 

BILLY BOZZA: I can just add too, you know, R01s, NIH is able to fund advancement of knowledge gain. But for SBIR, it’s really focused on product development, all of your aims, objectives, should really be geared towards that. That’s something we always kind of preach. In terms of peer review, keep in mind there are special emphasis panels for the study sections that SBIR grants that end up getting funded. So there will be a mixture of folks that are a little bit more academic, and those that are a little bit more entrepreneurial. 

So it’s just kind of like Lu and David is saying, somewhere in the medium. You don't want to neglect either of those two areas, I would say. And then in terms of commercialization plan, that’s required for all phase two SBIR applications, and I’m putting a link into the chat. We actually had a previous planned webinar topic on how to write a commercialization plan, so some good lessons learned from other C-level executive folks from other SBR awardees. 

LU ALLERUZZO: And just a random comment. Certainly, myself or David on LinkedIn, and you can see the type of information that we share for investors and the type of events that we’re attending. And I will say that that’s a good way to see as you’re maturing as an organization, the type of exposure that you want to create. Now, I’m not saying we’re perfect. Don’t get me wrong. We’ll make plenty of mistakes in the process. But I think it’s a good foundation and a good example for those wanting to create a biotech company. 

DAVID ANDERSON: The other thing you mentioned, the business aspect versus the science. A lot of scientists, they have great ideas and they have an idea of where it may end up commercially, but there may be even more opportunities that they don’t even consider. And that’s why it’s good to network and talk to other people about what you’re doing and where you think it could go because that might open up new avenues and new opportunities that you didn’t even think about.

BILLY BOZZA: The question has come in: does the technology have to be in a, to quote, “perfect form,” before trying to commercialize it?

LU ALLERUZZO: If it’s in perfect form you should have a billion dollar company already. So that’s definitely just start with where you’re at and keep moving forward on that commercialization or on that development plan that we keep kind of mentioning. And to be frank, you don’t know what perfect form is, because perfect form is going to be those that ultimately fund it as well and that’s going to evolve your vision every step of the way. 

DAVID ANDERSON: Yeah. And to me that implies it’s a platform rather than a drug candidate or a device and platforms always evolve. I mean, that’s how drug discovery has evolved over the years. I mean we used to just put the compound in the animal and see if it worked or not. Now, you know, you’ve got all kinds of sophisticated tools to design the drug on the target. AI to help you select a better compound based on physical chemical properties. I mean, there’s all kinds of pieces you could attach to your platform, your approach, to make it even better. So, yeah, improving your platform is a continuous process.

BILLY BOZZA: And maybe, we’re almost at time, maybe one more question and then a couple of closing sentences. How do investors view having a university on the CAP [phonetic] table on the biotech?

LU ALLERUZZO: I don’t know if I’m appropriate to answer the question. I have found, we don’t have a university on our CAP table. That’s a story for another time. But I will say that investors have been very curious why that is and how we structure it the way that we have. And structure matters. And it’s been very valuable not having different interests that are pulling things in different directions. So again, investors want to make sure interests are aligned for the front of the windshield, and what’s forward-looking and you want to try and remove as many obstacles as possible to achieving those objectives. 

So I wouldn’t say it’s a killer to have a university on the CAP table. I would say the way the university’s involved, or the value that they’re bringing on an ongoing basis, ultimately determines how much ownership they should retain or what type of structure is more appropriate going forward.

DAVID ANDERSON: Yeah, that’s not my area of concern, but I have had experience. Some universities, some states, are more onerous in what they want. And I won’t name states, but it can be a challenge. I think most universities have come to their senses. They realize that the technology is not the product necessarily; it’s a means to an end. So they’re more reasonable in what they expect. 

But if they are part of the structure, you have to deal with that and make sure they’re not overreaching, and that it harms your structure of going forward. Because some investors may say, oh, this entity has too much control and so we don’t want to get involved with that. So, that’s even part of your negotiation with a university, that you’re grabbing too much right now could poison the well for potential investors down the road.

LU ALLERUZZO: And that’s where network is so important. So as you’re negotiating your relationship with your university or a university, definitely engage with other biotech CEOs who have gone through this process.

DAVID ANDERSON: Yes.

LU ALLERUZZO: And give you feedback on what you’re negotiating. Because I’ve helped some people with that and my interchanges that have had a huge impact, without question. So you really need to be forward looking in that structure. 

BRITTANY CONNORS: That’s a great point, Lu. Do you have any recommendations for how to seek out peer groups or other CEO groups? Because I feel that those could just become increasingly important to be able to just connect casually with others going through the same thing.

LU ALLERUZZO: Yeah, I think it’s again, just – and even my closing thought is network is everything. And you know, there’s so many ways to build that network, whether you’re reaching out, people want to help whether it’s on LinkedIn, whether you’re showing up at events that are biotech focused. You know, even traveling regionally to major events like JP Morgan or obviously there’s just an event that happened in London, a healthcare event. I mean, there’s incredible events where you can create those interactions. 

But I think if you’re just starting out, then we’re talking kind of basic academic that’s trying to figure out how to create their company, you should be reaching out without question to the incubators in your community. You should be reaching out to what companies in research and what companies are established. Because I can guarantee, you will find biotechs in your regions that have been established, and adding those people on LinkedIn or reaching out to them through a friend to try and build that relationship. People will take you to lunch, take you to coffee. Offer to take them to coffee and build that relationship. 

DAVID ANDERSON: Yeah, I agree. There are a lot of conferences that actually have forums for interacting, for learning, from existing company’s CEOs, CSOs. So networking is super critical, whether it’s at a conference or just direct reach out through different processes. But if you live in a region that has existing companies, try to meet with people in those companies and pick their brains, ask questions. Because most people really do want to help. They understand. They were helped along the way and they want to give back. So it takes a little networking, but it’s worth it. 

BILLY BOZZA: Thanks again, Lu and David, so much, for sharing these experiences with our audience. As always, don't forget to check our website sbir.cancer.gov with the latest funding opportunities and commercialization resources to support your journey from lab to market. This was Billy Bozza from NCI SBIR. If you have questions about cancer or comments about this podcast, email us at nciinfo@nih.gov, or call us at 800-422-6237. And please be sure to mention Innovation Lab in your inquiry. We are a production of the US Department of Health and Human Services National Institutes of Health, National Cancer Institute. Thanks for listening.