[Second of two parts]

Vijay Pande, PhD, a general partner at a16z and the founding investor of the firm’s Bio + Health Fund, discusses the trends he’s seeing in biotech and healthcare, how the recent market decline will shape investing, and what his firm seeks from startups seeking investment capital. 

In Part II of this exclusive interview, Vijay Pande, PhD, discusses how close gene editing is to mature therapeutics; the future of bespoke or artisanal medicines; the source of future disruptive companies; and what a16z looks for in the companies in which it invests. Read Part I here.

(This interview has been lightly edited for length and clarity.)

GEN Edge: What sort of trends are you seeing in biotech and healthcare?

Vijay Pande, PhD, a general partner at Andreessen Horowitz (a16z) and the founding investor of the firm’s Bio + Health fund

Pande: There are a couple of things that are cresting right now. Gene editing has been around for a while, but I think it’s at the point now where the therapeutics that are in the clinic or are about to go in the clinic feel like they’re starting to mature. Especially once that matures, there’s going to be something that happens quite rapidly.

Imagine the first Model T. Once you had the first cars in the transition to automobiles, successive iterations of improving automobiles happened quite rapidly. And because you can improve part of it—you can improve the engine or the transmission or whatever in a car—you can roll out successive gene therapies by improving the editor. Or you can improve efficacy or off-target edits. Or you can improve delivery, you can improve the guide. And now you’ll be able to iterate. So, once that gets out, we’re off to the races in gene editing. These things will come to market quickly.

Also, a lot of times, trials fail because of unknown biology. So, many examples here from monogenic diseases, where we know this gene is the gene, and we know this is the problem. Often, it was just, “How do we hit this?” And now we know exactly what we can do. So that’s a very different paradigm.

If you think about gene editing, it’s engineerable, which means you can iterate and improve. You can get to market faster. You have very well understood biology. All of that is also going to be seen on the RNA side. We’re seeing this engineering mindset in both, and frankly, also, heavy machine learning in each one of those areas as well.

GEN Edge: Isn’t that already starting with COVID?

Pande: COVID, I think, is the simplest example where, I think, we’re off to the races.

GEN Edge: You said gene editing treatments are maturing. Is it fair to say we’re close to that maturing point given that Vertex Pharmaceuticals and CRISPR Therapeutics plan to complete their regulatory filing for the first gene edited therapy (exa-cel) by the end of the first quarter?

Pande: We still have some time. Right now we have the first early examples in gene-edited therapy, meaning about five years off for patients. For an investing point of view, we’re right in the thick of things.

To my previous point, once you get going, I think there’s going to be a pipeline of advances coming down the pipe, such that you will see much more rapid advancement. If you think of it like the advancement of the development of small molecules, there hasn’t been this ability to iterate and improve. And that is going to be fundamentally a thing—going from a bespoke artisanal process to something that looks much more like engineering and manufacturing.

GEN Edge: Is the artisanal medicine on its way out or is there still a place for it in some indications?

Pande: I think it will eventually be on the way out, but this may be 20 to 50 years from now, probably more like 50 years. I should stress, there is a lot of biology that we don’t know, and AI is going to be helpful for understanding and exploring that. But there’s probably so much to discover still that basic research, I would bet, will be around for quite a while.

So, it’s not about “When do we switch over entirely to this?” Rather it is, “When do we start seeing the initial gains?” And the areas that can ride on those curbs, that can switch from the bespoke part to the industrialized part, those areas will see rapid takeoff.

Then the question will be, what can we hit with gene editing? What can we hit with mRNA? Can we come up with an mRNA vaccine for cancer? Those will be the type of questions. What can we do with these technologies?

GEN Edge: Speaking of a vaccine for cancer, several companies—Merck, Moderna, BioNTech—are in early to middle clinical phases, with some promising data till now. Is that finally arriving?

Pande: We’ll see how they do in the clinic. But the thing about it intellectually, it does feel like it’s quite a reasonable proposition. It’s a very exciting time.

GEN Edge: How has the decline of public markets in 2022 changed how a16z has approached investing in the life sciences and healthcare?

Pande: When you look at analogous times, like 2001 and 2008, those were great times to build companies. What happens during the “frothy” times is that a lot of money goes in, there’s a lot of noise in the market, and a lot of the talent becomes very diluted between multiple companies. That’s actually a problem, because now you have all these companies where talent is split between them that are competing with each other. I think the current market will actually encourage those people to build one company with an all-star team together. Those companies, I think, will be exciting to invest in.

When we look back five years from now, this will be a moment like 2002 or 2008, where biotech and healthcare’s Googles and Amazons and Apples will quite possibly come from, especially since it’s coming at a time where the technology is so ripe and ready to go.

GEN Edge: Do you anticipate those Googles and Amazons and Apples will be challenging the big companies of today? Or will one of those big companies you mentioned be getting even bigger?

Pande: It’s an interesting question, and I think these technologies are so different that they’re going to come from—this is standard disruption theory—new companies. It’s funny, because no one ever thought Microsoft could be disrupted, and then here comes Google, and no one thinks Google could be disrupted, and then here comes, who knows, maybe ChatGPT, there’s something there?

You see companies like Google, Amazon and Apple very excited about healthcare, and even life sciences in some cases—Google, for example. But then, I suspect, as it’s always been historically, the true disruption will come from the upstarts.

GEN Edge: Is that just the nature of a big company, where innovation is often roadblocked?

Pande: It’s roadblocked because of the downsides of innovation. But then also, just the incentives, financial and otherwise, are much better aligned when you start a new company.

GEN Edge: Companies are waiting around before entering the public markets, does that compel you into making more later-stage financings, or larger ones?

Pande: I think it’s a great time to be investing in the early stage, because I think that’s where these new companies will obviously come from. I think later stage could be interesting, but what you’ll probably see is a piling into the winners, where some companies will have the envious situation of having a lot of money, a powerful technology, a really strong team, and that’s where the investment dollars are going to go. And consolidation to those winners. Even at [the 2023] J.P. Morgan conference, I’m starting to see hints of that… not the announced deals, I’m thinking about the ‘word on the street,’ where I hear what people are thinking.

GEN Edge: What does a younger company need to show your team to get funding?

Pande: For the initial stages, first money and seed stage, often investment is a bet on the team and technology and go-to-market. Ideally if they have all three, that becomes a no-brainer for us. With later stages, we want to see progress along the way, and that progress is measured in different ways for a life sciences company vs. a healthcare company.

When we announced the first fund in 2015, I said that AI will transform these industries. That was viewed somewhat heretically at the time. I think much less so now, especially since we’re seeing it in so many other places. So ironically, some aspects of AI start to become so mature that they’re no longer the new frontier.

What I‘m also constantly looking for is the next place where innovation will come from, especially as these other technologies mature.

GEN Edge: Is a16z a leader, a co-leader, a participating investor?

Pande: We almost always lead the rounds we do, and we take a board seat in the majority of our types of deals.

GEN Edge: What is the next place?

Pande: That’s a good question! AI are two letters that describe many, many things. One of the next things I’m particularly excited about is how the techniques that are used for AI in other areas will lead to new technologies specifically designed for life sciences and healthcare.

One of the newest trends is that we’re seeing founders that would normally start tech companies starting healthcare companies or life sciences companies. They’re coming to the space because they’re viewing healthcare as a disruptive space. At one of our portfolio companies, Inceptive, a co-founder [Jakob Uszkoreit, a former Senior Staff Software Engineer] was one of the key authors of “Attention Is All You Need,” the main Transformer [network architecture] paper, the paper that really launched ChatGPT and all these other things. He could do anything! He decided to build an mRNA company.

I think with founders like that, he himself and presumably the team that he’s built, they’re unique in that they cannot just borrow AI, they can create new AI that is biospecific. That is pretty rare. I think that’s probably the next wave.

GEN Edge: What do you consider treatments and tech that are most appealing to invest in, by indication or modality?

Pande: The things that in general are most appealing are what we’ve been talking about— things that have this engineering aspect, and especially the iterative improvement.

One thing we’re starting to see which is also probably the next thing is: iterative improvement is not so iterative if it takes two years to do the next design. In software, iterations can be like minutes. It’s not minutes for bio right now, but it has become, in some cases, a week, such that you could have 50 iterations in a year. I think pretty soon, that will become days to a day. I think once you have this much more rapid cycle, where you can design tests typically experimentally and then repeat, I think the progress of engineering will go much more rapidly.

GEN Edge: In AI, we see companies say that they’re in it, but they’re all over the map. Some have just a few algorithms, other may have made progress.

Pande: Do you remember the dot-com era, where one company just changed its name to “something-dot-com”?And IPO’d on that name?! You can say you’re a dot-com, but that doesn’t mean you’re a tech company. AI can mean so many different things.

This is part of the challenge and part of the fun for me, because I’ve been in this space for 20 years. It’s fun to go deep with entrepreneurs and see whether they really have something new, or if they’re putting dot-com onto their company name.

GEN Edge: In terms of numbers, what can companies expect to get at different financing stages?

Pande: That’s all over the place in terms of the quality of the company and so on. We have an over $1.5-billion fund, so we can write large checks. We can write small checks. I think there’s a lot of dry powder in general, and I think people are looking for what will be the emerging winners. Also, I think the market has been a little slow because a lot of people are just not going out to raise. That will start to change. Especially by the end of this year, I bet things will get quite lively!

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