Hello and welcome to the LA venture podcast. This is Minnie Ingersoll host of the podcast and partner at TenOneTen. TenOneTen is a seed stage fund here in LA. All opinions expressed on this show by me and my guests are solely our own.
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I'm excited for my discussion with Sean Harper today, Sean is a managing director at Westlake Village BioPartners. Westlake Bio recently raised a $500 million fund II, to continue their work funding transformative life science companies. Sean founded Westlake at the end of 2018 with Beth Seidenberg after leaving his role as head of R and D at Amgen.
Sean, thanks for coming on the show.
Thanks for having me.
Of course, I'd love to start with the basics. Uh, maybe you could tell me about Westlake bio and what sort of companies you're funding and what stage those countries these are.
Fundamentally we're involved in company formation. So company incubations, if you will. We're typically putting seed funds in just to get things rolling, you know, hire team, license assets out of it, universities, et cetera.
And then we often are the the lead on the series A investments and then we try and move these companies through. Successive rounds of private funding ,
when you're doing that first investment, what size check are you usually writing as a first check and maybe a second check.
Our seed funds, typically we start with a million. Sometimes we have to add a bit more before we can get to a series a on average.
It takes nine to 12 months for us to go from, , hiring in an entrepreneur or beginning to assess a technology at a university , and getting to a series a and in that year, Typically the million dollar seeds adequate sometimes , a little bit more and then check sizes for the series.
A with respect to what Westlake puts in range from eight to 35 million, .
And just to clarify, those checks that you're writing are always into companies who are working on new drugs. Is that right?
Great question. So, yeah, we were very, single-mindedly focused on human therapeutics. , we have a requirement that there's at least product that is no more than three years from IMD from first-in-human testing.
So as opposed to some investors who will invest , where the first product may not get into man for five or 10 years. We're pretty focused on getting human therapeutics into the clinic, at least the lead program. And I would say that, , we focus on that because , it's our expertise, right?
This is where we've all spent our time in the industry. So we don't do devices or diagnostics or digital health. It's all about, , getting medicines to patients
so tell me a little bit more. I think what you said was three years from human testing, is that what you said?
Yeah. Yeah. About three years. . That's where, you know, the big value inflection occurs as well for us in, in life science, BC is when you take, , an idea that looks good in test tubes and mice, and actually managed to take it in the clinic and develop proof of concept that it actually can have.
Efficacy and safety parameters in here.
So can you tell me more about the origins of the sorts of companies or entrepreneurs that you're looking at?
Yeah. So, as I said, there are really three basic models we use.
The first is licensing and academia. The second is licensing assets from biopharma, and that can be large or small biopharma. As you probably know many of the very successful drugs on the market are things that companies have deep prioritized strategically out-licensing to others. And then, you know, those have been successfully developed sometimes in the same indication that people had in mind, other times, different indications.
And the third model is what we call Denovo drug discovery, where we. Really invest in a team of experienced drug discovery, development professionals who want to pull together their team and, and begin to prosecute work . In academia. For example, we, we frequently encounter the situation where the founders believed that there. We're just about to go on the clinic, but in fact they're not.
And and we have to, we have to look at it and then we say, well, yeah, you're, you're really more like two years from the clinic, but that's okay. Because we in particularly Desmond Patty, our principal who's focused in this translational space, his entire career for 30 years.
We're pretty good at, assessing that. And that determines the raise the size of the raise along with things like, you know, can you contract the manufacturing of whatever it is or do you have to build internal manufacturing process development manufacturing? Because it's a, let's say cell based therapy or a gene therapy where the contract manufacturing organizations just aren't.
Developed enough to do it for you. And then obviously that will result in a bigger series, a raise, a bigger check from us, more likelihood that we bring in another investor to write a big check alongside us, that sort of thing.
What mistakes are they making when they think that they're ready for clinical trials? And you say, no, you're really two years out.
Well, I think, you know, that what we see often from the academic centers is tremendously strong biology and early chemistry work like screening high throughput screening capabilities these days, and identifying if you will leads. And getting going through sort of hit to lead and identifying tool compounds that can be put into animal models.
And, and what often is missing is really a lot of the assessment of whether these molecules, . Are actually going to have the drug like properties, for example, their metabolic profiles have life in humans, all that sort of thing that would allow them to be clinical candidates that you would want to invest, you know, three, $4 million in GMP manufacturing, GLP toxicology studies, and a couple of species.
. And when you put that lens from our experience onto a lot of these programs, the biology is great. The ideas are gray. That chemistry is a starting point, , but they're not as advanced as is believed by, by, by the founders. And this is not surprising because most of them don't have that deep industry experience of understanding how important things are like drug, drug, interaction, potential, , drug metabolism issues that can differ substantially, you know, mice.
Diverse from a 65 million years ago and in, in, in evolution and they're not the model humans and, and these, you know, a lot of the people that work in academia, they have their models and they're very focused on them and they. Can sort of forget that there's an awful lot of work that has to be done to go from these tool compound mouse experiments that they consider to be sort of proof of concept to showing proof of concept in humans.
Do. Some universities do this better. Do some you know, do you wish that some of these labs were doing more of, of what you're talking about?
Yeah. I think that, that the unit universities in general are beginning to recognize that grant funding from NIH and with a couple exceptions, there are some specialized grants that are designed to help entrepreneurs at academic centers, sort of spin out their work into small biotechs. And that can be very successful if they.
If they do it right, but I think there's a, there's a, a real understanding now evolving at the, , medical center type universities that some seed funds. Within the university that can be dispersed to projects to get them a little bit further along and allow them to do things like pay us CRO to do these metabolic profiling experiments to get crystallography performed things of that sort.
There can be arcane rules. Regulations around how grant funds can be used. And we see this all the time. Like you can't use a vendor outside the United States using NIH grant funding for some reason, for some of these grants. And so they haven't work with the best CRO that does those Tarago free to Germany, whatever, you know
, so these, these funds can, we've made available and we've seen a number of the universities we work with set up these funds , it's often just a couple of hundred thousand dollars, but that's real money at this stage that we're talking about
. , that makes a lot of sense. I have my siblings and my parents are all struggling to get NIH funding. So let me get into your background a little bit here. Um, I think it's really relevant. You were running R and D at Amgen. How does Amgen think about early stage drug development and doing R and D versus acquisition?
Yeah, , I would say I'm gen , is no different than what goes on across the industry in terms of large biopharma. In that there's a clear acknowledgement that if you look at the, at the history of the industry and the and the trend line, More and more of the innovation come from venture backed small company.
, and you can see this in terms of the proportion of the late stage visible pipeline at the companies that. Is derived from those sources has been steadily rising over the last 15 years.
The number of independent biotech companies that actually launch products into the marketplace themselves is steadily rising. So it less of the real earlier innovation is coming from the big biopharmas and part that's because they're consolidating and there's less of them, but also they have to spend a lot of their money.
On late stage development and marketed products, support and safety surveillance, and setting up, you know, a new commercial operations with the appropriate R and D support and different drug geographies around the world to exploit the emerging marketplace that's happening in places like China. And so all these things.
Compete for early preclinical research dollars. Take as an example, gene therapy or cell based therapies for cancer. I mean, these are the two. Most obvious to point to recent big breakthrough kind of technologies in our field. Right? You look at them and ask the question, how many of those, and they're hundreds and hundreds of them.
Right? How many of them were developed in large biopharma? To my knowledge, the answer for both modalities is CRM.
Wow.
Okay. And if you think about that, what you realize is that dynamics that happen. In any boardroom in any of these companies is you go on and say, Hey, you know, gene therapies come into age. I want to build a gene therapy capability within the walls of, you know, Pfizer, Amgen, what you picked your company.
And why don't you give me an extra like billion dollars. And over the next four years, I'll build gene therapy capability. And everyone will slap you on the back. Say you're a great head of R and D. I'm sure you can find a billion dollars in your budget , and you'll get enough, right. So that, because they have to run a P and L and they have to make quarterly earnings and the reimbursement.
Agencies around the world , and the, CVS and Optum and so on in the U S they're all squeezing. These companies really hard and the profitability of new products. It's just not what it was for old books. So they're trying to manage all this and meanwhile, They've got these very healthy balance sheets.
And so then you come back to the board room three years later and you say, okay, look, we're going to fall behind the rest of the industry. We have to have a gene therapy capability. I want to purchase this gene therapy company for $5 billion. , and this, this company will become, , Pfizer, , thousand Oaks and it'll do our gene therapy.
And they have manufacturing and everything. , and everyone will say, great, where do I sign?
Hm.
But they're generally acquiring that, that technology from venture backed companies. , either pre or post the companies being public, you know, they can buy them before they go public or buy them after they go public. And it's always been that way to an extent, but what you're seeing is an enormous growth. , in that venture back component and, and less emphasis in large biopharma at most of them in, in really cutting edge innovation, because they kind of know they can buy it and it's, it's expensive to do.
And that's the dynamic that's going on in the industry that makes it true. That some of the most exciting, innovative work is happening in venture based companies.
And this was a large part of why I made the decision to move when I did . And I want to be really clear. I'm not putting a finger on Amgen here. When I described this, this is a universal phenomenon.
Sure. Sure. Of course. Uh, and what have you seen for these early stage companies that might be eyeing an acquisition by Amgen? What have you seen work or, or maybe more importantly, what have you seen? Not work?
Yeah, great questions.
. I think one of the other mistakes that we see sometimes is that there's a decision made to hire a team. Now I know, of course there's academic founders who can be valuable and they can serve on the board or on the scientific advisory board and be invaluable company.
I'm not talking about them, but what will happen sometimes is that the university will incorporate, which is in and of itself, not a problem but that company begins sometimes to get staffed with somebody. Who somebody knows who has some kind of business. MBA type background or what have you. And they get plugged into this job as the CEO, as the CEO. . And they're not the right person to run the company because it's a science-based company and they just don't have the background experience, whatever
Because again, remember. Very early companies where virtually every employee is going to be an R and D person.
Who's trying to get something done. Right. And it's very hard sometimes for people with like just the business development business, MBA type background. To even be able to relate , to the scientists or understand the science and to lead that effort, nor is it very easy for them to know where this is all kind of going.
So, yes, there are people who can transcend that, , but most of our CEOs have either, you know, a PhD MD or both. .
And of course, as you might imagine, those, those kind of individuals with that phenotype tend to gravitate to work with us because we all have that background ourselves.
wait and sorry. And I should just clarify who you all are. Obviously we've talked about you. You're coming from head of R and D at Amgen, and you started Westlake with Beth Seidenberg. who's coming from Kleiner Perkins.
Yeah. So let me give a little history, cause it's, it's, it's a bit different than the typical life science venture group. In this case? Yes, Beth worked in the industry at Merck BMS and Amgen. And we met at Merck more than 25 years ago. And we worked together there. We worked together at Amgen and then after she was global head of development at Amgen, and then she moved to client.
And that was about 15, 16 years ago. Now I stayed on damn Jen. And so did Desmond Patty, our principal . Beth went on and created. I think she's now created 25 biotech companies and she was the lead investor at Kleiner Perkins.
She is a very similar background, you know, a physician scientist.
And so we have an unusual set of backgrounds in that we're really operating executives from the industry who , really lean in very hard to the, to the projects, to the technology, the science, the medicine on the projects.
Wow. And you just said that Beth has created 25 companies. And I imagine some of that is the work that Westlake bio has been doing to create companies. And some of that was when she was at Kleiner.
Yes. And between Kleiner in here. So we, you know, in our first fund we've we built 11 companies and in the second fund, we've established three. So I that's 14 and then I think she did, you know 10 or 11 or something in Kleiner. So it had, it's roughly 25. I'm not sure if she even keep track anymore, but and most of those have been successful.
The vast preponderance of them have gone on to exits
Between the three of us, Desmond Beth and I together, most things we look at, we've had some prior experience working in the field.
And if we haven't, we often want to invest because, you know, we want to work in areas where we can play to our strengths.
, can you double click on that a little bit? Which is like, I would say, Oh, another HR tech company I've seen so many of those are you, do you have the same thing where you're like, Oh, prostate cancer, God, that's so over.
Yeah, well, the whole field of, you know, immuno oncology and the particularly immuno-oncology that's focused in hematologic malignancies has gotten a bit this way. I mean, you do get into things, situations where there's like, There's like 150 cell-based therapies directed at the same antigen, you know?
And it's really like, we're going to start up the 150 first. So there are patients where you say like, Oh, like I'm just not doing that. But , in many cases, you say something like prostate cancer, Yes. I've worked on a lot of attempts , to help people with prostate cancer. But most of them haven't really done enough and there's still an enormous unmet medical need you know, that's, that's the fundamentals along with people.
So there's a timing issue for sure. , you know, you wouldn't have wanted to do, be investing , in gene therapy 10 years ago. And you're probably not going to be wanting to do it 10 years from now. There are sort of times where the technologies, you know, ripe and then become tractable.
If there's nothing more frustrating, practicing medicine than not having anything that you can do for patients. So you take an area like chronic pain. You'll very quickly exhaust your options in chronic pain and, you know, people can't tolerate long term in and say they can't, you can't treat them chronically with opioids.
You know, you just run out of options really quickly. And if you, if you have an unmet need like that, that you know, is sort of. One of the main reasons people seek medical help and the doctors don't have anything to offer. Well, you know, that may be a tough problem, but it's more worth trying to solve.
That makes a lot of sense. So are there companies that you'd like to be seeing a lot more of in your pipeline or more of, or less of.
. Even in the areas where you look at you'd and say, okay, auto immune disorders, like rheumatoid arthritis and psoriasis and those kinds of things. So they're well addressed.
Well, not really. I mean, yes, there's, we're a lot better off than we were when we were injecting gold into the people when I was in medical school. Right. But. You, you know, none of these drugs are just, they're all municipal breasts and they're all fraught with all kinds of issues because of that. And at some point it's going to be possible to, you know, essentially reset the immune system.
So it no longer believes that self antigens are foreign. If somebody brings forward a technology like that, it'll be transformative. . . Beth always says, you know, you have to be willing to sort of suspend disbelief and listen and think because our job is to be thinking about.
, what's going to be , , the therapeutic landscape, you know, five to 10 years from now because there's a long life cycle here. And we're open really to anything. And it can have a kind of, you know, I mean, people use these words all the time, transformative, disruptive, you know, it gets old, but that's actually what we're thinking about.
Right? , this is one of the things I say all the time is. This is incremental. It's just not transformed. It's nice. I like it, but it's incremental and we don't do that kind of stuff .
One of the big news stories out of biotech that hit my tech news was Google's alpha fold and protein folding. Do you think that's truly transformative? Is it living up to all the hype?
And do you see a big role for tech in biology or. Or how do you see that role?
Oh, yeah, absolutely. I mean, you know, you don't want to, over-hype this kind of thing, because you know, it'll, it'll have a huge impact, you know, on. One of the things that, that that's a barrier that holds us back that keeps us from being able to come up with, let's say a small molecule to drug, you know, a, a protein target, because we now can understand.
The structure of that protein much more easily, or you know, there are the computational tools that allow you to see the motion that is that these molecules, you know, they're not frozen in a crystal lattice the way we tend to think about them. They move, there's all kinds of things. And, and I saw this working In the genetics area.
When, we acquired decode, when I was at Amgen, I mean, the kind of work they're able to do today, simply wasn't possible until, you know, Illumina developed, , the kind of sequencing capabilities, sorry about the doorbell. The dog's gonna start barking next. .
, so I think there's absolutely no question. And the earlier you go into the drug discovery continuum, the more, this is true that these kinds of tech technologies, different ways of imaging different ways of analyzing storing vast amounts of data, robotics, all of that stuff they'd make a big difference.
And I often, when I give this kind of lecture, I give sometimes around the golden age of biotechnology. I mean, one of the things I really stress is that. A lot of the advances that are occurring that are making biology and more quantitative, more predictive science and more translatable into, , new therapies for people is the.
Introduction of these non biology technologies, whether it's robotics or, or x-ray high throughput, x-ray crystallography, or, you know, these kinds of things have, have profound implications, but at the same time, , you can, over-hype the impact. Because we still deal with an enormous amount of uncertainty and things like choosing targets to pursue you can, work with all these tools in a very elegant manner on the wrong target.
Hmm. But you'll invest in some of these tech platforms.
Well, no, generally not because it's just not what we do. , I mean, I have a hard enough time doing what this, this work, where I'm supposedly, you know, like kind of a world expert. And I struggle every day to do the job because of the level of uncertainty.
I mean Robert Rubin said that most people are, are more certain of everything than I am about anything. I, I subscribed to that camp. , but we're, we love to see the impact. And when we see that, Hey, you know, it was possible to drug this undruggable target because we were able to simulate a cryptic pocket in a computer. And when we made a molecule and look, it actually works.
We're like, okay, we'll take it from here with you,
That sounds great. Well, let me shift gears a little bit and talk about Los Angeles.
You're here. Beth is here. Your, your team is here in Los Angeles. What are you seeing in? How, um, how are we going to catalyze things in Los Angeles from your point of view?
Yeah. I mean, look, when Beth and I started talking about. Setting up West, like you know, she had been commuting to the Bay area for 14 years or something, but her primary home from Amgen days is still here and that's how we've stayed so close. And , I told her about my experience where I had been asked by , these universities to sit on these advisory committees about how can the university be more successful in commercializing their technology, right?
How do we create companies locally? Where are it creates job opportunities for our graduate students and our postdocs and all of that. And what I would tell them to their surprise often is . this area has tremendous academic institutions. I think it's number three in NIH funding in terms of a region in the world in the United States
so it's, that's not the problem. Lots of great people who could come in and be research scientists in the companies. We've got lots of industry experience people from places like our, again, you know, kite. Guillory ad now while of course, Sam, Jen, and what's really missing. And the reason companies are not being built.
There's no venture group. That focuses on, on cause many venture groups just invest in other people's a and B rounds and things. That's not going to help you. And I kept trying to say to them, you got to attract somehow, you know, Atlas ventures or the column group, or somebody to set up offices down here in like Pasadena or whatever.
And, and because it's a local activity, they, this very hands-on to build these comments.
So when Beth and I started talking about the firm and she started telling me, well, you know how overheated. San Francisco and Boston have become how crowded they are with baby sees.
How, how the war for talent is resulting in constant turnover of people, including R and D staff, which is really bad, you know, to have high turnover in that, in that group. We just started. Talking about the fact that we thought there was a tremendous opportunity to build companies here that basically everything was here, grassroots support from the government.
I mean, you can imagine how helpful the city of thousand Oaks or LA County have been . And we didn't know it at the time, but Alexandria Realty who are headquartered here in Pasadena. They'd been wanting for 20 years to do their magic in this area, building biotech, incubators, and that kind of thing.
But there just wasn't enough company formation going on on the warranty. And now they're doing that. We have five of them are companies right now in a first Alexandria facility here, . Close to the Amgen campus. And they're going to build more and, , it's really taking off.
, it's the characteristics here are favorable as I think they were in places like Boston and San Francisco for a biotech hub. I mean, Beth and I both watched those ecosystems evolve. And you know, the one thing that happened in those places that was really seminal was. Big companies started buying small companies and establishing their presence.
So Gilly ad of course bought kite and Santa Monica, but what'll happen. Next is a company. I don't know a Tara or one of the companies that's local here will get bought by, you know, Novartis or pick your big biotech, , and then there'll be a Novartis sign here. Our biggest challenge of doing the company formation work here was just ready, turn key available laboratory space. And now that's been largely solved by Alexandria.
That's really exciting. So you've gone. Your first fund was at a 300 million, 320000001st fund. So now you're working on this 500 mils. It's really exciting for the ecosystem. Let me ask you maybe one or two final questions. What's different than you expected being a VC versus doing R and D.
Yeah. I think The first thing was just, sort of how you actually go about doing all of the, financial and mechanical aspects of actually putting together a company, you know, licensing technology out of universities figuring out the cap table, all of this stuff.
And to figure that all out at 56 again, after I'd come from me, kind of, you know, the expert guy in what I was doing before, and now I'm completely clueless about what I, I don't even know what, I don't know that was uncomfortable. , but I never looked back because I knew in the long run, it would be great.
And it is, you know, you can create one of these companies.
And two years later, you know, the company's doing the major deal with the big biopharma. And before you know it, then they're talking about becoming a public company it's kind of magic. You know, it's, it's really quite amazing then that sort of zero to one. But, you know, you could read books about that, but to actually be involved in that value creation and employing all these great people and all that.
I I've found that that's been better than I imagined.
That's fantastic. Well, I think your work and your mission is really inspiring. I appreciate what you guys are doing to catalyze the ecosystem here in LA.
Likewise you're doing the same, of course. And it's been a pleasure talking with you.
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