Dame Kate Bingham of SV Health Investors analyses the high potential of investment in new therapeutic drugs. While these investments can have elevated risks at the individual drug level, if well managed, enough of them can succeed to produce good overall investment results.
Full speech transcript
I’ve started off with a graffiti chart.
This actually matters because in our office in London, we’re very Cool Britannia. Every drug that we have invested in at the beginning, which actually makes it, actually gets registered and gets approved, gets spray-painted on our wall. When if you think about it, 90% of drugs that go into clinical trials will fail.
So that’s why I always like to think of what is it we do, and we are here to develop new drugs to treat patients that are not treated with current medicines. So just as a quick background, what I do is to invest in breaking biology and science to develop new drugs for unmet patient diseases. This slide shows is all the different drugs, 27 actually we’re now on, drugs that we have funded right at the beginning of the discovery period, early clinical development.
I think in no case have we been responsible for the launch of the drug, because we are at the early stage. And the bit that really matters on this chart, which you probably can’t see, there are six little green boxes where we’ve invested in the first class of drugs, so a completely new way of treating disease. And that is coming out of innovation and institutions like this onethat are coming up with new ways of understanding biology and what are the disease drivers across different patient populations.
And that is what we do, but of course I’m an investor. So my job is actually to stay in business and to generate returns for my investors, which are pension funds or charities, sovereign wealth funds, family offices. And what I have to do is to make sure that I can return proceeds back to our investors, fomr what are highly risky investments, because our funds are closed-end funds.
We’ve got to be able to do that repeatedly, because once you’ve invested, you’re in.
So you can’t then get out. We’re an illiquid, high-risk investment. So we’ve done a good job over the last 20-something years, 20% net per year.
So it’s good for pension funds, and that’s why we need to try and loosen up some of the capital that we have in this country to invest in funds, not just ours, but across the sector where we can generate the returns. I’ve got less than 1% UK pension funds as investors, just to give you a flavour.
So obviously the reason I’m sitting here is because everyone thinks of me as vaccines, and clearly the vaccine taskforce went incredibly well.
You can see the two photos that I think everybody has seen very widely. The left hand was the first dose of the Pfizer-BioNTech vaccine, and the right hand was the first dose of the AstraZeneca vaccine, AstraZeneca-Oxford.
This is my favourite chart.
I don’t know if other people use the data, but this was in early December 2020. They were mapping the entire world of who was actually vaccinating their populations with COVID-19 vaccines, and we were the only one. So that is, if I have an epitaph, that is my epitaph.
But importantly, the most likely outcome of the vaccine taskforce was actually going to be failure, because if you think about all the things that were counting against us. We’d failed to develop vaccines for SARS and MERS over the last 10 years.
We had the leading vaccine candidates, the mRNA and adeno, had never been approved for any product ever, and the quickest vaccine that had ever been developed before took five years, and that was 50 years ago when regulatory standards were much lower, so that was months. So the likelihood was this was going to fail, but the reason it didn’t fail was, I think, in part, I think it was a bit serendipitous, but it was in part because they chose a venture capitalist to actually lead it, because especially in my business, things fail. Almost everything goes wrong, and because I’ve been in the business now a long time, I have seen science fail, I’ve been sued on IP, I’ve seen businesses blow up, I’ve seen clinical trials fail, I’ve run out of money, I’ve hired the wrong people.
All of these things that either that you are likely to expect mistaakesor that you should make sure you don’t make that mistake twice. I’ve seen this, and that is incredibly helpful, because it brings a very, very focused mindset, thinking about how do you address both my day job in terms of investing in drugs, but also in thinking about how do we select and accelerate the development of vaccines during the pandemic.
So I’ve got my four key lessons. The starting point, which we’ve heard a little bit about this morning, which is protecting universities and the astonishing leadership we have in academia.
We were given an incredibly relatively strong start because we’d had very serious and incredibly thoughtful leadership in vaccine development already, and precisely because we had had the SARS and MERS pandemics. Actually the academics had had a long time to start thinking about, well, what would be a vaccine that would be effective against another coronavirus? And without that, I think we might well all be still being sheltered at home. But because there was that insight, we were able to kickstart and leverage that learning from the previous pandemics and get the vaccines designed and developed much, much, much more quickly.
The second aspect, which is absolutely not something that government is really very comfortable with, is the whole management of risk.
So when Boris called me on that very fateful day in early May 2020, he was doing all the sort of, I want you to sort it all out. And my main message back to Boris was to say, you have to recognise that the most likely outcome here is failure, but you should be doing it. And what you’re going to have to do is you’re going to have to put cash up ahead of knowing whether or not these are going to work to both scale up the manufacturing, but also to get ahead and to run the clinical trials on these vaccines before you know whether or not any will work.
And that idea of putting money, the public money, into a programme where you can be sure you will be losing money, is not something that government is comfortable with, yet actually they took a deep breath and said, yes, we’ll do that. So that, I would say, was a ballsy thing by government. I was, of course, nothing to do with actually spending any money.
The ministers took the decisions on spending money, and the civil service made sure that the way we were doing it was kosher. So we were actually just hired guns. We were external advisors recommending how they should spend the money.
So that, I would say, was something that was really important. As to thinking about how do you manage the risk, we did it exactly the same way as we do in venture. So you work out where you want to get to, and then you split it up into small, bite-sized chunks and say, right, we’ll give you money to do this first section. So in the case of vaccines, it was the initial scale-up of manufacturing and the initial clinical trials.
And once you’ve shown that you can do that, then we’ll release the second money.
The third on my slide here is the people. And again, the reason why the vaccine task force was required was because we didn’t have the people in government, either in civil service or in the politicians.
And more importantly, we didn’t have the relationships with industry to actually kick-start those discussions. And actually, that is a massive fail because while you obviously can’t legislate for who wants to put themselves up to be a politician, we should, as a government nation, require our government machinery to have the skills and the relationship, and we don’t. And I’ve gone on the record, we have 90% of our civil servants have humanities degrees, only 10% are STEM.
And that is the wrong way around. We’ve got to have our administrators understanding what it is to deal with these complex science projects. Now, in the case of the task force, I was able to recruit my own team, and we brought in a kick-ass team.
And outside Russia, I would say, because we didn’t explore Russia at all, we either knew the companies involved or we were one step away and we knew somebody who did know them. So we were able to cover the globe very quickly, and it’s exactly the same in venture investing, which is you need to make sure you bring the best people in ever who’ve done it before and know the potential pitfalls, but also bring the relationships, because we pulled a lot of favours, as you might imagine, during the pandemic. But of course, as I build my companies, I pull a lot of favours there, too, because I want anybody who can help make my companies succeed, I want them to do that.
And then the last thing, I mean, it’s obviously very clear, set the objectives and make sure that you’ve got aligned incentives to ensure that everybody is actually all pulling at the same place, and that you’ve got very quick and speedy decision-making. So that was one thing that was very unusual in government, is we didn’t have a sequential set of decisions. We had a single investment committee, because that’s what I’m used to in venture capital, an investment committee which had the ministers from business, health, treasury and cabinet office, and they had to meet all together and they had to give an answer.
And they did what we recommended, which was fantastic, but it absolutely supercharged what we did in government. And just to give an example of the sort of VC mindset, and you can see we’re all a bit ADHD, we’re always in a hurry, we always want to get stuff done.
And so in the case of vaccines, we are not a big market.
You know, we were looking at this and thinking, we’re a poxy little UK, how are we going to compete against the Americans, the Europeans, the Japanese, who have much bigger buying power than we do? And so the idea was, okay, we’ve got to leverage what we’ve got, and what we’ve got is fantastic manufacturing. So we, you know, let’s do, we can’t start stuff from scratch, let’s scale that up. We’ve got fantastic national healthcare systems, so let’s use the ability to run clinical trials nationally to actually accelerate clinical development, and let’s just put the A-team on it to make sure that every single vaccine company we work with has access to the people that can help accelerate in the UK.
And that really worked.
I mean, I’ll just give you an example. We’ve not yet built a company in Scotland, so that is a goal that we need to pay attention to.
But we have just built a company in Cardiff. So while, of course, the bulk of what we’ve historically done has been in the Golden Triangle, we will go wherever the best science is. And this one is in precision psychiatry, so it is an area of massive, massive underinvestment and huge clinical need.
So we’re specifically looking at the severe psychiatric diseases, especially those affecting the young, psychosis, treatment-resistant depression, schizophrenia. And what happens is you get imbalances in excitatory-inhibitory pathways. And this particular company that we’ve set up came actually with industry scientists, but embedded in Cardiff.
So they were developing drugs that had the quality of industry, but the breadth of academia. And it’s worked out very well. We seeded it and brough
one other investor in. And I’ve put it in grey, but we are just about to announce, because it’s now signed, a fundraising of north of $100 million to take the lead programmes into clinical phase two studies.
So it’s highly unusual to be raising that sort of money, but it just shows we can develop some incredibly clever, brilliant companies based on UK science. And there will be just as much up here as there is in Cardiff. And it’s just a matter of making sure that we have the network and the relationships so that we can actually pull those two together.
Because there is no shortage of capability of VCs to want to do it. We’ve just got to make sure that we know about that great science where it is. And then what I just thought I would do just as a taster in terms of what could Scotland do, especially in a time of sort of geopolitical crisis like this.
And these are my sort of – I’m taking academia as read, that we compete very well on the global stage. But the one thing the UK does particularly well and vastly better than any country anywhere is these big data sets. So whether it’s our future health, Biobank, Genomics England.
And again, in Scotland with Andrew Morris, you’ve got a – you have had an HDR UK. You’ve got a huge ability to basically interrogate these large data sets, patient data sets, to get both longitudinal data and very deep data to both come up with new biological mechanisms that could be driving cancer, new ways to identify patients early so you don’t wait for patients to have heart attacks. You identify who’s at risk and you intervene early.
And from a cost and health care perspective, that has got to be the way we’re going to have to go. We can’t continue to basically bankrupt these health care systems by just treating patients too late. So we’ve got to get in early.
The UK is a global leader in this by far. I mean, it’s the biggest, the most deepest and the longest. And we really need to take advantage of that.
On the right-hand side, on advanced biomedical manufacturing, again, we have a phenomenal industry here and especially in this part of the world. So – and I would include the northeast, Darlington and the Tees Valley, up here through to Glasgow. We funded Valneva during the vaccine task force.
But you’ve got medicines manufacturing institute here. You’ve got oligonucleotide. There is going to be a huge big opportunity that’s going to get announced, I would hope, in the next two or three months about continuous flow RNA manufacturing.
So if you think about RNA-encoded proteins and the challenges we’ve had manufacturing those, and they’re expensive and difficult and require a ton of investment, actually this is going to be a transformational game-changer. So this is something to watch this space. But again, we’re really good at it.
The MHRA is our regulator. As I’m sure you’ve all read, in the US, Trump has chopped the top 25% of the FDA. And the FDA is going to be severely, severely hampered for really a long time.
The MHRA is a globally recognised regulator. We have a new leadership who’s just come in with a very, very clear mission to modernise, digitise, and accelerate what the MHRA does. And then, of course, we’ve got our national ability to run clinical trials, which isn’t good enough right now.
It is a fail right now compared with what we could be. But the fact is, if you put all that together and then you’ve got the underlying basis of academia, we are in a globally fantastic position to really build some real kick-ass companies. So if anybody is thinking about what is my message, my message is huge optimism and opportunity.
We’ve got to make sure that we’re joined up in using and leveraging the resources we’ve got. But we can become, I think, a game-changer.
Europe is slow.
Europe regulation has just extended their time, so they are just sleepy, sleepy at the wheel. If we get our acts together, we could do a really good job. And I’m on 16 minutes.
Okay, I’m stopping.
