OrbiMed Advisors Managing Partner Samuel Isaly – one of the life sciences industry’s most hallowed investors – was interviewed by Lazard’s David Gluckman on stage at this week’s BIO CEO conference in New York City.
Isaly spoke of his firm’s investment strategies, his view of the public markets, and the fact that he’s a Republican – but grudgingly supports the Affordable Care Act.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Isaly helped launch OrbiMed in 1989, and the New York investment firm now has $15 billion of assets under management – making it the world’s largest independent healthcare investor. Its investments range in seed stage startups to large public companies across the world.
Because of the extent and candor of the interview, we’re publishing the majority of the talk – broken in two segments, edited for length and clarity. The first focuses largely on investment strategy. Part Two, which will address Isaly’s views on the public markets and the political environment, will be posted soon.
How has the dynamic in healthcare investing changed?
When I started, the business of investing in healthcare was much less than it is today. The palette of investing opportunities is very, very much more colorful now than it was in years back. We believe that you now need skills in both science and business.
My most senior partner, Sven Borho, and I tease that as of today, we couldn’t get hired by OrbiMed. We don’t know enough in terms of PhDs and MDs.
The skills dedicated to investing in this area are particularly high. Analytical skills are important, and the speed of transmission of information. I can’t emphasize it enough. Here’s a boring anecdote:
When I’d go to the American Society of Clinical Oncologists meeting, I’d watch all of the abstracts – and would have to ask ASCO to FedEx them to me. I’d get them a day or two later. Now, with the push of a button, the whole world knows. The speed of transmission of information’s become very, very rapid – and we need to keep up with it.
What differentiates OrbiMed as an investor?
When I started, instead of trying to do well in the United States, or do well in Japan, or do well in Europe, I’d try my hand at doing well in a sector worldwide. At the time, that was rather rare. We are very much worldwide investors.
Another distinguishing characteristic: I never really felt that there was any difference between public and private. I’m agnostic as to whether a company is public or private, and the stage of development.
What’s OrbiMed’s secret sauce?
We want management to have special skills: Bright, hardworking, honest, and most challenging of all – lucky. Of course, you can’t define lucky – but in any event, when it comes to our people, I would insist they possess those characteristics.
What’s your investment process? How do you anticipate the anticipators?
When it comes to selecting companies, the concept I follow comes from economist John Maynard Keynes: The Keynesian Beauty Contest.
Say, the New York Post has a page listing 50 of the most beautiful ladies – and you’re asked to pick five out of the 50 that are the most beautiful. To solve that question, you don’t pick the five you think are the most beautiful – you pick the five you think that other people will pick.
That’s anticipating the investors. When evaluating a company, you ask questions like – what’s the outlook two years from now? What technologies will come out? In venture capital, how long will the value last, and when to an inflection point?
What’s the state of biopharma innovation today?
It’s difficult to quantify. Some of my tech colleagues earlier today said, “best I know, the pace of change is accelerating. The pace of scientific advancement is accelerating.” I can’t prove it. I just look around and see it.
But clinicaltrials.gov is a goldmine – and you find the number of candidates in human trials growing eight percent per year. There was once a time when growth was much more modest, and maybe not at all.
The FDA approved 45 new products last year. An equal amount went into the FDA this year – and a lot of that is because personalized medicine is arriving. All the quirks of your diabetes, or asthma, are carved away into separate orphan diseases – with a $10,000 price tag.
The pace of advancement is good. I’m delighted by CRISPR.
What’s the right way to approach R&D?
People who punch time cards are not likely those who discover new drugs. It takes continuous thinking. It takes smaller, academic groups to make discoveries.
What technologies do you find interesting?
The technologies are the most exciting for people who have, or will have, cancer. The development of immuno-oncology is clearly dramatic. We all have the capabilities in our bodies to destroy this stuff. The war on cancer is within us.
Gene therapies for single gene disorders are looking very promising. Multiple gene disorders are very hard to get to at this moment, but if you look at hemophilia or beta thalassemia – I think there’s great promise that those will be successfully addressed in five to ten years.
What about Alzheimer’s disease?
I will make a forecast: A pill for Alzheimer’s disease will be the world’s largest selling drug one day.
I just don’t know where that’ll come from.
There have been a lot of disappointments in Alzheimer’s disease, but we’re seeing monoclonals in deep development – and with the work from Eli Lilly and Biogen, there’s a reasonable chance we’ll see some activity.
Those earlier pathway drugs that extended functioning by a year or two – that’s really not so dramatic, and I don’t see a cure there. But earlier interventions will be determined by genetic prediction.
[Image courtesy of OrbiMed Advisors]
