Bioconvergence: Breaking Down Silos in Disruptive Innovation | LSI USA '24

Marc Alcser  0:05  
Welcome everyone to our panel on bio convergence breaking down silos and disruptive innovation. My name is Mark Elser, and I'm a corporate partner and the chair of the life sciences group at Stradling. Law. Based in Orange County, we provide legal representation to private and public companies, mostly in the life sciences, space and all aspects of their life cycles. I'm excited to be with you today to moderate this panel. First, I'd like to introduce each of the experts on the panel and ask them to provide a brief summary of their background. So we'll start with a soft here on my left eye

Assaf Barnea  0:40  
Good morning. My name is Assaf    Barnea. I'm running to funds which are based in Israel call center ventures in Santa Ana capital. So now venture started as a joint venture with Philips and Teva Pharmaceutical, actually investing seed stage in seed stage technologies in digital health, medical devices and bio convergence. And as of two years ago, I set up some or capital post incubation fund also with Philips Teva, and other strategics and family offices to do a rounds and B rounds, post incubation companies, we did six investments so far. One of which I would like to elaborate is going to be a company called Nano drops for Tamala G, which is a great example of bio convergence. A bit of myself, I'm also the chairman of these really large Science Board of the export Institute trying to increase the export that of Israel have been a $10 billion. This is including therapeutics and biotech, and devices. I've been a consultant to the World Bank to the venture capital team of the World Bank and did few other things. Thank you.

Ariane Tom  1:43  
Hi, everyone. My name is Arianna Tom. I'm the founder and managing partner at collider capital, where we invest in early stage neuro technology companies. A little background on myself, I'm originally trained as a materials engineer, did my training at Stanford University and ultimately developed a lot of novel neural interfaces, applying, you know, a lot of information and knowledge about materials to create new types of brain computer interfaces and neuro imaging technologies.

Suraj Mudichintala  2:21  
Hi, everyone, it's nice to Nice to be here. My name is Suraj    Mudichintala. I'm here representing Action Potential Venture Capital. We are a single LP fund backed by GlaxoSmithKline. The origin of the fund was in neuromodulation. So looking at actually bio convergence from a lens of both neuroscience as well as material sciences funds been around for 10 years. And we have been investing roughly five to $10 million checks in series A through C companies call it and in terms of my background, quickly, predominantly a business background, started my career in management consulting and have been investing in healthcare technologies for about five years now. Thanks,

Marc Alcser  3:02  
Raj, and the rest of the panel here. So I guess the first thing diving into this and we'll we'll start off with USAAF is, what is bio convergence? And what is it really solving for?

Assaf Barnea  3:14  
Well, bio convergence, as it sounds, the convergence of it's not just biology, or what biology for that matter, it's the convergence of multidisciplinary convergence of another domain, which should be, to some extent engineering related could be software engineering, could be material science could be anything that has to do with the miniaturizing electronics components could be the 3d printing of organs. But it's not just the biotech concept. It's not just developing a molecule or an antibody. And we shall I assume, we should also talk about the outcome. I mean, the benefits of that in terms of addressing truly needs whereby, you know, biology within itself would not be able to solve. So that's multidisciplinary approach. And the convergence of the two, those two disciplines, by the way, creates fascinating, fascinating business models and fascinating parameters for us, as venture capitalists to look into those companies and try to understand what should we duplicating should should we just be duplicating again, and again, the same models or not? But I think the beauty bar convergence is that resolving some of the most challenging domains within healthcare, let it be, you know, drug delivery, let it be the ability to cross the blood brain barrier for that matter with new technologies to do so. Which we were not able to do so for decades and decades. Bio convergence may allow those to happen, finally.

Suraj Mudichintala  4:43  
Yeah, I think really important point there, too. On the business models, I think it's it's bio convergence not necessarily strictly related to developing a new product. But what comes out of that, right. I think, you know, there are examples of companies that have been able to influence the operating costs and provide better bottom line margins because they're able to have a more efficient Sales Force as a result of bio convergence, whether that's you know, we have a company in our portfolio called Saluda medical that actually eliminates the need for titrating spinal cord stimulation by by virtue of bio convergence. And I think it's it's, it gets really interesting, right, I, you know, we're predominantly med tech people in this room. And I think when you look at companies that are now starting to leverage drug models, leveraging je codes for reimbursement getting recurring payments, you know, I think it's, it's fascinating that it's not just the technology and the product, I think it permeates the organization across business functions.

Marc Alcser  5:38  
Great. And so Suraj following up on that, maybe describe some of the promising technologies that you're working on. And and stepping back, I guess, one step back from there, around what beer would or timezone? Did the bio convergence start to become something that people were pursuing?

Suraj Mudichintala  6:01  
Yeah. You know, from a timezone perspective, I think bio convergence, you know, to me, it's, it's really just the changing the changing of how teams feel, in terms of, you know, you now have computer scientists that may have at one point been working on navigating cars, but are now working on navigating vessels in the body. And so I think it's, there's no like one specific time in which kind of these disciplines have started to intersect. We think it says it's been as early as neuromodulation, which was, you know, 2030 years ago, and now the factors that have kind of come together to enable next generation neuromodulation platforms, is just one example. You know, in terms of other applications that I think are really interesting, you know, we look at Euro tech and some of the things going on with transcranial magnetic stimulation or other modalities of electrical therapeutics. And, you know, I saw if you'd mentioned kind of some of the limitations of molecular medicines as it relates to penetrating the blood brain barrier. I think that's really interesting. And so far as thinking of neuro diseases as circuitry imbalances, as opposed to chemical imbalances, you know, Pharma has been throwing kind of molecular medicines at your urology for who knows how long now and take Alzheimer's, for example, with a 99.7% failure rate of getting a drug to the clinic. And, you know, if you actually look at some of the most recent science, it's actually a temporal changes in temporal activation of different mode networks in in the CNS that that could be causing Alzheimer's, or it could be causing various kinds of, you know, whether it's depression, etc. I think that's really, those are all really interesting applications. And I think you could really build fund around that thesis. You know, other applications, I think, coming from a background where we have GlaxoSmithKline, as our single LP, you know, we think about kind of value creation across the spectrum of therapeutic development. So you talk about drug development, translation, and then kind of actually deploying therapies in the clinic. I think bio convergence can kind of enable technologies, whether that's precision biomarkers, or any types of computationally driven platforms to enable better therapeutic development, but also enable biomarkers for patient selection stratification and de risking the ability of bringing a drug to market. You know, we have a company in our portfolio ONC AI that actually uses CT scans and a deep learning model in order to better triage treatment patterns for late stage lung cancer patients. Now in the clinic, that can be used as a precision diagnostic. But we think that there's actually a huge opportunity in pharma where you can now look at label expansion opportunities for existing drugs and actually develop biomarkers that that can really blow up the value of drugs that are a second or third line therapy that exists today. And so I think applications that look across that entire value chain of pharma can be really interesting as well.

Marc Alcser  9:17  
In our own, what are you working on? Or what are you looking at and your fun?

Ariane Tom  9:20  
Yeah, so great comments there. So what we look at our enabling tools for precision neuroscience, and this can really span the gamut. But in this conversation, some of the things that we're looking at are ways that novel biomarkers can be measured and evaluated, you know, either with very high precision, very high resolution. And, you know, the the idea and the concept of bringing these types of characterization tools to biology is not necessarily new, but it's also something that we believe that we'll large industry players are beginning to start to appreciate more and more and more. I think that the reason why we're having this conversation today is to talk about silos in innovation and how those are starting to break down. And I think that just Rogers point, being able to define and measure and monitor how certain therapeutic changes are happening, tailored to individuals is super important and will continue to emerge.

Marc Alcser  10:34  
Okay, welcome back, everybody from the little fire alarm diversion there. So we were we were talking about pharma development and how bio convergence kind of helps out in that process and makes it faster, more efficient, more targeted, and all of those various items. The next question I had, though, was was going back a soft in terms of these early stage companies that are developing or focused on doing bio convergence technologies. What What kind of unique challenges do they face in this marketplace? Yeah,

Assaf Barnea  11:06  
I think that's the main thing for and convergence being repeatedly stated again, and again, but this is this is exactly where we are, I think all of us encounter there. First of all, it's the convergence of those technologies. So there's unique know how that should be integrated into something which will work into a specific use case into something that eventually will make such a disruption that it will be worthwhile to invest in that. But more than that, there will be a convergence of the people have the, you know, VP of Clinical VP, clinical VP of bizdev, the CEO is VP of r&d, this what turned out to be and also in his that one of the reasons that these earlier innovation authority, the government of Israel has decided to prioritize by convergences, because of that we have those combinations of people with different expertise from the high tech industry, converge against the biotech industry. And that that is a great greater barrier to cross because otherwise, you may stumble into you may deploy 510 $15 million, and then find yourself within three or four years that you have to repeat it all over again, because of the unique convergence and unique disciplines of those different different verticals different this multidisciplinary approach fell, they would be, I think the fact that basically the power convergence eventually is a result is it is the core technology within certain technologies. So bow convergence eventually may come to be a company like one that we have in Israel called me mat, which is basically looking to distinguish between bacteria and viruses. But it's not just the software components. And it's not just the biologic components, it's eventually the use case, the use case, you know, what is the advantage how you disrupt the market, if you can disrupt the market, with the unique technology, eventually, the core technology doesn't mean anything by convergence or not by convergence. It has to be translated to a specific unique use case, with a unique justified enough business model to overcome those investment habit investing in the convergence into the new into the discipline, and translate it into unique enough business models in order to overcome.

Ariane Tom  13:11  
Yeah, adding on to that, I think that's also a challenge for a lot of companies and investors alike in being able to discern really what the valuation comp should be, and what in attaching that to the revenue generation model. Imagine a an implanted device, or piece of hardware that is actively collecting a lot of data and information that are very important biomarkers for diagnostics purposes. Furthermore, these same biomarkers can be used in a feedback loop, you know, to be able to stimulate and tailor and tune the parameters of that stimulation in real time to a patient. Now, what kind of company? What kind of company is this? Is it a medical device company? Is it a diagnostics company? Or is it a therapeutics company? And founders, you know, need to be able to articulate this type of thing, which oftentimes this term platform technology has kind of been used quite a bit. But what happens is that, you know, the challenge from their perspective is to be able to get the right funders in the room who can understand that they should be seeing this technology through multiple perspectives, and be able to evaluate what the impact the commercial impact could be, but using a combination, and so again, the convergence of these different kinds of business models can emerge, but sometimes because the industry is so siloed and it's like, Are you a therapeutics company or not? Are you a diagnostics company or not, medical device or not? And I think that that serves to Hurt innovation at times. And so that's really what we are looking for, you know, as early stage companies that have IP that can be leveraged in multiple dimensions, but really what we're, what our role as investors is, is to help is to help the teams really figure out what they need to do to build to the, to the best success possible to get this into the market. And I think that that really requires one to be open minded and be open to the interdisciplinary nature of this.

Suraj Mudichintala  15:30  
Yeah, I think the chat, the fundamental challenge with our healthcare system is that it does not necessarily reward innovation. You know, if you think about the regulatory barriers, in conjunction with the need to get unique codes, it the need to develop payment that justifies investment. These are fundamentally things that in the product development process are missed in misalignment. And that is really challenging for investors who are looking to both be on the front edge of technology without necessarily being on the bleeding edge of technology, where you run into barriers that make early stage investments in feasible in terms of the return profiles, based on the amount of capital required to set up the appropriate reimbursement infrastructure, if it is a proper device company or Figure Figure ways to navigate the regulatory complexities with efficiency. I think that, to me, is the big champion, that's I think, for 90% of the companies that we look at those are the big challenges. You know, and, you know, in terms of how do you circumvent those challenges, I think it's a little bit of, you know, you've got to kind of take these small incremental steps, you know, and have companies that are unafraid to take those risks and build a playbook for others to follow suit. You know, I think one good example is, you know, we have a company in our portfolio called calla to wearable wrist worn product that is a neuromodulation device, kind of had to go through a bunch of novel pathways going through the DME kind of going through securing payment, and a market for essential tremor, which is a massive market and payers are, you know, not not willing to back a payment level because of the implications on the cost budgets that that may have. And so I think, you know, now that that company has been able to sit to secure coverage and payment at a rate that justifies the business model, I think we're going to start to see a lot more wearable devices, wearable neuromodulation given the success of that company, so it's going to be a little bit of a stepwise change, I think. But the industry is, is moving in the direction. And I think that entrepreneurs are learning from some of these stories, in

Assaf Barnea  18:04  
some cases, I hope it's not going to be incremental. So for that matter, you know, the technology itself may be disruptive, even the example that I've been given before, I don't know if you guys were able to listen to this company that we invested in, we just did in our investment co investment with one of the largest strategic players in the ophthalmology space, our company called Nano drops. So the idea is basically then again, to put a laser flush to create a pattern on your cornea then to put a drop, basically, and you're good to go without glasses and lesson and lenses sorry for like three or four months with people come back to that service. I think people would eventually we did a market survey looks quite fascinating, by the way we believe it. So it could be a billion dollar company. But then again, the beauty of that technology is the biology and the physics converging into a unique disruptive solution for not using glasses and not talking about myopia presbyopia now in China and other places whereby, you know, the government is launching new programs just to solve those issues. Nonetheless, if we were looking into a b2c model, where the customers will come back every three or four months get used to go to CVS optics, sit on a chair at laser flash, do a drop in your eyes, and then come back after three or four months. Hopefully, they would, you know, like a bit like a Botox treatment those who would like to stay away from the from using glasses like myself every now and then even though those are new. So this is this is this is something that I think really we need to as going back to an amazing point that you've mentioned, is the fact that we need to make sure that we set up those business model and the reimbursement or out of pocket, out of pocket payment in the line with what the service should be justifying. In some cases, this will disrupt the marketplace, this will disrupt the marketplace. And I'm not talking necessarily about the use cases, you know, inpatients and whatever but rather, those who may touch the consumer. Definitely there will be major major challenges, whether in hospital settings and others in clinic settings, of course. But this this is something that reimbursement will play along with it as well.

Marc Alcser  20:05  
reimbursements always a big issue. And certainly that kind of leads into the next. The next question that I had for the panel here is, you know, looking forward, you know, what, what kind of what would help most between governments and and academia and the industry in kind of furthering this whole bio convergence movement? Let's call it Yeah,

Suraj Mudichintala  20:29  
I can take, I can take a stab. I mean, I think, and we've talked about it a little bit already, I think, from a from the earliest stages, having the having all of these kind of issues in, in in mind as you develop a product and realize that, for example, you know, even even in things like your IP filings, for example, you need to be very specific on the language of what exactly your product does. Otherwise, five years down the line, when you go and look for setting a payment level, you may actually be rejected because your device looks more like a 10s unit than a unit that actually modulates a specific biomarker. And that actually makes a huge difference. But I think it's really challenging for people in early whether it's academia, or just really early stage entrepreneurs, to kind of have that roadmap set out from the beginning. And I think that's really important. You know, I think from a regulatory body perspective, I think, FDA is, you know, has been trying to come out with a variety of different programs to help early stage entrepreneurs, you know, through the TAP program was one that came out recently, I think breakthrough designation, and kind of the impact that that's now going to have in terms of payment with CMS is, is helpful. And I think all these things are percolating, but they're not quite at the stage that they could really reduce the time to get to market. So I think more work needs to be to be done there as well. But, you know, I think, to me over the last five years, it does feel like things are moving in the right direction from a systematic buy in perspective, for all things bio convergence.

Assaf Barnea  22:12  
I think there's some to some extent, we as an industry, we should aim, at least, for setting up new gold standards, even the example that I've been using before this other company that I've mentioned me made, basically, whether you'd like to give antibiotics to patients, if this is viruses or germs that that decision, you know, it's a global challenge for various diseases that we need to know right here on the spot in clinics and other places, if you want to give your child antibiotics are nuts. This is this is something that eventually once those technologies will step into the marketplace, we can define a new benchmark a new gold standard for, you know, you have to take one or two and then the industry may get along and basically set a new standard for you know, not just under the agnostic side, but rather on other issues. I think the more we see those, the more we adopt, those eventually do even could define the new benchmarks and best practices for us to adapt.

Marc Alcser  23:14  
Great, thanks. So we talked a lot about that, I guess what what you guys are working on now let's kind of look into the future. And to close out this panel. What do you think? And we'll start with area, what do you think is the biggest growth area or the biggest opportunity within this? Let's call it an industry just for the purpose of the panel? Yeah,

Ariane Tom  23:33  
sure. So you know, I'm, I'm personally very bullish about neuro technology and precision neuroscience. Really what we've what we've witnessed over the last decade, especially with the input of the BRAIN Initiative, which pushed about $4 billion in non dilutive grant funding into translational neuro technologies, is the advancement of a lot of the hardware. And so our access to the brain and to neural tissue is now you know, we're now entering this phase where the the advent of the combination of the developments in micro electronics, neuro imaging, etc, combined with our ability to mine that data with software and machine learning, I think that that convergence is going to be something really exciting. You can imagine, you know, just as with the iPhone that we had, and then the apps and the the app store that was built on top of that to enable a lot of different products and services that we'd never had before. You know, we believe that this could also be a future Avenue in terms of hardware that will not only have implications in the healthcare system and life sciences, but also in consumer tech and defense tech.

Assaf Barnea  24:51  
Even though the examples that I've been using were a little bit different, but I'm quite bullish on the truly on biology and deep tech or biology and AI To the extent that we've been repeatedly saying AI for, but in terms of oncology, we have a company called Uncle decipher, which is a unique, fascinating technology, which is looking into kind of computational biology looking into the silent mutations, hidden mutations, which are not been observed enough and could actually bring about indication expansion to pharma companies, we can save millions of people if that works. So, I believe that there's so much out there in the AI components and into biology that eventually the insightful insights that we start to see will materialize into significant amounts of both therapeutics as well as the agnostic tools as well as printing of organs and others.

Suraj Mudichintala  25:43  
Yeah, you know, I don't think I have too much more to add, I think we, you know, I think we're learning a lot about human biology through AI. I think neuroscience is absolutely the frontier. You know, there's so much we don't know and so much for uncovering, even in the last five years, it feels like there have been massive leaps and understanding of the default mode networks and, and the brain in general. And so, I think it's a really exciting time to to be at this intersection. And, you know, I look forward to the future.

Marc Alcser  26:16  
Awesome. Thanks very much. So in recap, bio convergence has a lot of opportunity going forward, huge market opportunities, lots of different applications. I'd like to thank the audience for joining us today, and as well as LSI, for putting on this amazing conference. And of course, my esteemed panelists. Thank you very much.

Assaf Barnea  26:33  
Thank you. Thank you guys.