AR: At what point in the life of a biotech
company do you choose to invest?

SC: I like to invest in the very early
stages of biotech companies. I’m
looking for companies with real
breakthroughs and innovations.
Obviously, there’s greater risk in
investing at such an early stage, but the
returns are also greater when a
company does succeed.

AR: What do you look for in a biotech
business team when you’re considering
investing in a biotech company?

SC: Since I’m looking for companies
that develop really novel and cuttingedge
products, having a strong science
and research background is far more
essential than having business savvy.
The pedigree of the business team is
all-important. Do they really know
what they’re talking about? Do they
have a viable business model? Those
kinds of questions.

AR: Do you prefer platform technology
companies over drug discovery companies, or
vice-versa?

SC: We all want to cure diseases. My
associate was telling me that there are
something like 3,500 diseases and
there is no cure for 70 percent of
them. That’s a lot of unmeet need. So
there’s plenty of fertile ground for
drug discovery companies to exploit.
However, since the mid-nineties,
venture capitalists have begun to look
at tools companies as well.The current
trend among venture capitalists,
however, is to prefer discovery
companies over tools companies. My
view is that the picture is not that
simple. I’m certainly still interested in
platform companies, especially because
what’s happening more and more is
that platform companies actually
evolve into drug discovery companies.
So I don’t think it’s a question of
“either-or.”

AR:How would you compare the returns in
the biotech field relative to the those in the
IT field?

SC: I would say that there are about
similar returns in both industries. The
key difference, though, is the timescale.
Unlike in the IT industry, there
are no quick hits in the biotech
industry. You’ve got to wait a long time
for a return on your biotech
investment. It takes about ten to twelve
for a biotech company to turn a
substantial profit. But once a biotech
firm does hit, it hits big.

AR: At what point in the drug discovery
process do most biotech companies seem to
fail?

SC: I would say that the majority of
failures happen during the human
clinical trials. I’ve seen a number of
companies pass through the in vitro and
animal stages just fine, but they often
find it difficult to get past the human
trial stage. They might even pass the
safety trials on humans, but many
companies have trouble getting efficacy
results for their drugs during the
human trial phase.

AR: How would you compare the risk factor
of investing in biotech companies relative to
investing in IT companies?

SC: People think I’m crazy when I say
this, but I think that there is less risk in
biotech investment. IT companies are
notorious for failing quickly.There’s no
backup for IT companies. It’s all pretty
much black-and-white.They either win
big or they fail miserably—come out
with nothing. But there aren’t really as
many total failures in the biotech
industry. In fact, we’ve had no gooseeggs
in biotech investment so far. A
given biotech company may not be a
huge winner because its market is
limited or for whatever reason, but it’s
rarely the case that it will just tank
altogether. What tends to happen, in
fact, is that these types of moderately
successful biotech companies get
acquired by bigger biotech firms or a
pharma company licenses their
products.

AR: What criteria do you look for when
evaluating biotech companies?

SC: One of the most important things I
look at is the company’s market space.
If a company comes in and claims to
have a cholesterol-lowering drug, then
I’d be very reluctant to invest. In a
market like that, there are a huge
number of competitors. So I look for
companies that try to do something
that hasn’t been done before.

AR: Do you think there is fertile ground for
hard-core IT techies to switch-over into the
biotech arena?

SC: I think there’s definite potential
there—particularly, in the world of
bioinformatics. I think bioinformatics
is ripe for innovation. The problem
right now is that biotech companies are
so customized that they would tend to
do bioinformatics in-house rather than
to outsource it. But if that problem is
overcome, I think biotech is a great
area for transition from the IT industry.

AR: What do you see as the hottest sectors
within the biotech industry at the moment?

SC: We’re drowning in drug targets
right now, but the real challenge is to
get validated drug targets.We need to
be able to separate the junk from those
targets that might actually yield drugs.