Q&A: Mark Levin

June 17, 2010

MassBio asked Mark Levin, a partner at Third Rock Ventures for his thoughts on the economic climate, the future of venture capital and hot new science. Here's what he had to say.

Q: It has been said that Third Rock looks for “Big Science” to invest in. As you look to the next 10 years out, what do you see now that has the capability to qualify as "big science?"Mark Levin

A: Well I guess a couple things. Certainly that’s true; we do look for big science. We also try to balance the portfolio. If you look at each year, we’re typically going to be involved in starting up let’s say five to seven companies. About half of those will be big science. So when we think about big science the things that we are very focused on these days is certainly this whole genetics and genomics revolution and how it’s going to affect personalized medicine – the right drug for the right person at the right time – that’s a huge focus of ours. Another major focus is this whole area of new drug modalities in that we’ve got areas such as peptides or natural products, gene therapy. We just started up a gene therapy company. We’re following the whole stem cell and regenerative medicine area very carefully. It’s not something we’ve invested in but we think that’s going to be a very important area for the future, so we’re following that very closely. And we have a major effort in biologics, so we look at the whole new protein engineering field for biologics, whether it’s peptides again or antibodies or engineered molecules of some kind on the biologics side. To balance that, when we think about the therapeutic areas side we have a lot of expertise in metabolic disease. Obesity is a major focus of ours certainly, based on what a horrific disease it is and how it’s affecting the world, but also oncology, neurodegeneration and rare genetic disorders.”

Q: At our Annual Meeting recently, George Whiteside was asked, "When is the right time to invest and start a company around a technology?” to which he replied, “When the science is done”. What do you consider the best positioned “scientific platforms” and when do you think the science will be done?

A: I’m sure George would agree with this – the science is never done. And I think it’s fair to say that most, or all the companies that we’re involved with or anybody involved in the science really is never done. I think when you start up a company, as we did with Millennium, the science wasn’t done certainly on the genomics and genetics side and it’s something that evolved. We got involved in a lot of other companies with polaric and transcription biology or others. Genentech—in the early days of Genentech, the science was just beginning to evolve with regard to cloning, and Genentech itself and many other major companies had to develop that science. So when we look at science we really look at areas where we think there’s been really major breakthroughs in biology, in academia where there’s outstanding people leading the field,  where the publications are going up dramatically, which typically means that breakthroughs are occurring, and we also spend a lot of time with pharma and device and diagnostic companies and what is just starting to catch their interest. For us it’s a combination of when we see breakthrough science, it’s the publications, it’s great people, it’s us getting involved in it and thinking it’s really going to make a big difference for the patient. And then it’s also looking at the customers downstream, the pharma companies and big bio as an example, and seeing that they’re interested in it – that’s typically when we get involved.

Q: What are the biggest challenges to transforming big science into a usable platform that VCs and innovators start to form companies?

A; Well, the big challenges for us were always people. People make it happen. And again I think it goes back to the fact that really that from our standpoint when we get involved in something, the science – a lot of it’s been done but it’s evolving very rapidly. So when we bring this rapidly evolving science into a new company and we put in place an important vision and certainly a plan for the future, it really takes extraordinary people to make this happen. And I would argue that almost in all cases with important platforms it’s the people that make the difference, because even though you have an important breakthrough for the future, that breakthrough will go in many different directions because the science is really still evolving rapidly. And it takes people that can understand where that breakthrough should take you and where it should not, and building a balanced portfolio that allows you to be successful. Because if you started following just on one breakthrough in science and you follow that no matter what, most of the time you’ll be unsuccessful. So it’s the people and their ability to see where the science takes you.

Q: Unless you are a well- established investigator, there seems to be a real barrier between academia and industry, characterized by a dearth of capital that can be deployed at the very early stages. Why are VCs and Pharma hesitant to place a lot of small bets on interesting science (not big science) and see what sprouts?

A: Well, I guess there are a lot of reasons for that. The first reason is, as you probably know, almost everything fails in drug discovery today, and, everybody has different numbers, but if you look at, let’s say, if you’ve got a target in drug discovery today, the likelihood that that target will end up taking the product to market could be, you know, one in 50, one in 100. If you’ve got animal model data the odds might be one in 10 to one in 20 that you’ve got a product. So then if we take that back to even earlier than that where you have an early idea in academia, you can imagine the probability that that will ever end up being a product. So the probability in itself are something that everybody thinks about. Secondly, most of the early stage stuff or ideas in science or academia is just too early. You don’t have targets, you don’t have chemistry, you don’t have a biology around it, and people are looking as we talked about, as George said ‘when is the science done?’ or when do we think the science is evolved enough, most of the time it is just too early and you can’t afford to invest a lot of dollars around it. I guess lastly is a lot of venture groups I know now are funding projects in academia by putting $100,000 or $1 million and letting it develop for a year or two, to see if in fact it really brings science to fruition. We actually have done some of that. So I would say some groups are doing that and when they see an ideal project – a big part of it is, one, you shouldn’t do a lot of it because there’s very little of it that will ever be successful, at least from a product standpoint, and two –  it’s a challenge in dealing with the technology transfer offices sometimes. I think the venture groups and technology transfer offices need to sit down and find the right formula for that, because when you invest so early, early before it’s even a company, then the value of that has to be seen appropriately by both groups and they need to come to a happy medium. And a lot of time those negotiations just don’t go on and then they fail. So that’s another big part of it.

Q: We’re seeing signs we’re pulling out of the recent economic downturn. Will venture capital come back in the way it existed prior to the downturn, or will we see a new model or direction?

A: Well, that’s a tough one. So I started in the pharma/biotech industry actually in the seventies, and I was at Genentech in the early eighties and venture in the late eighties and then off to Millennium, and I guess I’ve seen it go up and down many, many times, and every time it goes up and down everybody says ‘well this is a huge change.’ This change I think is probably a little different and that it has certainly affected pharma in a big way and there’s new healthcare initiatives that are going to affect pharma. Pharma’s restructuring, the venture industry and our limited partners are rethinking things, so I think it will be different, but I still think it’s going to be very aggressive going forward. If you look at pharma today, and what’s happening with regard to their patent estates going away, tens of billions of dollars worth of products are going away, they’re cutting back on discovery, and the venture groups for the most part are not funding early stage work. So I think what you’ll see over the next couple years is the venture groups coming back into earlier discovery just simply because the customer, pharma, is going to demand it more and more because they’re more focused on later stage efforts but yet at the same time they need to be able to build their pipelines. So I think you’ll see venture coming back very aggressively and I think you’ll see a lot of groups working on the early side again. Of course it’s going to depend on pharma and the IPO market coming back. But I’m very confident of it. We think it’s going to be very exciting for the future here. The other part of that which is driving this is science and medicine are better than ever. The whole genetics and genomics revolution is just exploding on the science side and that’s a real driver. So there’s a lot of great science out there to build important efforts around.

Mark Levin is co-founder and partner at Third Rock Ventures.

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