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Clarke Futch

lines on the record: 74
first: 2020-06-01
most recent: 2020-06-01
sittings or episodes: 1
sources: podcast

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“Have both a top down and a bottoms up approach. So from a top-down standpoint, one of the things we've done on the scientific side is we've created a research team which really culminated in two substantial senior hires. One is our chief medical officer who has a lot of clinical regulatory expertise, and one is our head of research, who's a PhD scientist by background. So our research team, really headed by head of research, will put out these white papers every six months or so. So for example, he authored one on migraines a couple of years ago. Hasn't been any new development in migraines for two decades. People use what are called tryptans, summa tryptan, and other things. And they work reasonably well, but they don't work on everyone. So there's a whole new class of drugs called CGRPs.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that leaves us with the one remaining risk, which is commercial risk. How well does the product sell relative to our projections? And there's a whole host of things to consider there about existing competition, new competition, what's the reimbursement dynamic for that particular drug, market dynamics, all of that consideration. And so we need a real broad skill set in some ways, but also very deep in other ways. And you have to wrap that in the fact that we do deals, right? We make investments. So you need people who can understand how to get a deal from A to Z. So it's complicated, but it's fun.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have to look at the patents, the intellectual property. We have our own internal IP council. We have to look at manufacturing and making sure that the manufactured without any disruptions and therefore sold and therefore the royalty paid. We look at the clinical, scientific and regulatory aspects. And those re-risk, the patents, manufacturing, and regulatory are really what we view as potential binary risk. So if the product for safety reasons gets pulled from the market because it has some significant side effect, that's a problem for us because no sales means no royalties. Our process, which we've refined and honed over now quite a long time, is designed to weed out those potential binary risks.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've been able to insource the scientific and medical capabilities such that today we're doing, again, it's inverted. We're probably doing 80% of the work internally at HCR. And so that also has driven a growth in headcount. But it's a very technical and specialized work because”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the team has grown, it's grown from the three founders, including myself, to about 30 people today. And it's grown for two reasons. One is the regional approach that I mentioned. And in each of those cases, we've taken someone from the home office in the New York area and repotted them, so to speak, into these offices. And that's gone incredibly well. So we've grown geographically. The other area we've run in is in the science and medical capabilities that we have internally. When I first started out, which is like 19 years ago now doing this, we would outsource a lot of the clinical scientific medical diligence, 80% would be outsourced. And what we've been able to do because we've grown, we've raised more capital.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've opened offices in Boston. I mentioned that the Boston company with the Shingles vaccine, San Francisco, London, and then the greater New York area. So we try to get locally, have people on the ground and be involved in that community and educate people. These companies are raising capital all the time. Every time may not be the right time for our type of financing. But at some point in their corporate financing history, it will be the right time. And so we're trying to find those intersections.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think the way to think about it is what's the total amount of capital raised to fund these biopharmaceutical companies and how much of that is this royalty financing? And the answer is $9 billion is a drop in the bucket still, even though it's been massive growth in our little niche of the world. It's a drop in the bucket if you look at primarily equity raised, either venture capital raised or IPOs or follow-on equity. It's a small fraction. There's two, three, four, five times as much money raised in the equity markets each year. But the equity markets can be volatile, right? We're certainly seeing that now. And so what we try to do is we're kind of always there as a financing source. And a lot of it is about just getting the word out, just educating people that this is an option. One of the things we've done, we've gone to a regional sourcing approach.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they didn't like their stock price. Most companies don't like their stock price, right? The people who are in the biotech business are, fortunately, natural optimists. And so they always view the future as being better. Many times it is, sometimes it's not. But in any case, they wanted to raise capital. They didn't like their stock price. It's not a company that can go to JPMorgan and take out a loan. These companies are burning money. And they have a very interesting business model issue, which is the business model are long-term capital projects. It takes years to do these clinical trials and to get it approved can take 10 years, and it cost a lot of money. And yet they finance it on a short-term basis every year, every other year. So they're constantly out raising capital, these smaller biopharmaceutical companies that are the primary owners of these royalties. So long story short, they wanted to essentially reallocate”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's exactly right. The small company had moved on to a new therapeutic category. In their particular case, they were focused on cancer products. They were looking to raise capital to fund their own clinical trials on their own cancer products. And they basically have two options. They can raise equity.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Will pay you a lump sum amount today up front, in this case $190 million. At closing, and in exchange for the right to receive that quarterly future royalty cash flow. So today, Glaxo SmithKlein each quarter, instead of paying the small company, they pay us directly. And then we just take that cash and we immediately distribute it back to the investors and our fund vehicles.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“And a small company in Boston, and this is very typical, small company in Boston, which is one of the life science hotspots, I had developed some technology patented that technology, licensed the patent rights to GSK way back when in exchange for royalty, I think it was like 2% of sales, so relatively modest. Glaxo goes and runs the clinical trials, gets it approved, starts selling the vaccine, starts paying royalty back to the small company in Boston. We go to the small company in Boston who we've been in dialogue and we'd been tracking where this product was in the FDA process. And when it got to approval, and that's the key for us, 90% of what we do are products that have been approved by the FDA. And so once it got approved, small companies started to receive this quarterly royalty cash flow. We go to them and say, looks like you need capital.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Shingles, you may be familiar with it. It's a pretty serious issue. It can be mild. It can be quite severe. It mainly affects people 50 years and older. And there was an existing vaccine, but the existing vaccine to prevent shingles only worked about half the time and only lasted a couple of years. This new vaccine, which is marketed by GalaxosmithKlein called shingrics, works about ninety percent of the time and can last up to a decade or longer. So it's a far superior product.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that has been accelerated in part by the growth of venture capital and the growth of venture capital for life sciences in the 1980s and 1990s and then 2000. And then the IPO market to fund the smaller fast-growing biopharmaceutical companies. And you have the larger companies really evolving their business model to really where they're marketing and distribution companies. So what happens typically today is you'll have a small growing company develop some technology, but it doesn't have the infrastructure to sell the product. And they will sell the patent rights from a small company to a big company in exchange for royalty just a percentage of sales. So let me give you an example of a deal that we've done, which is publicly disclosed. A few years ago, we bought a royalty and a new vaccine for shingles”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Last estimate I saw was 70% of the products sold by the large companies had been invented at small companies. And you've had a multi decade trend in the pharma industry of outsourcing research and development.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our business is about delivering non-correlated yield. And non-correlated meaning the returns are not correlated to the capital markets. Rather, what it's correlated to is the sales of pharmaceutical products. All the royalty is just a percentage of net sales of the product, 1%, 10%, somewhere in that range typically. And the reason you have royalties If you went back two or three decades in the pharmaceutical industry, the big companies, the Glaxo-Smith Kleins, the Merck, Pfizers of the World, they would invent 60, 70 percent of their products internally in their own research and development laboratories. and then run the clinical trials to get the products approved and then manufacturers And market the products themselves. What's happened over the last almost three decades now is that ratio has inverted such that today”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“But it gave us an opportunity to have access to capital. We left Paul Capital in the fall of 2006, set up healthcare royalty partners, and we were able to close on some capital about July of 2007.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Myself and two other partners there basically couldn't come to agreement and we left without anything firm. And in hindsight, it was probably much riskier than I thought at the time. I had a very good job. I was doing very well and I had four kids and a mortgage and all that stuff. And you go from that to making zero. It's a bit like jumping out of the airplane with a parachute on and you don't know if it's going to engage until you're actually outside the airplane and going down. But we're very fortunate because when we left Paul Capitol, the LP is called me. And we had to be very careful because we had certain nonsalists and all that stuff. But we followed it to the letter of the law.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that happened at the end of 2006. I had been at Pole Capital for five years. I'd become a partner there. And that was going well at Paul Royalty Fund number one. Then when I was there, we raised Paul Royalty Fund number two, which was about over two times the size. We were about to go out and raise the next fund. And that's a time which forces a discussion internally, as you know from your background about economics. And this is a movie played over and over again.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“For this quote unquote, alternative form of financing. And I thought my clients who had been servicing as an investment banker, there'd be times when they would find this financing mechanism of selling royalties as attractive. And so it took a little bit of a leap of faith and the rest, as they say, is history.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Towards the end of 2001, by that time, the dot-com boom crash had occurred and the investment banking underwriting business had dried up and a little bit of a leap of faith, but I got hired by this firm Paul Capital. And they were really one of the early pioneers in this royalty monetization market when it was tiny. I mean, tiny, meaning first year I was there, I think the total amount of transaction volume of all deals added up together for the whole year was like $150 million. So really, really small and subsequently grown last year is about $9 billion of transaction volume. So it's grown dramatically. Having advised boards and management teams on raising capital, I thought there was a lot of long-term opportunity.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sold his firm. He found it called Montgomery Securities, started a new firm called Thomas Wisel Partners. I moved out there, I think I literally was like the first healthcare person. The firm they were. 250 technology Oriented folks. There, I started doing more life sciences. Underwriting and MA as an investment banker And that's how I got into pharmaceutical area. Of course, every investment banker thinks they can be a principal investor or wants to. And I was no different, I suppose, in that respect. Subsequently moved from San Francisco to New York Work out at the New York office I got a call from a recruiter about this firm. Whole capital, which had this royalty business they just started. I didn't know anything about it, but better to be lucky than smart. My timing was pretty small.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Directly back into investment banking. I wanted to focus on high growth exciting companies. So I went to work for Raymond James. They were focused on more of the growth sectors of the economy. And their program at the time, you rotated around into different departments. So I was in. The technology group for six months, and then I was in what we called leisure and entertainment, which was casinos and restaurants. And then I ended up, my last rotation was in the healthcare group. And I just ended up staying there. At the time, I was focused more on what we call healthcare services. So nursing homes and various physician practice management groups and things like that. Because my background was finance and legal, not really science. And I left Raymond James 1999 moved out to San Francisco to work for a guy named Tom Wisel who had”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, it's certainly not a natural path into investing in pharmaceutical royalties for sure. My background is not all that glamorous. I grew up in Nashville, Tennessee, went to Vanderbilt University to undergraduate, thought I was going to be a lawyer, or at least my parents thought I was going to be a lawyer my whole life. But I ended up, this was in the late 80s, I ended up getting a job in New York and working on Wall Street a couple of years. Subsequently, did go back to law school, University of Virginia. And in law school, you have these summer clerkships, and it's three years, so you have two summers. And I did that for two summers and figured out that I didn't want to be a lawyer for the rest of my life. And so I ended up going right out of law school.”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Clark Futch, a co founder, managing partner, and chairman of the investment committee at Healthcare Royalty Partners, which is an investment firm that purchases royalties and uses debt-like instruments to generate non-correlated return streams from biopharmaceutical assets. The firm is a leader in the space and has invested over $3 billion in 70 investments since its founding 14 years ago. Our conversation covers Clark's background in investment banking and path to pharmaceutical royalties in the earliest days of the business. We discuss the nature of the opportunity, the reason why it exists, and how it works, and the team it place at Healthcare Royalty Partners that makes it happen. We then turn to the investment process, covering sourcing, screening criteria, due diligence, deal structure, portfolio construction,”
2020-06-01 · Capital Allocators · Clarke Futch – Healthcare Royalty Partners (First Meeting, EP.20) · IDENTIFIED FROM THE TRANSCRIPT · source