YouSaid · the spoken record

Rod Wong

lines on the record: 74
first: 2023-04-24
most recent: 2023-04-24
sittings or episodes: 1
sources: podcast

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“Early on, I think I had some talents and skills and I gained confidence from that, but I did have some very lone wolf type of personality attributes because of that. And I wish I had learned the value of teamwork and to embrace that even sooner than we did. We did it when we needed to, but because I've realized that to really accomplish things that are big, to really have a bigger impact, you can't do it alone. You have to do it with people. It actually requires way more self-confidence to do that because you have to be okay with welcoming people in that know way more than you do about different things. And you have to have, you got to be sure enough in yourself, right? Then to be able to work with those people in a way that's positive.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't let people get in your way for better or for worse. I think that it's really put a very strong independent streak in me.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, my parents were of the generation, and May is just their style, where they gave you a lot of personal responsibility. The other thing my dad specifically, he always told these stories about his childhood, and most of the stories were some version about him ignoring authority and then doing something bad. And then somehow coming out on top, like as one he forged his mom's signature, said that he had to be out of school because he was sick when he wasn't sick. He didn't go to school for a month. And then eventually, and he would just go to the beach and hang out. And then eventually he got busted. They held him back, but because he was such a bright kid, he took the test. He was in Hong Kong. You take these A-levels and whatever. And it's very test driven. Took the test and then skipped the grade that he was held back from. Anyways, so those kinds of stories always like, I think imprinted in me, this faith in yourself, think for yourself. And then once you're confident.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“It wasn't that I was going to turn this thing around and we were going to be a great success, especially at that point, you're always at your least confident and you really can't plan for success because it looks so far away. It's the obvious things. Be passionate about what you're doing. Enjoy it for what it is and plan for the long term.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“When young folks ask me what they should think about before considering to start their own thing, I always give this example, which is that like you can't plan that things are going to go up in a straight line. There's no straight line in anything. So if you're going to make a decision based on planning, plan for a not straight line and don't make it a two-year plan, make it a five or a 10-year plan. That's number one. And then number two, don't do it for bad reasons. And a bad reason is if the only reason is to make money. And for me, the most important reason I was able to persist was because in that moment I was the glass half full view was I'm my own boss and that was very, very important to me at the time. And as long as I can pay my bills, pay the rents. I loved my job. I enjoyed what I was doing each day, then that worst case scenario, that's okay.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Professionally, I would say my toughest moment has to be 2011. So we launched this place in 2009. I lost our biggest client. Our assets went from small to two-thirds smaller And it was tough. So one we had to decide to keep going. My CFO took on two part-time clients to keep the doors open. We actually, I think our first office was maybe 2,000 square feet, maybe even less. And we took on two sub letters so that we could pay the rents. We let a couple people go and we only had a few people. Very, very challenging. But, you know, I actually have really fond memories of it now, obviously, since we've done better since. And actually, the folks that came in and subletted now have become lifelong friends. And they've been fortunately successful too. That was a difficult time.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't make me choose. At each stage or each job, I've been really lucky and I will have like one or two mentors that then I'll carry forward in my life. So my first boss, Eric, he just said such a great example as a human being and as an academic. My second boss, Wayne, his ability to hone in on what is important and then do deep, deep work is to this day, I mean he was one of the great ones at DK, Scott, and Tom, business builders, pulled me out of my minutia and made me think about bigger picture risk and macro. But one person that wasn't my boss but was a colleague and mentor, Kevin Tang, about 10 years older than me, he really showed me the possibilities to influence and build. And, you know, we did some deals together when I was just dipping my toe into them. That and I really learned an incredible amount from him.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think from an investing perspective, it's what we talked about, and this is the analyst in me, when we just see a drug that has so much promise, but we're in one of those rare instances where the team that's taking it forward, you don't have confidence in. It's really frustrating. At least now we have more ways to help improve the odds.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think things that I describe as lock and key have always been kind of things that we've just feel like we can bet on, right? So like if you know that a tumor is caused by this mutation or if you know that this rare disease, they are missing this gene and if you can express the protein that's missing or replace it, that's probably going to work. And as simple as it sounds, we continue to make investments like that. And they continue to be very rewarding and have high odds.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have a kind of a straightforward life. I just like doing things that are physical. I don't have one single sport that I love, but I do a little bit of a lot of different things. That's probably my number one thing. I'd say hobby-wise, I have a lot of guitars. And based on the number of guitars I have, you'd think that I'm an incredible guitarist. I'm basically a beginner, intermediate guitar player, but I love learning the guitar too. Clears my head and gives me some connection to music.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Capital. So to be able to go to a company and say we can bring together multiple pieces of a deal so that you have the capital that you need to launch your drug or to run your phase three trial, we have the capabilities now at the right time for this tough moment in biotech.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think now we have the team that's in place, we have the capabilities that we care about. So I think now it's really about executing against it. So of course, from a sourcing perspective, we've got to find those opportunities. I think it is a wonderful time because the cost of equity is so high to then also where our deal making hats and all the building transacting capabilities that we have built and put those to good use because some companies, you know, their capital needs now are so large relative to their market cap because a lot of things have very small market caps that you can't solve their problems with a deal that's just like an equity offering. The rough rule of thumb is you can do an equity offering for like 10 to 20 percent of a company's market cap at any given time. But some companies need three, four x amount of capital.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Know, I think one of the things I'm most concerned about is payers and the pressure that we're seeing on paying for innovation in drug development. That's probably my number one long-term concern. I think there's Not paying attention to the manual yet. So I think the FDA is going through that process on a short term basis. But I think the pricing concern is a big one. We think about at the firm different ways where we can be advocates for innovation. I think there's more work for us to do there because I really do think there's a misunderstood narrative out there that folks need to do a better job in our industry of helping to correct.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our view is kind of actually we just tripled the list and you know this list like gene therapy as an example there's a lot of work we could do to make gene therapy better right cheaper improve the therapeutic index and actually think that we don't need to increase the number of modalities at all if we just focused on improving what we have this new updated list i think that would last the industry 10 to 20 years”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Antibody drug conjugates, which can improve what we call the therapeutic index by getting that delivered to the tumor cell. So oncology, we're seeing tons of innovation for similar reasons, immunology as well, a lot of unmet need there, a lot of diseases that don't have enough therapies. And then I would say some tissues that have been hard to get to, the brain, the eye, the heart, because of new modalities and their ability to get drugs into those tissues are also seeing significant ways of innovation. So this kind of mega innovation wave gets me excited. The one thing that I think a lot of venture capitalists talk about, which we are actually less excited about, is that there's a lot of venture capitalists focused on actually what is the next new modality? What is the 15th and the 16th? As an example, gene editing gets tons of airplay.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“The innovation that we're seeing, especially in drugs, is very broad. We see a ton in cancer. Cancer is always the number one area of drug development. It's obvious high met is the number two killer in the United States and other developed countries. But now with information in the form of genetic drivers, we're redefining cancer into what it actually is. Not just pointing out that, hey, you have cells that are growing when they shouldn't be. That's cancer. And then pointing out where they found it. Oh, lung cancer. If you think about it, it's so archaic to refer to a disease that way. So now cancer is being redefined into its genetic drivers. That's unleashed a ton of opportunity and innovation. And you have all these new tools, like even chemotherapy, for example. The problem with chemotherapy has always been that there's a lot of collateral damage. It kills tumor cells, but kills U2. And now you have things like...”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“They are passionate about science number one. And that's true of a lot of the folks here too. But it's tricky to bring both of those things together and have discipline, especially with risk management. But even if you size things appropriate to have a very sober view, objective view of truly what is the worst case, easy to say hard to do. So that's caused a lot of failure.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of them is the transition that we talked about from small to scalable. People always said, oh, you know, the firm's actually way riskier when you cross a billion dollars. And before I went through it myself, I didn't understand it. And now I really get it. It's very hard, especially when the wiring of your leadership, everything that's gotten them to that point are the same things that will cause their business to fail. Being a lone wolf, not embracing teamwork, not embracing structure. I think that's one key thing that's caused firm failure. I think another key thing is falling in love with science and not doing the risk management part of the job properly. There's a saying, right, doctors can't balance their checkbooks. Of course, there's some truth in a lot of sayings. And there's truth in that one. A lot of people get into this business because”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“And organized our team is differentiating. I think the companies that we work with, like interacting with a team that looks like that because it actually looks more like their own teams. But at the end of the day, one of the really nice things about our business is that this was a very, very small business. Even 10 years ago, not only was the list even shorter, but the firms were tiny. So the culture that developed in our ecosystem was one that we worked together to get things. So most of us are friends with some portion of the rest of us. And the culture is to default and not be competitive, but try to be collaborative. And that spirit, I think, has stayed relatively intact even as the firms have grown.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“The industry has grown a ton, and asset management firms or investment firms have grown with the industry. But that said, it's still a pretty small business, right? Small ecosystem. So I don't know the exact number, but healthcare dedicated firms that are managing meaningful amounts of capital like north of a billion dollars is probably a dozen plus or minus something like that. You complement that with some bigger pools of capital at platform firms or generalist firms. But you add that all up and it's a short list. Everyone on that list does it a little bit differently. I think the things that have differentiated us are a lot of the things that we've talked about, you know, we're not just full life cycle, but we also have the flexibility and the creativity to financially support companies and all kinds of creative ways, whether public private, stock, royalty, licensing transaction. I think that differentiates us. And then I think just the way we've kind of structured it.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's been a really interesting adventure. There are a lot of really positive things about a listed fund. I think the challenge is that UK in general, and then specifically for listed funds, there's not a deep audience and there's not a lot of liquidity for that. So that's one challenge for sure. The other is it's not a familiar product for people. So like a lot of people now want to allocate to biotech, but they're just not familiar with that structure. And some folks, you know, they don't want something that's marked to market every day. So there's just some interesting dynamics that make it a little bit more challenging in some ways. But I really do think the strengths of the vehicle are such that it's worth us to continue to invest in it.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“The next 24 months to launch that drug. And in this market environment, people are so risk averse that they don't want to take that risk. And it's hard to find 200 to $300 million. So those are losers in the environment. And those are the kinds of situations that we think selectively you can find like really interesting opportunities. But if you can help solve that problem and increase the odds that they can successfully launch and achieve that peak sales estimate, then you can really create a lot of value.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“That have the potential to move the needle for a pharma. So it has to be a blockbuster drug and is in a strategic area or disease or technology that fits in to farm up portfolios. Those are the kings in this cycle. Even in a tough market, capital availability for those companies is good and valuations are pretty good. The ones that have the worst seat in the house are the opposite of that. One particular example that we find kind of interesting is that companies that actually have succeeded all the way through development and they're getting ready to launch a product, but that product is a sub $1 billion peak sales product. Could be pretty big.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right now, one of the dynamics that's happening in the space is that pharma, which pharma's been kind of between a couple of major patent expiry waves. So about 10 years ago, there was a big wave, Lipitor, the antidepressants, all these big drugs went away. And then there was this wave of breakthroughs in cancer, you know, the PD-1s, for example, K-trude up, DVO, a lot of people are familiar with. It has a period of relative growth for the industry. And now in the back half of this decade again, you're going to have these big patent expirations that's on higher revenue basis. So there's tremendous pressure in the industry for those companies to try to mitigate those patent expiries and do deals. So I would say those biotech companies, so the targets, the ones that have the best seat in the house are the ones that are developing drugs.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Genetic data from public databases and using that to conclude what the outcome was likely to be, that it's going to be way smaller or way bigger continues to be a huge source of edge for us because that work is, it's not, it doesn't take a genius to do it, but it takes a lot of effort.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Called constipation beds. And what you saw in phase three was exactly that. There was this big placebo effect. Anyway, very long story to say, so we spend a lot of time studying looking for statistical trends and anomalous things that we can take advantage of in data. And a lot of it's not just theory. You have to gather data and you have to really understand it and understand what you can actually predict. Now opposite example much briefer story is on the commercial side. We were known in the early days of making some investments in rare disease companies with rare disease products when you launch. Oftentimes there's tons of uncertainty. You don't know if there's going to be no patients out there with the disease or way more than people expect. And we've got very good at doing exercises by, for example, counting patients at certain centers, by knowing how to use insurance data, more recently knowing how to use”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“A lot of them work, and phase threes they all fail every single one. So empirically, we said actually the statistician is wrong. Doesn't matter how great the p-value in phase two, the phase three failure odds are high. In hindsight, I'll tell you what my intuition tells me. And this is just a hypothesis, which is that constipation patients are really human beings. And they're willing to take their placebo for a month, right? But when they can't go back to the bathroom for a month, they walk into the Dwayne Reed, the CVS. There's a whole aisle.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“The regulatory agencies like FDA make you do longer studies. Initially, you don't have that much safety information, you don't have a lot of toxicity data, and so they're like, okay, test it for a month. Do your phase two for a month. And then when you prove yourself, and it looks like an interesting drug, then in your phase three, we want you to do six months, right? Because we want to be sure that it's safe. So in constipation, the way this plays out is people do proof of concept studies over a month. And you would have these drugs that would have really, really impressive p-values, right? So if you gave that data to a statistician, they would tell you the phase three has 99.999% of being successful. And then you saw all these phase threes fail. And we're like, what's wrong? And I can't definitively tell you the answer, but I can tell you what we did and I can tell you my hypothesis. We studied all these historical constipation trials going back into literature. And we found that phase.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's as very straightforward question. But yeah, the answer is actually big. I mean, I think at the end of the day, what it's about is about doing different types of exercises, research or analytical type exercises, that you're confident are going to be predictive of the future, right? That's the name of the game. And it depends on the investment type, the situation, and where the misunderstanding is. I'll give a couple of different examples. Sometimes the misunderstanding is people don't understand statistics. And so you can have edge by doing it properly. So there was a wave a bunch of years ago of constipation drugs and development. And the end point for constipation studies is how many bowel movements you have. Obvious. Because that's the goal. And the nature of drug development tends to be when you progress from early stage trials to late stage trials.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're doing your research with your team. What are the things that you get conviction in or the signpost of that conviction, both that you think the drug's going to work and that you have a differential view from the market?”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of the challenge is that high probability investments, or at least by our assessment, they don't grow on trees. You'd probably have less volatility in terms of a strategy if there were more of them, so the individual idiosyncratic losses and wins would be smaller, it'd be a smoother kind of return profile. But the reality is, you know, there's 50 drugs approved a year in the United States. So there's not that many. And then you got to find the ones that are misunderstood, mispriced, and all that. So we are willing to tolerate a bit more voliosyncratically to just focus on kind of those high probability investments.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's evolved around the edges. What I just walked through fundamentally hasn't changed. But what has changed, I would say, the biggest pieces on the tale. So 80% of our business approximately is public and the portfolio looks exactly like what I just described. But now 20% is private. And in that private bucket, we're doing mid delay stage venture type investments. We call it crossover, right, in biotech. And then we're doing some early stage company creation, Series A types of investments. So we've essentially added a farm team over time, which consists of those private investments, right? A typical year, we're doing 10 to 20 of those in total. So the goal of that, of those private investments.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have to use the R and guess what the worst case scenario is both fundamentally and factoring in the market environment. We've been relatively disciplined about that. So you see on that top 10 losers list that we've only had a couple positions that lose us more than 5%. If you have those kinds of guideposts in your mind, then you can kind of start see how the portfolio falls out from that. So we'll have larger positions that are 5 to 10% plus of the portfolio. That must mean that those larger positions have some kind of base business value support. They sell a drug on the market and we're playing for the second drug. And then you have a number of positions that are sub 5% because there's a lot of single product development stage companies and the downside is 90% or 100%. And those positions almost universally will be less than 5%. There's some strategies where 10% position any kind of biots accompany commercial stage or otherwise would seem like an enormous”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you how we're positioned right now, for example, and generally speaking. In our flagship fund, we're about 70% a little bit north of that net long. We are 90 some odd percent invested. So on the long side, so our gross exposure, if you add long and short, is not that high, right? It's like 90 by 20. And so you net with 70. That is not that atypical for us. I would say our outer bounds are net of 30 and net of ninety. And then the high end of gross is probably like 150. So that's what it looks like just by the numbers. I would say a very important element that we haven't touched on yet is our best ideas, this conviction piece, our very best ideas, and sometimes we don't even have one that reaches this level in a given year, but we are willing to take up to a 5% loss if we're flat out wrong.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Regular markets, you have to think about okay, so I know it's a 10x if it's 100% probability it makes it to the end of the rainbow, but what proportion of that 10x should something be valued at or trade at the different steps along the way? And there are exercises you can do, right? There are comparables analysis that you learn in business school and as a young banker to help frame that up. And then there's also some judgment and then you got to overlay the macro environment. So those are the things that we kind of layer on top to size positions dynamically over time.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it gets into a little bit of the portfolio manager and trader part of the job. And I think the way we do is pretty simple. We just consider each point in time almost kind of like you're re-underwriting the investment, right? So no matter where an investment is trading or where it's been marked last, you're thinking about then what is the next step in terms of key event, probability around that event, and then the asymmetry around that event. Now, there is for sure some art to this, right? It's dependent on top-down things, like what kind of market environment you're in, you know, as an example, kind of the worst part of the bear market sell-off, this cycle, Q2 of last year, you could have been right on everything, right? Called the event right. Day the news comes out, the stock trades down because it's a source of liquidity like everything else in biotech that quarter. So you got to factor in those elements. That's part of the art. And then even in...”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is that you have good management, solid management, knows what they're doing, and it's really about supporting them just to maximize the odds however we can.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“But I use that analogy just to make the point that we're fundamentally value oriented and we are looking for asymmetric risk reward. The trick is that you have to overlay that we live in a probabilistic business or one that's binary. So we've always been very focused on those variables. I will say that on the management piece, I kind of make it very simple. I put things in three basic buckets. Low percentage of the time management that is so stellar that you think they can take a very marginal product, right? They can sell ice to an Eskimo and there's drugs like that. And they can find a way to get it across the finish line and make it commercially successful. And there are certainly drugs like that. Then the other extreme, also a low percentage of management teams, is those that will screw it up. The execution, and that's extremely frustrating for analytically oriented people. And then the middle bucket, which is most.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the honest answer is we have always been very analytically focused. So the probability, the size of the opportunity, and then related to that, the valuation piece. I like to say if Warren Buffett were to ever invest in biotech, development stage biotech, maybe he had used the framework that we would use. Now, of course, I know he never would”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we were short in size, and they sold the company at Allergan. And we didn't even give up then, by the way. After they announced the deal, we tried to gain audience with Allergan at the time and tried to convince them of why it couldn't be approved and there wasn't much interest in that message. The deal closed and the drug got rejected a month later and got rejected two more times after that, I think. One big lesson in the losers was do not underestimate what savvy business people are capable of one adjustment that we made as a result was on our shorts, we slashed the max position size.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“To make inhalers with a single puff in them work. And we had done all this diligence and we were 99% sure. I don't want to sound like a crazy person. So I'll say 99, not 99.9. But we were very confident you couldn't manufacture it, and so it can't be approved.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, one of the biggest learnings that I've had in terms of, if you're to say, since I started as a PM, what have I changed about the strategy? The losers are at a basic level, we play in a binary space, and that's part of the business. We're wrong, you know, high 30s, 40% of the time, 40 some odd percent of the time. But the key is making those losses as small as possible. And you'll see at the top of the losers list one key theme, which is that even when we thought we were fundamentally right from our analysis on a name, we've gone up against savvy management teams that then find a way to capture or realize value despite the fundamentals being against them. So like our second largest loser was actually a short position against a company called Map Pharma. They're developing a single use inhaler for migraine. And the very short version of the story is our research said that they can't manufacture this stuff. It's very, very hard.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Until you get three baggers, five baggers, ten baggers, and then they make it on that top 10 list. So a lot of what we think about is we're ultimately always looking for something that has the potential that can be added to that list”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you look at our top 10 winners and losers, which is actually my favorite slide, because I think if there's one slide that you can look at that gives a person a shot and understand what drives our business, that is the slide. So top 10 winners and losers from Inception. And what you will see is that on the winners column, we have, I think now, over 10 approved drugs. And most of those companies we identified at some pretty early stage in the life cycle that companies sometimes went as private, couple instances when the asset was in academic hands. So when you think about what actually drives the business or the returns of the funds, it is finding things early when they're misunderstood or simply no one's paying attention, doing the work, getting convicted, and then supporting it along multiple steps, stages of the life cycle. And typically this could span, call it five years.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we do business development for private companies, because we have some brand and reputation now, and so people seek us out because we have repeat working relationships with executive teams and entrepreneurs, because we work across different security types, right? We've been growing a royalty strategy at the firm as an example. And that brings in new ideas. And we're not just doing it only in New York or in the US. Now we have a small outpost in London and in Shanghai. And so we have international funnels. So we've really tacked on all these different ways of sourcing. And it's about making good decisions at each step. as you move your way down the ultimate funnel so that you're killing things quickly you're doing deeper waves of research in an efficient way so that ultimately we can find the ideas that can become something in the portfolio”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“The mission has remained unchanged in the sense that the end of the day, our mission is to find things that can be transformative products, drugs or medical devices or something else that offer a compelling commercial opportunity as a result, have a compelling risk reward. So the way I kind of think about sourcing now is that it's about actually we're not married to any one way of doing things. It's about having as many productive funnels for sourcing as possible. Now we have our core funnels. For example, absolutely probably the biggest single funnel is that we have analysts that are divided up by disease and modality. Those represent coverage areas for those analysts just like they do. That sounds very similar to most investment firms of some kind. You have coverage universe. And they bring in ideas because they own those areas. So that's a core funnel. But we have so many other funnels now.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to turn to how you're thinking about investing more and more drugs potentially getting approved, more businesses to track. How do you think about where your investment opportunities are coming from and the filters that you're using?”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think Gantcharts are useful because in a single slide you can show all the projects that are important to people and you can show who owns them and over how much time you have to get those projects done and then you can track it sounds really simple and that's the beauty in their power”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we added a bunch of tools they're all some blend of falling under the buckets of structure or process. And then it was a process of taking the tools like PowerPoint decks and just using them to the point where it's optimal, not weighing the organization or teams down and building those things, but just to facilitate the job that needs to get done. And so now I think that's where we are. You know, a lot of it's also on the structure piece, organizing the firm well. It's basic things that you don't think about when you're a small firm, like making sure you have people reporting into the right people, making sure you have managers that are competent to deal with their direct reports and those kinds of basic things. So if you're to pin me down and say, what are your couple favorite tools? I would say very short PowerPoint decks and I would say Gantt charts.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's funny because when you're first doing this, you tend to overdo things. So like, you know, just as a small example, we got religion about using slides as part of our process. Structures are meetings, you know, forces people to be clear with their communication. And at one point, a good deck, quote unquote in RTW was probably 30 to 50 slides long. And I remember we had one off-site where I bet we presented 300 slides and we made people sit there and listen for four hours, you know, to 300 slides or whatever. And then you make progress. And now what is a great deck? A great deck is probably four slides.”
2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source