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Rod Wong

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74

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2023-04-24

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2023-04-24

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1. “Percent to 90%, and it was not an easy two years. But actually from a professional standpoint, I think it's one of the things I'm also most proud of because it was really challenging. It required me to learn a lot of new things. And I'm very proud that we got to the other side.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “I think when you read like management textbooks, I remember there was one that I read in business club. It was like in technology operations management, it was talking about like the Toyota manufacturing line when there would be these bottlenecks and these fire drills because of that. You know, in hindsight, it's so obvious, but when you're living through it, it never feels obvious until someone points it out. But that's what we were experiencing. We would basically have just a lot of fire drills and we're misdiagnosing what the cause of those fire drills were, right? When you don't have structure in process, when you don't have competent management, people point fingers at each other and say, oh, it's because that person's not doing their job or all these things. And when you actually build in structure and process and you learn what it takes to be a competent manager, all those things just kind of fade away. And that was completely our experience. It took, I would say two years to go from zero.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “We got a lot of help. We sought help every way we could think to find it. We brought in outside consultants. We hired people that are professional leaders and managers. We developed internal training programs, which are constant ongoing. Coaching, everything that we could think of to just get us there faster, we tried to do.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “I mean, academic labs. I don't want to say make broad negative generalizations. But it's the same thing. They are small teams that are very, very good at what they do. And you develop big personalities, big egos from that. And that's a management challenge when what you're talking about is you want people with different expertise to really come together and work together and actually be happy doing it.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “Even big firms are structured as very small teams, sometimes just flat out individuals. There's a lot of lone wolf culture to get away from that what's in the DNA of money management to something that's more the skills that you need from the corporate world was really a challenging thing. And it took us a while to figure it out.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “As an example, and then you need builders, so that is really what key roles that would normally exist at a biotech company. Should we bring in-house so that we can move more efficiently, so we can create muscle memory, institutional memory, so that we can do those things in an efficient way. Over time, that's basically what we've tried to build. I think you can make a list and probably do a pretty good job of the things that you might consider that you want in-house. But the trickiest thing, actually, in our evolution that I found was to get it all to work together smoothly without the wheels coming off the bus. When you think of biotech companies or any kind of corporation, those are people that spend a lifetime developing their careers in a way that's where they're working with other people. And that's part of what is gating criteria to be successful. Most asset management firms, even very, very successful people.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “The way I think about it is that over the years we transitioned from a few people with some talents and skills to building an organization with capabilities and organizing those capabilities in a thoughtful way. So we have a few key divisions now. We have people whose primary job description is to analyze things, the way we've approached evolving analysis is that we've said, hey, science has become way more complex. So in analysis, it's been about developing and acquire expertise that's subspecialized by disease, by modality, things like that. And then in the building part, it's about what functional expertise do you need to do the things that we want to do. You need deal makers, so transactional people, that's not just ex-banker types, but legal internally.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Therapy companies out there at the time, this was Rewine, call it seven, eight, nine years ago, we were noticing that there were academic projects out there that didn't have company sponsors that looked like they could be compelling drugs. And so the only way to take those forward or to participate was actually to build, create and incubate and build a new company. And so that kind of thinking ultimately got us into a whole bunch of areas. And so now we're very much not just stock pickers, right? Now we're what we call full lifecycle investors and we can participate kind of on the whole spectrum from entirely passive to completely operational.”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “It really was a gradual evolution for most of it. It got more intentional, I would say, in the last handful of years. But a lot of it would be we were compelled. We would encounter an opportunity and that opportunity would be missing something or it would require change. And so then we had to figure out how to do that. I think the biggest case study in our history in terms of taking the extreme example was rocket pharma. That's one of the things I'm most proud of in my career so far in terms of the most rewarding experience is to play a part in creating something that I think could be very impactful. Rocket is the third largest independent gene therapy focused company right now. So that came about because we were doing a deep dive in gene therapy. We thought that the technology had matured to a point where you're going to see drugs come from it. And even though there are quite a number of gene”

   2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “Size those opportunities better than the market. So at the end of the day, the stratuists find those things that offer high probability asymmetric risk reward over a medium to long duration and build a portfolio out of those things, recognizing that great drugs that are underappreciated by the market should be hard to find. So that should be a moderately concentrated portfolio. I had confidence at the time because of the experience that I had for a few years at decay. When I started, I was still basically a stock picker at heart, but I was starting to get the itch of, oh, can you do more? Can you be more involved, whether it's transactionally building things? Those were just ideas at the time. There wasn't like a plan. I like the idea of being an independent firm, having the freedom to do that someday.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “When I started I have some beliefs about how to invest in healthcare optimally, that kind of looks like run a moderately concentrated portfolio, take bigger bets, have edge in two basic things, right? At that point in my career.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “New products, right? On average, we've been approving 40-ish drugs a year, and 40 goes to 80, even if you're losing some on pricing, it should be a tremendous amount of value creation.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “I think it's a great question. I think there are moving pieces that we can't know the definitive answer yet. This price versus volume question? Not just because policymakers are pressuring price, but also because if you move from more frequent monopolistic markets to more competitive markets because innovations sped up so much, you have multiple players for the same opportunity, those things have to net against each other. I like to frame it this way, which is that drug development is one of the sectors that has relatively good value capture via pricing. So you're starting from a relatively good place. I think about the opposite is actually in tech, where you hear all the time like 90-some percent of the value accrues actually to the consumer. A lot of things that we consume in tech are actually free, but it's still been the basis of a tremendous amount of value creation. So I think about that way very simplistically that if you're going to generate a”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “And when you have that type of growth and that type of potential on the science side for an increase in number of effective drugs, you then take on your business school hat and say, okay, on the business side, there's more volume, there's questions about price, right? You hear about things coming off patent and the pressure on drug prices. How does the likely, let's say, increase in the innovation on science translate to what you think happens for these businesses?”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Drug conjugates, protein degraders. We've more than tripled the number of technologies that you can produce drugs from. And that list I just kind of rattled off, that's not science fiction. The only things I've named are things that have proven themselves mature enough to actually have drugs come from them. I think it's those two factors that are driving the boom. And I think, you know, it should be a couple decades at least of then improving these modalities, utilizing the information, and just getting a lot more drugs developed.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “The first draft costs $300 million. $300 million is like a great human achievement, but just like landing on the moon, it doesn't enable anything. Now it's a few hundred dollars and that's enabled a lot. So the first piece is information telling us what causes disease, et cetera. And the second is, I think the piece that's a little bit less obvious to folks that don't spend time thinking about this is this explosion in the number of modalities that we have, which are the underlying technologies at which you can develop drugs based off of, right? So we're all familiar with the ones that we have had. A small molecule of proteins, antibodies, we had them for decades. And basically, as those core three ones, it's an oversimplification, but that's a fair characterization, I think, at a high level. And now people are very well aware of things like RNA because of the COVID vaccine. But the list of additional modalities is long, and they've all been introduced in the last half a decade to a decade. Cell therapy, gene therapy, gene editing, antibody.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “So we are eighteen months into a biotech bear market that's the second worst correction in the history of the industry, right? The first being the obvious one, the genomics bubble bursting in 2000 to 2003. It's second longest, second deepest. So the first case, I would say on a short-term basis, is that valuations are cheap. And that sets up well, even though it's been painful looking forward. The more important thing, though, is, I think, what you're thinking about, which is innovation. We are in the mid to early innings of what I would call the biggest innovation boom our sector industry has ever seen. And I kind of split it out into two major drivers at the end of the day. One is the access to cheap information that increases the odds that you can discover in meaningful medicine. The number one piece of information that's gotten cheap is the genome. The genome was sequenced a long time ago.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “But it was great for the about four years that I was there. We actually built a business that grew very quickly. I learned how to build a team. I learned how to market. I got wonderful mentorship. At the end of the day, for all the obvious reasons, long-term oriented healthcare strategies, most of them need to stand on their own to have a shot at being successful. And I'm also at the end, you know, I realized kind of an entrepreneurially oriented kind of person. So eventually it became obvious.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Well, that's a great point. I mean, honestly, I think biotech, especially the way we that I've always done it, which is longer term oriented, is difficult to fit in any larger firm that's not focused only on healthcare. I mean, if you think about it, boil it down. The top-down ball is higher than average. The bottom up or idiosyncratic vent-driven ball is way higher than average. the expertise that you need to get comfortable to speak the same language, it's about as big a gap as you can probably get, right, for at least for long short equity. So from that perspective, I think it's hard to make it work anywhere. I am so grateful to the folks at DK for taking a bet on me to build that business there. And, you know, DK specifically was also on the conservative end in terms of the vol profile of their primary vehicles. So it was especially challenging.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “That job, I think 28 or something like that. I knew just enough, I think, and had just enough edge at an evolving time of the industry. And I was confident and naive enough to think that I could do the job. So I did that for a while and then eventually we started this place.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “I'm very, very fortunate it was linear as a biotech equity research associate for Callan. And I picked up the phone one day and a portfolio manager named Wayne who worked at Sigma, you know, one of the old SAC divisions. My boss was out. He asked me some questions. I tried to answer the questions. He had just had an associate leave, I think, to travel around the world or something, and I built a relationship with him over a few months. And then, you know, he liked me enough that he made me a job offer. And so I went from that associate job on the sales side to an analyst job on the buy side. I was very lucky. Wayne was an incredibly successful money manager at the time. He's very got a lot of attention for. And so people wanted a piece of Wayne. And I was one of the very few guys that was working for him. So I got opportunities. And then the next job was portfolio manager at DK. I was young when I started.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “At the same time, I took, you know, an econ course, a couple econ courses, this Harvard Prof, Gregory Menkew, I think it is. He wrote the most used intromicroex textbook in the country. And I fell in love with that textbook. I mean, back then, you could have called me like a cult follower or something. So I fell in love with Econ at the same time. And so very early, I kind of had both interests that were growing. And so even when I applied to med school, I was thinking, you know, med school and business school. I can't say that any idea what career path, you know, if I try to put myself back in my shoes at that time, maybe I was thinking administration and practice kind of thing. But that's just because I didn't know any better. Business school is great. I interviewed for everything you could imagine. And then it all kind of crystallized when I met the guys I ended up working for in my first job at Cowen, which was”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Much for spreading the word about fake TED on capital allocators. Please enjoy a conversation with Rod Wong. Mod, good to see you. Thanks. Good to see you. Why don't you take me back to how you first got interested in medicine? I think that's basically a blend of my dad and my mom. So my dad was my hero growing up, like all good sons, I think. And he was a theoretical physicist and gravitated towards the sciences, was pretty good at math, but I was not my dad. And my mom was very grounded concrete person. She's architect designer. And so I think I just kind of went somewhere in between. You know, I ended up being pre-med in college and I love biology. Chemistry made sense to me. It felt very natural. So from that natural path to science, how did you go off the rails? That's an interesting way to put it. You know, the funny thing was as I was falling in love with life science and kind of drifting away from hard science or abstract science.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Guest on today's show is Rod Wong, the founder and managing partner of RTW Investments, a life sciences focused investment and innovation firm of eighty professionals that manages six billion dollars in assets. I had a chance to drop by Rod's office in New York and discuss his background, case for life sciences, investment and business approach, investment process across sourcing ideas, research, probability assessment of binary outcomes, portfolio construction, competition, and outlook. Before we get going, you might notice a little change in the inflection of my voice. As you might expect, this clip still falls in the same slot on the show as usual.”

    2023-04-24 · Capital Allocators · Rod Wong – Empty Rooms: Innovation in Biotech at RTW (Capital Allocators, EP. 310) · IDENTIFIED FROM THE TRANSCRIPT · source