Latest / The BioHub - by Avetix / Episode 63 - Aaron Kantoff – Co-Founder of Scion Life Sciences

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Episode 63 - Aaron Kantoff – Co-Founder of Scion Life Sciences · The BioHub - by Avetix

• 0:06
  Today I'm joined by Aaron Cantorf, the Co founder and
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  managing partner at Scion Life Sciences.
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  Aaron helped build the therapeutics group of Apple Tree
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  Partners from scratch, Co, founding 11 companies along the
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  way. After leaving Apple Tree, Aaron
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  Co founded Raised Bio, which was acquired by BMS for $4.1
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  billion. Now at Sion, he's continuing to
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  back and build all biotech companies with long term
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  potential and he has a fresh approach to VC.
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  Today we talk about the companies he's built, what he's
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  learnt from them and why Sion is doubling down on life sciences
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  first biotech in today's. Oh, so I'll repeat that Aaron.
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  So why did he's doubling down on science first biotech in today's
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  market, right? OK, sorry about that.
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  I'll join do. You want to start over.
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  Yeah, I'm just going to start it.
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  Again. Yeah.
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  Welcome to another episode of the Bio Hub.
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  So today I'm joined by Aaron Kantsoff, Co founder and
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  managing partner at Scion Life Sciences.
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  Aaron helped build the therapeutics group for Apple
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  Tree Partners from Scratch Co, founding 11 companies along the
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  way. After leaving Apple Tree, Owen
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  Co founded Raised Bio which was acquired by BMS for $4.1
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  billion. Now at Zion, he's continuing to
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  back and build old biotech companies with long term
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  potential and a fresh approach to VC.
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  We talk about the companies he's built, what he's learned from
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  them and why Zion is doubling down on science.
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  First biotech in today's market. So good to have you, Aaron.
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  Thanks, Max. And that was a really kind
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  introduction. No, it's a pleasure, honestly,
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  really excited. So let's just step back to the
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  start of your journey. How did you first get into life
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  science investing and what what pulled you into biotech?
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  Yeah. So I had a somewhat unorthodox
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  path to biotech initially, so starting with childhood, but
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  both my parents were medical oncologist.
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  My father was a specialist in prostate cancer and my mother
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  specialized in breast cancer and also did some public health HIV
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  work. So clinical medicine was, was
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  part of the household. I visited the hospital at Dana
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  Farber Cancer Institute and also in the early 90s did, did an
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  internship visiting my mother's patients every weekend.
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  And then Fast forward to college.
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  I knew, you know, really did not love being in the hospital, did
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  not love blood. I was interested from an early
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  age in markets and finance and business and chose to go to NYU
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  Stern and really wanted to be a hedge fund manager initially.
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  And so I was a generalist up until 2010, at which point I, I
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  had sort of the, you know, my, my opinion was that being a
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  generalist was overly saturated and people were specializing.
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  And so when I was doing, you know, one off investing in
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  biotech, I noticed that people were following the specialist in
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  that market. And so I really wanted to play
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  at the intersection of of something I loved, science and
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  medicine and business and talked to a couple VCs at the time, one
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  in Boston, Atlas Venture and the managing partner of Apple Tree
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  Partners. And that's when I started.
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  I was investor employee number one at Apple Tree at the
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  beginning of 2011. That's awesome.
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  And you had a pretty cool journey from then on.
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  From what I could find, you've helped build 11 companies from
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  scratch, including nearly over $10 billion in M&A exits.
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  Some of the ones who found a like Chinook, Corvidia,
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  obviously raised bio and then a number of successful public
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  companies like Akiro, Centesa Stoke.
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  What what do you attribute to having such a high hit rate and
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  what separates a durable company from from one that could
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  potentially fade? The last part of that's a good
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  question. I think, you know, at the start,
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  I think focus, I think while 11 seems like a lot, you know, I, I
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  like to say at Apple Tree and, and now it's time.
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  We're, we're not a company formation factory.
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  So my job on the formation side of the business is to find on
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  average one really great idea a year.
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  So that keeps the bar high naturally.
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  And then second, we have a radical and rigorous focus on
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  finding real medicines. Our view is that's the one
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  sustainable currency in our industry.
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  You know, and through ups and downs in the market, revenue
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  from a real drug is is always going to that be valuable and
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  that value flows in any market. And then lastly, I think being
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  selective on partners, whether it's investment partners,
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  syndication partners or your operating management team.
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  So a lot of what I do is help to put the pieces in play.
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  But companies can drastically improve their probability of
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  success by having the right managers in place on the on the
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  team and the right board assembled.
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  Yeah. Well, yeah, I can definitely see
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  that if we, if we talk specifically about raised bio,
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  which was a $4.1 billion exit to BMS and that was that was just
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  over 4 years from inception, which is pretty incredible.
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  What? What made that company so
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  successful? Yeah, I guess.
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  I, I guess I failed to mention one other factor before, but I
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  guess luck, there is some luck involved.
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  That's not the only factor with race.
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  But look there was foresight to go into what was an emerging but
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  validated space radiopharmaceuticals, which was
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  like the backwater of like a backwater of oncology at the
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  time. Most pharma were not interested
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  and, and most venture groups were not interested.
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  And so, you know, 1 you know, we, we, we had a view, you know,
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  if we built it, they would come again.
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  If you deliver on the promise of a real medicine, you know,
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  eventually strategics and investors will follow that
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  linear path that is created when you tell a story that of
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  something that can be brought into the clinic and eventually
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  have an impact on patients, you know that sells and you know,
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  great investment partners that that join from from day one.
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  Ben Bio, Anne Royston and Cheryl Adverson helped to to lead the
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  Series A and then we brought in a great management team.
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  So all those pieces that I just touched upon, Ken Arvin, the Co
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  founders, Devin Aaron there, there there was the foundation
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  was set and we were we had a lead, we had a head start in a
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  space that's become white hot, but at the time was not.
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  And so that that head start gave us the ability to create some
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  dominance and become a leader in the field.
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  And yeah, if you you talk to anyone involved in that, it's
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  not any singular piece of that story that got bought for 4.1
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  billion. But there was pipeline, there
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  was a lead asset that had a real linear path to being commercial.
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  There was manufacturing, which is an important piece of the
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  puzzle in radio pharmaceuticals. And all those pieces combined,
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  you know, really helped drive BMS to, you know, step up and,
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  and step into this. Yeah, that's awesome.
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  How early on did you know that this could be a little bit
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  different to the rest? Did it feel different right from
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  the start or? I mean, there's some that I
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  think every journey is a roller coaster.
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  I mean, you know that the there was moments where Akero, which
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  is now over $4 billion company, felt like a rocket ship.
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  Then it had setbacks and there were moments where, you know,
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  right out of the gate Ken gets involved.
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  Months later we're doing a a series B, but there were
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  setbacks for raise as well. We actually along that along the
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  path did did a down round and, and, and then we had a
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  successful IPOI think just the overwhelming excitement about
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  the field that came to fruition sort of somewhere between a year
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  and two years after the founding of the company.
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  I knew we had something in terms of it.
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  If we didn't mess it up, we were going to create real value.
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  And, and I think the management team did a great job of of
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  maintaining the head start in that lead.
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  And yeah, the brand, you know, maintained a Halo all the way
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  through an IPO and you know, the M&A that that followed soon
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  after, we don't want it. Today's market is obviously a
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  little bit tougher than what it was like 5 years ago.
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  Do do you think it could have been potentially different if it
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  was founded today rather than when Reyes was was founded
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  during that? Well, I suppose it's a bit of a
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  yeah, I think. I think Reyes benefited on one
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  part of the of its continuum, which was that series AI think
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  Series A seed rounds of preclinical companies are a
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  little more difficult today, but there was genuine excitement,
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  multiple term sheets in a lot of groups that were interested.
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  So I still think it would get done today.
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  You know, the ultimately the story sort of had the right
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  pieces. So I, I think not something that
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  is easy to replicate like I, when I tell my like when my LP's
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  look at this like there are very few exits of north of $3 billion
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  in our industry period. And then if you look at all
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  those exits over the 25 year history, you know, just take
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  that time period, there's, you know, not even a handful that
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  have gone from an inception to sale north of 3 billion and in
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  less than five years. So generally, like when you see
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  a Corona, a Sarah Ville, you know, some of these exits, you
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  know, they're they're, they take, you know, a decade or
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  longer usually. Yeah, that's what makes it more
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  incredible. It's it's amazing.
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  You you've always leaned towards the incubation model as well.
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  What? What do you love about building
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  from the ground up, and how does Scion in particular approach it?
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  Yeah, I mean, I think we'll start with what I love about it.
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  So, you know, I, I, I love putting the pieces in play.
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  I, I love seeing sort of the chemistry and the team and the
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  excitement and enthusiasm from going from, you know, inception
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  to putting a strategy get together.
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  I think, you know, we play at the barbells of, of the
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  investments spectrum. So we're either, you know,
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  forming the companies or investing in them when they're
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  maturing public in a more passive way.
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  If you're going early and your venture group, I think ball
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  control's important. So what, what I love about it is
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  to some degree controlling my own destiny.
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  It's, it's, you know, hard, hard to put into practice, but having
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  some control early days of whether the lights stay on or
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  not, what the strategy is, indication selection, etcetera.
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  I think that helps increase probability of success.
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  And there's learnings from each of these that you can impart on
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  these new companies. And, and again, going back to
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  focus, I think there are some venture groups and some
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  individuals on 1520 boards at a time.
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  Our goal is on average, you know, myself and Sam to each put
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  one up a year. So I never feel like we're too
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  bandwidth constrained to really help our companies go from point
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  A to point B. So how do we go at it?
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  I think we like to think of ourselves as Proactive Investors
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  at sign. I think one thing going back to
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  you know, Sam and I need an apple tree and just becoming
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  historians of the space, we really noticed that a lot of the
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  space were were reactive and you know, looking at 1000 pitches at
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  a time a year, reducing that down to sort of the top 10% that
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  they do diligence on the top 10% of those.
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  They go into deep diligence and generally by the time they get
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  to that filter, they're already sort of leaning in and doing
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  those deals. I don't think they go at it a
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  lot of at that point there was not a lot of this is where we
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  want to play let's go survey that field.
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  So we start with sort of a proactive approach.
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  Every year we establish 2 or 3 hunting grounds.
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  We dive into that with our fellowship program, our
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  associates, our full team and it's a collaborative, not a lone
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  wolf strategy. So and then within that, we have
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  other focuses that came out of our three investment pillars.
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  So our, our three investment pillars start with modality or
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  the technology made to use a drug.
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  And each of these is trying to increase the probability of
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  creating a real medicine because that's at the end of the day,
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  our goal is to create a real medicine.
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  And our hope one day is to put up, you mentioned earlier,
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  durable company, and that's one that can be self-sustaining,
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  does not need to be taken out. A lot of times when you go to
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  the, you know, finish line, pharma does buy you anyway.
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  But I, our hope is when we look back in, in 2025 years that
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  we've created one company that looks like a, a Vertex or an
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  Alexion before they got bought to stay company with a
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  commercial drug and a pipeline behind that.
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  And you know we have a long durated fund that allows us to
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  stay longer with our companies in the traditional model.
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  I love that. Yeah.
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  You look at those companies that have kind of got through and I
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  mean, you always look at that gap, right?
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  Like small biotech to, to big pharma and you're just like,
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  wow, that's, that's, that's a trend.
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  Yeah, yeah. Just finishing it up.
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  So like you focus on technologies that are proven
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  that for us that means ones that have made it to the finish line
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  that that are tried and true, you know how to manufacture
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  them. So you're increasing your
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  probability of getting into the clinic.
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  And then that's comes to our second pillar.
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  We like to go after diseases where we understand the path of
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  Physiology and biology well enough to cut to court the core
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  of that disease and increase our probability of creating valuable
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  early clinical data that lowers our risk of a late stage blow
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  up. So a late stage blow up is if
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  you you squint at the phase 1B data, 2A data a certain way and
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  you're, you convince yourself of going and running that
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  definitive registrational phase three trial and that becomes an
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  important binary bet that you don't want to lose on.
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  So you you want to de risk it with understanding the biology
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  and really valuable early clinical data.
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  And then our third pillar goes to the durability factor, which
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  is from inception, we really think M&A is, is, is one of two
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  exits and we don't want to cut off the other exit which is
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  going public and creating a revenue stream for a company.
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  And so from inception we think through late stage clinical and
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  and and commercial viability as a biotech company.
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  So that precludes us for example, it you know, from going
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  into obesity. That is somewhat blasphemy in,
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  in right now in, in our in sort of traditional DC, there's some
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  funds that are all in and I can understand that it's a, it is
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  the biggest market we've ever seen.
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  Multiple pharma groups have franchises.
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  There are going to be a lot of winners through M&A, but our,
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  our view fundamentally is that we want to be able to take it
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  the distance and not be concerned about M&A being our
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  path to success. And so by having both M&A and
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  sort of a tractable late stage plan, we we think we're
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  increasing our late stage probability of success as well.
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  Well, yeah, I love that way of thinking.
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  You, you guys at Scion you you raised about $310 million in
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  your first round. What inspired you to launch a
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  firm? I think on the heels of the
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  success that Sam and I had together at Apple Tree, we built
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  a portfolio of seven companies that together with the managing
• 18:05
  partner there, we really wanted to run it back together on a
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  platform that was more durable. You know, I without going into
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  details, you know, the, the part of the reason you know, I left
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  in 2019 was, you know, we all of apple tree was funded by a
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  single LP who was initially from Russia.
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  So there was like some existential risk to that being
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  an issue politically. And, you know, having all your
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  eggs in one basket, especially on the heels of the success that
• 18:45
  we had just felt like a risky proposition.
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  So building, building a firm that you know, took sort of the
• 18:54
  best of some of our practices built up at Apple Tree with a
• 18:59
  slightly more diversified investor base who had the same
• 19:05
  interest in staying long and building mature value and
• 19:09
  allowing ourselves to build a culture that fostered a belief
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  in our philosophy in those three pillars that that's what excited
• 19:20
  us about building some. Yeah.
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  And we talked about the market as well, didn't we like a little
• 19:27
  bit how, how has your strategy been shaped in this current
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  market? Yeah, I think I, I guess the
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  only difference is I think they're, you know, the only
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  difference is from, you know, what we, you know, previously
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  did is we've put a somewhat arbitrary stop on how far we'll
• 19:50
  go. We're not afraid to fund things
• 19:52
  alone from from Inception. So we will see things, we'll
• 19:56
  keep things in stealth and, you know, they'll pop up, you know,
• 20:00
  years after Inception. But we've we have.
• 20:03
  In this market and for a variety of reasons, realize that, you
• 20:07
  know, it's at some point you need to bring other investors to
• 20:11
  the table to, to, to and, and, you know, to really proceed down
• 20:17
  the path of creating a real company and a real medicine.
• 20:20
  So we now look at $30 million as sort of our high watermark of
• 20:25
  how long we will fund a loan in a single company.
• 20:30
  I think that's sort of the main difference.
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  I think we've always funded 2 critical milestones, but it's
• 20:36
  never been more important to do that.
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  I think you can't be left without capital fundraising in
• 20:43
  certain periods. So I call it the valley of
• 20:47
  death. I think a lot of companies look
• 20:51
  to get funding, you know, in between, you know, having a
• 20:58
  development candidate in Ind and that works if you're sort of at
• 21:03
  the back end of that spectrum timeline to the clinic is is
• 21:06
  there. And that works if the if
• 21:09
  fundamentally creating the development candidate was, you
• 21:14
  know, a high value proposition. But that's a timely and costly
• 21:19
  process that you know, people have to be conjoined and and
• 21:25
  interested in. And in this market it's it's a
• 21:30
  slightly harder period. So we like to make sure our
• 21:33
  companies are funded to to really key nodes of value
• 21:36
  creation do. You do you get more involved as
• 21:40
  well earlier in the companies like in terms of like how they
• 21:44
  spend their cash and things like that.
• 21:47
  Yeah. I think, I mean I think we've
• 21:49
  been look there's been sort of natural inflation of costs and
• 21:55
  there has been sort of undisciplined approaches that
• 22:01
  became sort of the norm during the, you know, high abundance of
• 22:05
  capital time period. You know, like I said, 20/18/19
• 22:09
  to 20/21. I think we like to find managers
• 22:13
  that are aligned with us on not just throwing, you know, $100
• 22:18
  million series A's on the table. We also like to ask the question
• 22:25
  of our management teams, you know, are we doing this at the
• 22:30
  most efficient cost basis possible.
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  So we're we're definitely conscious of not drip feeding,
• 22:38
  but also looking to be efficient in terms of personnel and R&D
• 22:44
  spend and making sure that what became industry norm during that
• 22:49
  period 2019 to 2021 is not sort of embedded in our thinking
• 22:55
  today at all. Yeah.
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  And that just that just highlights how important the
• 23:00
  right people are in these ventures as well.
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  You know, if you're looking, I imagine this is something you
• 23:06
  think about, like if you're looking at bringing other
• 23:08
  investors in, they're, they're obviously looking at the
• 23:12
  management team you've brought in as well.
• 23:15
  Yeah, that's right. I think, I think the factors
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  that the same factors that you know go in any industry are, are
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  even more important than biotech.
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  You know, you really have to fundamentally believe that the
• 23:31
  team can bring you to the promised land and the investor
• 23:34
  base around the table has the wherewithal to bring this to
• 23:37
  sort of critical value inflection points.
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  Yeah, yeah. What, what are you most excited
• 23:42
  about right now at Scion? What's to call?
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  Yeah. I mean, I, I think for us you
• 23:52
  know conditional sort of or targeted delivery on an organ by
• 23:57
  organ basis. So we're biologics, large
• 24:01
  molecule heavy. And then we are constantly
• 24:04
  asking the question if we could drive sort of cell specificity
• 24:10
  or tissue specificity, where would we go and what are the
• 24:15
  unmet needs in a given tissue? So yeah, right now for instance,
• 24:19
  we have a genetic cardiology company, we have a genetic
• 24:25
  benign hematology company and we have a really more targeted
• 24:30
  approach to depleting T cells. So in each case sort of on the
• 24:36
  macro theme of getting rid of or getting to the cells or tissue
• 24:44
  of interest in a targeted way after sort of decades of
• 24:50
  systemic therapies, I think we've made enough progress,
• 24:54
  especially in oncology by AD, CS, radiotherapy that we can.
• 25:01
  We have the modalities and the tools to get where we need to
• 25:04
  get to. And you know, leveraging all
• 25:07
  that for unmet needs outside of oncology is, is really how we
• 25:12
  think about where to play over the next decade and what we're
• 25:16
  most excited about. Yeah, I can't wait to see it
• 25:18
  play out. I think it's going to be pretty
• 25:21
  exciting. Finally, last question, which is
• 25:25
  a question we ask each of our guests.
• 25:28
  If you could have dinner with any scientist or innovator, past
• 25:32
  or present, who would it be and and why?
• 25:37
  Yeah. So I guess I have a two-part
• 25:39
  answer. So first, I would love to have
• 25:44
  a, you know, quick moment with Marie Curie and, and tell her
• 25:49
  that sort of all her work and innovative space around
• 25:55
  radioisotopes has led to real medicines that are making
• 25:59
  breakthroughs in cancer sort of nearly 100 years later.
• 26:04
  And then, you know, second, as someone that tries to
• 26:08
  systemically, systematically approach new innovation, I'd
• 26:13
  love to sit down with some of the greatest innovators of all
• 26:16
  time like Leonardo da Vinci or Tesla.
• 26:20
  These guys, we're able to just pump out so much innovation.
• 26:26
  And if there's any method to their madness in terms of
• 26:30
  creating new things, I'd love to love to pick their brains for
• 26:34
  for a dinner. Yeah, same, same pleasure to
• 26:40
  have you on, Aaron. It was it was amazing to hear
• 26:42
  the story. Thanks Max, it was a pleasure.
• 26:46
  And please everyone like and subscribe to the Bio Hub.
• 26:48
  And thanks again, Aaron. Thanks, Max.
• 26:51
  Thanks everyone.