5AM Ven­tures: Fu­el­ing the Next Gen­er­a­tion of In­no­va­tors

By RBC Cap­i­tal Mar­kets
With Andy Schwab, Co-Founder and Man­ag­ing Part­ner at 5AM Ven­tures

Key Points

  • Pre­scrip­tion Dig­i­tal Ther­a­peu­tics, cell ther­a­py tech­nolo­gies, and in sil­i­co med­i­cines will be a vi­tal part of fu­ture treat­ment modal­i­ties.
  • Un­lock­ing the po­ten­tial of the mi­cro­bio­me could be the miss­ing link to bet­ter dis­ease di­ag­no­sis.
  • Grow­ing links be­tween acad­e­mia, in­dus­try, and ven­ture cap­i­tal are spin­ning out more in­no­v­a­tive biotech com­pa­nies.
  • Biotech is now seen by in­vestors as a growth space as well as a safe haven, fu­elling the re­cent IPO boom.

Bri­an Abra­hams, Man­ag­ing Di­rec­tor and Co-Head of Biotech­nol­o­gy Eq­ui­ty Re­search at RBC Cap­i­tal Mar­kets, speaks with Andy Schwab, Co-Founder and Man­ag­ing Part­ner at 5AM Ven­tures, one of the world’s lead­ing VC firms fo­cused on cre­at­ing val­ue in ear­ly-stage life sci­ence com­pa­nies.

In this ex­clu­sive in­ter­view, Andy shares some of the unique char­ac­ter­is­tics of 5AM’s in­vest­ment ap­proach, how he iden­ti­fies high po­ten­tial sci­en­tif­ic in­no­va­tion at the ear­li­est pos­si­ble stage, and his per­spec­tives on the IPO boom in biotech.

Lis­ten to the full in­ter­view on Pathfind­ers, a new pod­cast from RBC for com­pa­nies and in­vestors in bio­phar­ma. Start lis­ten­ing now.

Bri­an Abra­hams

What are some of the cut­ting-edge tech­nolo­gies across your port­fo­lio com­pa­nies that you think are the most ex­cit­ing?

Andy Schwab

I think every­thing that’s be­ing de­vel­oped in cell ther­a­py and the CAR T space right now is in­cred­i­bly in­ter­est­ing. Ob­vi­ous­ly, there are read-throughs in­to lots of oth­er cell ther­a­py tech­nolo­gies, and in­to dis­eases out­side of on­col­o­gy. The in sil­i­co space, on the tech­ni­cal side of iden­ti­fy­ing new tar­gets, is al­so an­oth­er area that we’re ex­cit­ed by.

And one area I’m re­al­ly ex­cit­ed about is the mi­cro­bio­me. That’s go­ing to be re­al­ly in­ter­est­ing, to have liv­ing en­gi­neered mi­crobes in your mi­cro­bio­me that can im­pact dis­ease. If we can en­gi­neer mi­crobes to live – safe­ly, ob­vi­ous­ly – in your mi­cro­bio­me over time and treat dis­ease, there’s a huge op­por­tu­ni­ty there.


What ther­a­peu­tic ar­eas do you view as most ripe for in­vest­ment with the most po­ten­tial for in­no­va­tion? And, con­verse­ly, are there any dis­ease ar­eas that you see as par­tic­u­lar­ly chal­leng­ing?


We think any dis­ease that has a ge­net­ic ba­sis that you can at­tack and tar­get are the best dis­eases to go af­ter. The low hang­ing fruit there has been in on­col­o­gy, in pre­ci­sion med­i­cine, in gene ther­a­py and gene edit­ing.

Some of the more chron­ic, lifestyle-dri­ven dis­eases are just hard­er to pur­sue. They’re so mul­ti-fac­to­r­i­al. It’s much more chal­leng­ing to choose points for mean­ing­ful in­ter­ven­tion and in­no­va­tion in those ar­eas.

What are the fu­ture treat­ment modal­i­ties and sci­en­tif­ic break­throughs that will en­able bet­ter dis­ease man­age­ment and get in­vestors ex­cit­ed? Find out on RBC’s Pathfind­ers in Bio­phar­ma pod­cast se­ries. Start lis­ten­ing now.


How much does the FDA in­flu­ence your strat­e­gy of cut­ting-edge in­vest­ment? To what de­gree does the reg­u­la­to­ry land­scape dic­tate the op­por­tu­ni­ties that are pur­sued by com­pa­nies, and how you val­ue them?


I think the FDA is in­cred­i­bly im­por­tant. Over the past decade, I’ve been very im­pressed by how much more en­tre­pre­neur­ial, thought­ful, and sci­ence-dri­ven they’ve be­come, par­tic­u­lar­ly with the re­sponse to COVID-19 un­der ex­treme­ly tough cir­cum­stances.

I can re­mem­ber, ear­li­er in my ca­reer, go­ing out­side the U.S. to de­vel­op ther­a­peu­tics, be­cause it was eas­i­er to get in­to clin­i­cal tri­als in oth­er coun­tries. Any swing back in a neg­a­tive di­rec­tion would have a huge im­pact on in­vest­ment.


What’s your per­spec­tive on the re­la­tion­ship be­tween ven­ture firms and uni­ver­si­ties? How has that evolved?


We’ve seen more and more in­ter­est from uni­ver­si­ties in spin­ning up com­pa­nies and be­ing en­tre­pre­neur­ial with the fi­nan­cial com­mu­ni­ty. Sci­en­tists have al­so be­come more en­tre­pre­neur­ial. You can name a num­ber who are in­volved with dozens of com­pa­nies at this point.
But it’s not as easy as just tak­ing your best re­searchers or your best re­search and start­ing com­pa­nies. It takes ex­pe­ri­ence. It takes cap­i­tal and it takes man­pow­er.


What do you see as an ear­ly mark­er of a great idea? How can you tell when a con­cept can lead to a suc­cess­ful­ly mar­ket­ed prod­uct?


We see in­cred­i­ble sci­ence from the best sci­en­tists in the world on a dai­ly ba­sis and we get ex­cit­ed by all of it. But, ul­ti­mate­ly, this is an in­vest­ment busi­ness, and our job is to bet on the ideas that are go­ing to get to mar­ket and help pa­tients.

Sev­er­al things help us to do that. One is hav­ing very deep and broad in­vest­ment teams, both in San Fran­cis­co and Boston, who are ex-phar­ma ex­ec­u­tives that have been there, done that, and seen all the pit­falls in terms of which drugs ul­ti­mate­ly get to mar­ket.

From a pri­ma­ry dili­gence per­spec­tive, we aim to do the hard work at the out­set to de­fine ear­ly on ex­act­ly what it is that’s go­ing to prove this sci­ence is go­ing to be mean­ing­ful. We can put $5 to $10 mil­lion to work to find that out.

Some­times it leads to fail­ure and we write off the in­vest­ment and move on. But by ask­ing the hard­est ques­tions ear­ly on, when it does lead to suc­cess, we’ve got a lot of con­fi­dence in its abil­i­ty to get all the way to the mar­ket.


It’s been a record-break­ing year for biotech IPOs. How do you see the pub­lic mar­kets re­cep­tiv­i­ty to in­no­va­tion to­day?


Two key points on that. The first is that com­pa­nies are go­ing pub­lic much ear­li­er. Half of the IPOs this year are ei­ther pre­clin­i­cal or ear­ly clin­i­cal, and I think that’s a nod to the fact that we are now able to see much ear­li­er in clin­i­cal tri­als whether a prod­uct is go­ing to be suc­cess­ful or not. That bodes very well for the fu­ture, and it’s why the pub­lic in­vestors are ex­cit­ed about in­vest­ing in com­pa­nies at ear­li­er stages.

The sec­ond point is that biotech is now a growth space as well as a safe haven. There are in­cred­i­ble op­por­tu­ni­ties for growth, be­cause dis­eases that are ac­cel­er­at­ing, and as a so­ci­ety we need an­swers to these dis­eases. That’s re­al­ly fu­eled the IPO boom this year and the year ahead.

Gain per­spec­tive to help you lead to­day and de­fine to­mor­row with Pathfind­ers, a new pod­cast from RBC for com­pa­nies and in­vestors in bio­phar­ma. Learn more.


Brian Abrahams

Managing Director and Co-Head of Biotechnology Equity Research