P | P | P – our chat with Ori Biotech
We caught up with Jason Foster, CEO of Ori Biotech as part of ‘Product | People | Potential’.
Ori Biotech is an innovator in Cell and Gene Therapy with a proprietary, flexible manufacturing platform that can enable widespread access to lifesaving treatments.
The purpose of this series of articles is to feature and showcase the very best UK start-ups with grand potential, truly inspiring businesses that are shaking up their sector. We capture and share the stories behind the name. We collate authentic peer to peer real-talk while celebrating the growth and success thus far and gather a glimpse of what’s ahead.
Roy @ ADLIB: Jason if you would like to introduce yourself, what your business does, what stage are you at currently, and what makes your business and offering unique?
Jason: I have a 20-year history of building businesses in the healthcare and technology sector.
The start-up business that I was involved in from 2006-2016 was a CNS focused speciality pharmaceutical business now called Indivior (LSE: INDV). I joined as an early member of the U.S. management team and we built it into a global business with over 1100 people and over $1B in annual revenue. The business was listed in 2014 on the LSE in a $3.5B enterprise value IPO.
That is how I ended up moving to London in 2010. I helped build the European business to around 200 people with £250 million revenue. I left after 10.5 years in 2016 to again work with people building earlier stage companies.
Since then, I have invested as an Angel in about a dozen startups globally, advised private equity and venture funds on their healthTech portfolios, and sat as a Non-Executive Director to 5 startups. I also recently became the CEO of Ori Biotech, which is the third start-up I have been involved in, so I have learned a bit along the way… having one go down in flames fantastically in the 2001 dot com bubble and another survive the 2008 recession. Now weathering this COVID-19 ‘Black Swan’ event with Ori, it feels very familiar.
What have I learned through those journeys? I am happiest in the early building stages and the needs of a business are different when you get to a certain size and you are managing in a publicly-traded, global environment. Coming out of my Indivior experience, I wanted to try to find a way to help people build their health-tech businesses.
That led to me setting up my consultancy business, Health Equity Consulting and that business advises private equity and venture capital funds on their portfolio companies, mostly in a commercial and strategic capacity. My background is sales, marketing and operations which often is a gap in early-stage companies. Most of the health-tech founders that I meet are clinical or technical, or both. Rarely do they have any kind of operational or commercial experience and that is often a skill set that adds value early in the strategic lifecycle of a company. We started working with VC funds here in London but now work globally, providing advice and often introductions to our partner funds for financing.
That was the context in which I met Ori Biotech in 2018. Farlan Veraitch, and the other co-founder Chris Mason, founded the business in 2015 and between them have spent over 40 years in cell & gene therapy/regenerative medicine. It was immediately clear to them in 2015 that autologous therapies would be incredibly difficult to manufacture and to bring to patients at scale, with highly variable, manual processes, very low volume, and high-cost of manufacturing for the first generation of available products. Today, these problems, and the resulting high cost of manufacture, are preventing large numbers of patients from accessing the first generation of therapies.
When I met Ori in 2018, I was blown away by the science and the potential of cell and gene therapies, but also equal parts horrified by the fact that patients cannot get access to these life- saving treatments. I offered to invest and to help where I could with introduction to potential customers and funders. We closed a successful round for a £7 million seed round last year, led by some of the leading VC funds in the UK. At that point, I also volunteered by human capital as well and became the CEO of Ori Biotech in June 2019.
Since then, we have been running like our hair is on fire, as you might imagine, developing the technology platform. Essentially, the full-stack platform is intended to be able to bring cell and gene therapies from pre-clinical development directly to commercial scale.
I am not a scientist. So, I like a layman’s analogy, which is, today the industry is like Henry Ford building one Model T at a time in our workshop and it is Ori Biotech’s goal to enable that high throughput assembly line manufacturing — increasing volume, improving quality, and lowering costs. These products are incredibly expensive with the first-generation products costing between £500,000 to £2 million per patient. You can imagine a scenario where access for patients will always be challenging if these products remain so expensive. But with the cost of goods currently estimated at 50%, reducing prices will be difficult. We think Ori can drop the cost of goods by 80% or more and the hope is that, if we can do that, it will allow better payer coverage and greater patient access. If we can bring the prices down, clinicians and payers can move the treatments earlier in the treatment pathway. Now if you are a patient with ALL or DLBCL today, for example, you have to fail all other treatments before you get to the possibility of having CAR-T therapy. When they get to this last line of treatment, patients are often very sick and have weeks, not months to live by the time they get access to these curative therapies. Remarkably, many of these very sick patients who receive these therapies can still be cured of cancer!
And so, if it were your loved one or mine, we would want everyone to have access to these therapies earlier. Our mission as a company is “to enable patient access to this new generation of life-saving personalised medicines.”
Roy @ ADLIB: Speaking of People, can you share some of the challenges you have faced and what you have learned in terms of growing and scaling? And any tips you would be able to share with businesses as they grow?
Jason: I will limit my comments to healthcare and health-tech as I think each vertical/industry is a little bit different although there are some general principles that we’d likely all agree are important. We talked first of all about people, and I joined the Ori team because I was really impressed with Farlan, Chris and the team they had put together, as Ori has been developed by experts in the field. One of the principles that you must know is that the credibility of the company is driven by this expertise and knowledge.
I think people, first and foremost are one of the key things. An early senior hire that goes wrong can be extremely expensive, and negatively affect the likelihood of success for a company.
Another foundational element I would suggest is developing a solution that the market needs AND is willing to pay for. It sounds incredibly obvious, of course, you are trying to develop something the market wants, but companies are often led by a technical founder or a clinical founder who sees a problem from their perspective and then goes out to try and solve it. They think “Because we have the tech, people will want our solution” without necessarily fully understanding or appreciating the customer point of view. Is this the right solution for the problem? I always advise focusing on the needs of the customer to drive the solution, versus taking a solution and trying to find a round hole to try to force your square peg in. I see this most often with technical founders, in particular, engineering lead solutions, that think “Oh, the market has a problem so the market should want this solution” and then they go out and spend years developing it and then try to sell it, and only then realise no one is willing to pay for it. They need to be able to answer the question, “WHO is going to pay for it, and WHY are they going to pay for it?” Particularly in healthcare, if you try and sell the solution to “the NHS”, which doesn’t really exist as an entity, there really is no National Health Service. The NHS is made up of over 10,000 payers, inside seemingly one NHS healthcare system.
You need to understand the individual motivations of a procurement manager in an NHS Trust versus a Commissioner in a CCG. But not only an institution as individuals, the CFO in the Trust has a hugely different set of KPIs and incentives than an individual Clinician inside that Trust. For example, Doctors can say “No” to a solution/technology they don’t like, but they can’t often say “Yes” to the purchase i.e. they are not usually the person paying the bill. You need to get clinicians on the side but ultimately, the people who write the cheques are totally different people, you need to understand who those people are, and what their motivations are. Are you solving a problem for them? One of the major challenges in healthcare today is this disassociation between the person who writes the cheque, and the people who get the benefit. Understanding the motivations and needs of the actual purchaser is critically important.
That is the kind of a general thesis around healthcare in the UK, global markets are different, and my 10 years of experience in the US with payer systems show this is a different ballgame. But the principles are the same, understanding your customer intimately, understanding why they are going to buy your solution, what is their motivation? And then, in a world as we live in today with COVID-19, we are seeing 10 years of change happening in a few months, this sort of mass exogenous Black Swan event that’s driving people to think differently, and to adopt technology at scale hopefully permanently.
A key question for me is, how much of it is a lasting change versus a temporary band aid?
And this is the answer that no one yet knows. But you see things such as the adoption of telemedicine, for example, which admittedly I was not hugely convinced of the economic moat and business model for telemedicine in the UK. Barriers to entry are relatively low. There are many players in the space, but this event has made obvious the benefits of telemedicine, which are now clear to everyone, government decision-makers, clinicians, and patients themselves.
Now, in this pandemic environment, we have clearly demonstrated the need and the benefit for remote access to patients and lower-friction, lower-cost ways to deliver care remotely. The big outstanding question that I have not yet seen answered, is how do the financial models work? Is this a scenario where the margins get competed away immediately if you are a telemedicine provider? One new provider developed a telemedicine solution in 48 hours and it is now being given away for free as part of EMRs and other products. I fear telemedicine may already be commoditised.
I can even have a consultation right now over Zoom. There are of course privacy concerns, but generally, any platform that has video conferencing can do telemedicine. I think the question around this is, how do you make sustainable business models that work? And how do you protect your business? How do you build an economic moat around your health-tech business, and protect margins without having them competed away immediately?
Roy @ ADLIB: You have answered some of the questions in how you have reacted to COVID-19. From your experience of these black swan events, what else can you offer in how one can protect their business?
Jason: One of the big killers that I see is expenses. In some ways, sales are in your control, but also out of your control, the amount of time it takes, if you’re selling to enterprise or you’re selling to hospital systems, maybe you’re selling to the NHS, it’s very difficult to predict if it’s going to take six months or more likely up to two years. But costs are completely in your control. What you see frequently is that companies invest ahead of revenue too much and their burn is unsustainable. And burn kills companies. They become beholden to new money, investors to fund operations and then they are stuck.
It takes a long time in healthcare, seven to ten years, to build a successful business in my opinion. You are not talking about a one-to-three year FinTech flip here, health-tech is different. So, you need to be in it for the long haul. And you need to build slow and steady on the cost side before you really start seeing significant traction on the revenue side, then you can start to scale between Seed and Series A. Companies can make a big mistake ramping up costs too fast, thinking they have product-market fit, launching a product and finding that their sales cycle is much longer than they thought or that their product isn’t quite right, and their burn is too high. Then they cannot raise new cash, especially in an environment like this with a lot of VCs saying “we’re open for business”, but only if they already know the company or they’ve been following you or you have a very good warm introduction. It is going to be very difficult to create new relationships with funders and get them to fund without the face-to-face process that you would normally have.
I think one of the things you need to be very, very careful about an environment like this is managing your burn rate. And if you’re going to cut to conserve cash, cut deep and quickly, if you’re going to put people on furlough, if you’re going to cut costs, do it deeper than you think you need to. Because the market will stay irrational longer than you can stay funded.
No one likes the kind of death by 1000 cuts which creates a bunch of uncertainty for the team. People start to say, ‘well, am I safe or I am not?’ no one knows what the realities are.
Roy @ ADLIB: Moving onto product, what has been your approach to understanding and implementing product-market fit or sales cycles?
Jason: We are just in the process of delivering our first test units to our customers. It is very important for us to get feedback from the cold face of the market. It is what our customers think that matters for engineering lead solutions like ours which is a platform that combines hardware, software, smart consumables and data services.
Most engineering-led solutions are developed by engineers and other technical staff in-house. As you might expect, the engineer develops something, they throw it over the wall into the market and they say, here you go, and then that salesperson goes out to try to sell it. Often at times it is not actually fit for purpose, particularly in our industry. The first-generation technologies have mostly been repurposed from other uses for processing stem cells or other utilities. And they are not flexible enough to adapt to the current processes. The industry has suffered through using them because they had nothing better. But we have designed a bespoke solution for the needs of the cell and gene therapy industry. We want to make sure we hit the nail squarely on the head. One of the things you learn is understanding the needs of your customer is paramount and being sure with 100% certainty you have got product-market fit, before you spend the money to finalise product development, go into manufacturing and launch a product, which can be very expensive. Even if you are only launching software – making it, launching it, promoting it is still expensive. Your LTV (LifeTime Value of a Customer) is hard to calculate for a long time even in software, you really must be sure that you have got the right product, for the right need, that your customers are willing to pay for.
Roy @ ADLIB: And then potential, can you see some challenges or barriers you have had to overcome to create a product service offering with potential?
Jason: Certainly, a deep understanding of what the market needs is critical. And I think it is a primary challenge people must overcome, but also financing. Despite how hot the cell and gene therapy sector is right now, for investment, particularly on the therapeutic side with over $9 billion invested in Cell & Gene Therapy last year. Most of the traditional investors in the space, are looking at it through kind of a life sciences lens, they want to invest in therapeutics, and they like that binary upside and downside risk.
If you are doing something different that does not necessarily fit squarely into an existing investment thesis for a VC funder, it can be harder. Like where we sit at the intersection of biology, technology and cloud which is a new area.
If you read blog posts from Andreessen Horowitz about their BIO thesis around the intersection between Life Sciences, Computational Biology and Technology and where it all comes together, it is very appropriate for us but a somewhat unique thesis for life science VCs currently. So, we are targeting tech, healthcare, health-tech and healthcare IT investors. We are trying to take the learnings from SaaS business models, network platforms, big data services, capturing data inside the manufacturing process, structuring it aggregating and analysing it, turning it into information for our customers. These types of things have not been done much in the pureplay life science field before except maybe by Illumina in sequencing.
Roy @ ADLIB: You have been successful recently with raising £12 million in seed funding last year for 4 different companies. Investment can be a challenge for start-ups and scale-ups. Could you share any pieces of wisdom around the best approach?
Jason: It is more art than science, but there are a couple of things that are killers, things to avoid. Most often I see teams that think that the technology sells itself, that it should be obvious to everyone that our tech is better than their tech, and therefore it should be funded. Very rarely do I see cases where there is a technology that is actually so compelling. There are so many other factors. The people involved, the expertise, the market dynamics, the business model, the IP position, the competitive landscape, funding, there are so many other things that impact whether or not a company can be successful, that aren’t really product or tech-related.
It is important to have a good product, there is no doubt, but that is not enough. A lot of founders that I meet think that that is the most important component. And I suggest that is probably not the most important component. It is the adaptability and experience in the team to deal with the areas they had not anticipated, all the challenges they are going to come up against. But they have to be able to pivot around these problems, this is one of the reasons why you need a broad-based of experience on a team, where you need commercial acumen, operational experience and the technical experience, and if you’re a healthcare company, clinical/scientific experience, all coming together.
That is part of the ‘secret sauce’. And the other thing I would suggest is around the story. Now, it sounds trite, but storytelling is a very important skill for founders. How do you tell the story of your market, the challenges within the market, and where your solution fits?
Founders must become VERY good at telling their story. And it’s not a story that is kind of pre-recorded, where, you can just push play and regurgitate the information, but it’s within the context of that investor, their model of the world, their investment thesis, what they’ve invested in before, their understanding of the marketplace and where you fit. How do you position yourself, your business, your growth prospects, and ultimately your exit opportunities.
Understanding the investors KPIs, if you’re dealing with a family office for example, oftentimes these folks have business building experience, they were operators, entrepreneurs at one time, they think about the world differently than a VC fund. On the other hand, VCs get paid for investing other people’s money and making returns. They have a fund lifecycle and portfolio risk that they have to manage. They have a certain set of KPIs to raise their next fund. You know, they make money through fees and carry, you need to understand their motivation, and being a founder is just like any sales job where you need to understand the KPIs the interests and motivations, the model of the world of the person who you are talking to and storytelling allows you to communicate that information in a way that is compelling.
Storytelling is something that you need a lot of practice doing, tell your story to anyone who will listen, get their feedback, does not make sense or is it too technical? Is it believable enough? Are there gaps in the story that people do not understand? Then really practice it. The ability to tell the story in a clear, concise and compelling way is so important because we human beings are hardwired to respond to stories, it is how we have passed history down through history. And it is even more important in times like these.
Roy @ ADLIB: That is a great answer. Lastly, what is your vision over the next three to five years for Ori Biotech, where would you like it to be?
Jason: I mean, ultimately Farlan and I, the co-founder and CSO feel passionately that this business must deliver on its mission. If we do not do our job right, then there are going to continue to be cures for cancer and rare diseases that many patients cannot get access to. And that is untenable, it is just an unacceptable outcome.
The science is going to continue, 1000 clinical trials are going on in cell and gene therapy. Today, over 900 companies are researching the field. It is exploding and we are at the very tip of the iceberg, but we must ensure that these products can reach patients. And that is Ori’s mission as a company which is not going to be solved in three years. Maybe that gets partially solved in five years. But this is probably a seven to ten-year journey to get widespread access, to low-cost high-quality therapies for these patients.
So that is it, that is what good looks like for us. Ultimately, if we are a standalone company, we want to build a significant business enabling patient access. Perhaps, we may become part of a larger organisation that can complement our mission and help us achieve it, faster and bigger in scale.
That is where we see the company evolving. Ultimately, I think one of the big risks to the emerging cell and gene therapy field is if these products are only clinically successful but not commercially successful. The people who are funding these therapies, governments, the academic research centres, the VCs, the strategic corporate investors need to be able to see a return on that investment, with payment structures put into place, so that these drugs can reach patients at scale. The distribution mechanisms need to be in place so patients can get access to them earlier in the disease progression. All of that kind of infrastructure for the cell and gene therapy field needs to be laid down, the sort of railroad track if you will, be put down. So, this industry can evolve and scale. Currently, we are at the very beginning of that journey.
So, we want to be part of that solution. Improving quality, decreasing costs and improving throughput so that these therapies can start to be first-line treatment and affordable for every patient. That is what success looks like for Ori.
Thank You Jason for your time!