By Rich Soll, Senior Advisor, Strategic Initiatives, WuXi AppTec (@richsollwx)
Tim Shannon’s career has been shaped by the needs of patients, first as an academic/physician, then as a pharmaceutical and biotech executive at Bayer and Curagen, respectively, and now as a general partner at early-stage venture capital firm Canaan, where he has taken hands-on roles in next generation company formation. Finding innovative solutions to pressing diseases or developing new technologies in pursuit of creating novel therapies has been a lifelong passion for Shannon, who has been touched by the personal affliction of disease.
To his credit, he has made his mark in value creation with a marketed therapy for Parkinson’s disease, a novel approach to hepatitis B, and more recently the realization of a novel, potentially new pharmaceutical game-changing modality.
Through mentorship, hands-on experiences and dedication, he is bridging the gap between academic science and early stage company formation and has played a pivotal role in shaping the Connecticut life science ecosystem as a region uniquely distinct from Boston and New York, yet thriving with the highest caliber R&D.
I had an opportunity to gain a great deal of insight through a recent discussion with him.
Rich Soll: This is our first discussion since the recent JPM in January. What were your impressions of the 59 drugs approved in 2018 by the FDA?
Tim Shannon: I think it is all impressive. First of all, this is great for patients. I think it’s also phenomenal from the FDA perspective, which is working hard to bring patients products with very compelling value proposition. Commissioner Scott Gottlieb has further energized that process.
Rich Soll: What, in your view, was revealing in the class of 2018 drug approvals?
Tim Shannon: One thing of importance is the growth of percentage of approvals that represent first-in-class products. Increasingly, as novelty becomes important, it seems that to be innovative, you have to be novel. The second interesting part is the number of smaller companies with approved products bringing their own products to market is increasing.
The third interesting finding comes from some recent stats which show that almost two-thirds of new products have their origin in smaller companies, which is rather astounding. Now, more and more of these smaller companies are actually bringing the products to market, so that it could end up that 10 years from now, we have an industry where companies look much different. There will be much more innovative R&D companies with much smaller sales and marketing infrastructures. I find all that very interesting.
Rich Soll: What can we do better to improve productivity?
Tim Shannon: In a positive way, tremendous progress in oncology and rare diseases is great because it is a very acute and compelling progress in very dire situations for patients. However, drug approval successes in other areas lag, such as in chronic diseases; and in fact, in common diseases such as cardiovascular disease, diabetes, and infectious disease. And, although neuroscience has a lot of activity, there has been not as much progress in getting innovative products to the marketplace.
So, the big question is, to what extent can we take the learnings of the successes in oncology and in rare genetic diseases, identify what have been the factors that drive the successes and apply them to the areas that lag in productivity?
The other big issue boils down to the value proposition of what we do. I think what we do with our medicines is incredibly powerful as you can extend the patient’s life two or three years, cure a patient from a disease or turn an acute life-threatening disease to a chronic disease. Those are extraordinary feats. But to the extent we can do that in a more cost-effective way, then it really becomes yet more valuable.
Rich Soll: Do you worry about the cost of drugs?
Tim Shannon: Like others, I am concerned about the escalating costs of medicine. Costs will limit utility and it will limit access. So, this is a big issue that we as an industry will actually have to come to grips with. We need to be producing medicines in a more cost-effective way with lower price point that still enables investors and companies to be rewarded. I’m sure there’s a way to do that. It just needs to be done in a different way than we do now. To me, this is a lingering overhang that we will need to deal with over the next decade.
Rich Soll: Let’s talk a little bit about Canaan. What is the firm’s investment strategy?
Tim Shannon: On the healthcare side of Canaan, we predominantly do early financial stage and early development stage investments in companies. We’re usually around when companies are seeking seed or Series A financing. We are pretty active in that space. Some of them we will literally start, and others we will syndicate with good friends of ours who are starting new companies.
Sometimes they are established companies or a team already with a licensed technology. We’re typically looking to bring things from the discovery-preclinical stage into the clinical development stage as the major first value inflection and then use that value to start partnerships or collaborations and then raise additional private or public money to keep building that company.
Rich Soll: For your portfolio, how important are collaborations towards achieving these goals?
Tim Shannon: I think they’re critical. We are small players in a big ecosystem and none of us have the knowledge, the resources, nor the wisdom to know everything we need to know. A key part of success is getting help from outside to help solve problems. And that’s WuXi’s mission, to help extend the resources and skills of companies though WuXi’s talent. So I think it’s a critical part of the ecosystem particularly the part in which we reside.
Rich Soll: How has WuXi been valuable to companies in your portfolio?
Tim Shannon: I personally have had the good experience of starting new companies jointly with WuXi, co-investing in companies with WuXi, and sitting on boards with WuXi management, jointly working to help companies meet their goals and grow. Almost all of my companies have used WuXi as a service provider and collaborator on discovery or development programs, or with manufacturing. I feel I have had a very strong strategic and collaborative experience with WuXi – and when strategy and collaboration work well, great things can happen.
Rich Soll: You’ve invested in a pretty impressive group of companies. What inspires or motivates you about these companies and are there unifying themes that tie the companies together?
Tim Shannon: The first thing that motivates me is trying to help solve fully or in part an important medical issue for patient communities. That’s the starting point. If it really is an important medical problem you can solve, I am convinced that we will get rewarded for it as an investor in one form or another. That is the unifying feature – just really trying to do something important. If you can do that successfully, the rest will follow.
The key parts to that are, what is the problem, what are the technologies we have to solve those problems, and what does that risk profile look like because there are always lots of risk. For some of the problems you have tools where you have a decent chance at success with reasonable amounts of time and money, and there’s others where you know it’s going to be much harder. So, selection becomes a match between compelling medical need with problems that are solvable in whole, or in part within a four-to-five-year time frame with a good investment return profile if you succeed technically.
Rich Soll: Can you give us some examples from your portfolio?
Tim Shannon: Let’s take a look at three examples: Civitas, Novira and Arvinas.
The first example is the first investment I did here, Civitas, later acquired by Acorda. The product Civitas did the early development work on Acorda got approved this past fall and is called Inbrija – an inhaled version of l-dopa. It can be used for Parkinson’s patients to carry around to rescue them when their medication starts wearing off, thus remaining able to fully function within minutes of taking it, I have been in this business a long time, but still the ultimate thrill is getting products to patients. So that was an innovation of delivery and really providing a great tool for patients to help manage their disease.
The second example that is near and dear to me was the Novira program, which was a novel target in hepatitis B where we hoped to develop curative combination treatments for hepatitis B. There is a whole investment thesis around that. Worldwide, there are hundreds of millions of patients who have hepatitis B who currently on lifelong therapy and still with the risk of liver failure and liver cancer.
One of my family members is afflicted with it, one of my children, and that was my first-hand view of how inadequate the current treatments are. And there’s nothing like that personal view.
It was thrilling to show that drug was active in Phase 1 and that a great company like JNJ pick it up. JNJ is one of the companies devoted to developing a cure for hepatitis B. So, on a personal level that was very satisfying for me. Also, it was a great investment. As I said before, if it is an important problem you are trying to solve, you’ll be rewarded. In that case it worked out well.
The third example is a more recent one – Arvinas. I helped to put together Arvinas from the ground up. So this one was based on Craig Crew’s work out of Yale and was the first company in the novel area of protein degradation that I started up with Craig. I ran it as the CEO for the first year and half to help build the company. And now I’m still chairman. It’s not there yet, we are just entering clinical studies now, but it is very exciting to be involved from the start in an entirely new drug modality that can do new thigs.
Rich Soll: It’s very believable, creating a new modality. A lot of people love it.
Tim Shannon: I’ll tell you, it wasn’t believable when we started. We had a lot of people look at us in bewilderment because it was going to be very hard to do. But we are right on the cusp of it now.
It has been great to be one of the leaders, one of the people who helped put that together – to be able to interact with incredible people like Craig and the other great people who work in that company. We hired just incredibly motivated people who every day commit themselves to do this very hard thing. Every day, something new is happening, and you’re looking at what you found out and you’re acting accordingly, generating new data, and so on. And then you get there.
You really do see that coming to fruition and it’s thrilling to see that now. Degraders have become a must have. There are a lot of small companies and also large companies now that are trying to develop degraders. Where it will go will be very exciting. Over the next couple of years we will be generating the human data that gives us a feel for what these can do.
Rich Soll: Arvinas is close to Yale in the New Haven area. What is that local ecosystem like?
Tim Shannon: It has much more of a community and family feel than some of the bigger ecosystems. So it’s just much simpler to work, interact and collaborate with people. It’s very low on ego but very high on intellect, drive and desire as well as experience. I think that ratio of potential, to the number of people looking to take advantage of that potential is very favorable compared to larger ecosystems. New Haven is a small college town, dominated by Yale, which I think most people would have to say is going to be one of the top five universities in the world. It a pretty good place to be, an easy place to be, with a world class research university. And UConn is really an aggressive university in trying to grow into innovation.
Rich Soll: Is experienced talent the biggest issue for this region?
Tim Shannon: I would say I think we still have lot of experienced talent from the pharma days in Connecticut and more recently still a lot of talent from Alexion. What we’re trying to do is keep some of the newer talent in the area and that’s where we’re trying to intervene. At the management level we could definitely use more. I think that’s just reflective of the ecosystem isn’t big enough yet or well enough developed yet where there’s been generations of companies turning over. New Haven doesn’t need to be Boston or San Francisco. But I definitely think there’s room to scale.
Rich Soll: I have heard very good things about you actually in terms of helping people put the business plans together and getting their pitch right. Can you talk to me more about your mentorship?
Tim Shannon: I started as an academic. I love teaching interactions. Actually, the part I miss most about not being in universities is the students. I work regularly with Yale to help them understand what they have and how it could be shaped into something – the concept of a license, an opportunity or a company. I enjoy working with academics and universities to translate research into something that could be the basis of a new product – and help patients.
One of the more fun things we’ve done is a program called The Canaan-Yale Fellowship Program, where Yale selects for us eight students a year and we work with those students over the course of the year to help them understand drug research and development, company formation, investments, what makes things work, and what makes things not work. In turn, they help us with diligence projects.
These candidates tend to very smart M.D. or M.D./Ph.D. students who are at the cutting edge of technology. We’ll have them look at either real opportunities we’re evaluating, need to know about, or have not thought about in while. Many of those students have gone on to companies or venture firms, and actually we’re probably going to be hiring some of those for one of the companies we will be starting in New Heaven soon. So that’s a very good deal. We’re doing the same program now at UConn.
We are developing this next generation of talent with our selfish goal of trying to keep some of these people local. But the bigger goal – no matter where they go – is the relationships we’ll always have one way or another that will come back to help Canaan or Yale or both in the future.
Rich Soll: What do you say to a young person who is thinking about making a career out of by biotech or life sciences?
Tim Shannon: I think it’s nothing better you could do. We all know about pain and suffering arising from disease. If you can figure out some way to help, whether it’s on care provider side or the patient side, it is important. I think people who take care of patients are saints, because it’s really hard to do and you don’t have all the tools. Improving the tools is important. Continue to be wildly innovative and do it in a way that everyone can get access to it. I think there are ways to do that, but we have to commit ourselves to it. It’s going to require a change.