Digitization and big data analysis in biotechnology are not just creating a new wave of therapies and medicines, but are creating new opportunities for investors as well.
The Latvian version of this article is available in print in the February 2021 issue of Forbes Latvia.
78 years ago a lab assistant named Mary Hunt in Illinois, USA brought a moldy cantaloupe into work. The ‘golden mold’ on this cantaloupe was instrumental in the mass production of penicillin. It helped win the Second World War for the Allies and has since saved what is estimated to be over 200 million lives.
Twenty five years prior to this champion cantaloupe mold, Scottish scientist Alexander Fleming had left an uncleaned petri dish in his laboratory in St.Mary’s Hospital, London unattended and returned after a holiday to find that some airborne spores had landed in this dish and that the subsequent mold had inhibited the spread of bacteria. The mold was identified as the common Penicillium notatum (now called Penicillium chrysogenum). He reported his discovery, noted its antibacterial properties, and returned to his other fields of research.
Several years later in the early 1930s a team of biochemists at Oxford led by the Australian Howard Florey and the German-Jewish emigre Ernst Chaim were researching antibacterial drugs and came across Fleming’s paper on penicillin. They decided to run some experiments and were blown away by penicillin’s ability to destroy pathogens in mice while creating no discernable side effects. Incredible. Unfortunately, penicillin was extremely difficult to produce, severely limiting the impact of their discovery. Fleming had noted the same in his observations.
Fast forward to the Second World War. The Nazi’s are threatening the invasion of Britain and the decision was made to move the project to produce large scale penicillin manufacturing to the US, which at this point was still not officially involved in WW2.
The Oxford team ended up in a US government research facility in Peoria, Illinois, in the middle of the US Corn Belt. There was a massive, secret campaign that appealed to scientists from Allied countries to send in soil and mold samples that could be tested for their ability to help produce penicillin at scale. Nothing moved the needle. Until a lab assistant named Mary Hunt in Illinois, USA brought a moldy cantaloupe into work. The magic mold on this melon was successfully manipulated using X-ray technology and lives on in every dose of penicillin that has been produced since.
Another invaluable element of this improbable story is that the mold production was radically accelerated by using the corn slurry that was left over from local Pretoria, Illinois corn starch producers. Previously, the Oxford researchers had tried to grow penicillin on the surface of the nutrient source, but in Pretoria, they used local know-how and ingredients to massively increase yields by growing penicillin that was submerged in large tanks that were constantly agitated and aerated. This was also an incredibly important random variable in the success of mass penicillin production.
In 1941, the US did not have enough penicillin to treat a single patient. By the end of 1942, there was enough penicillin produced to treat up to 100 patients. After Mary’s cantaloupe in 1943, there was enough penicillin to supply the Allied armed forces. In 1945, Fleming, Florey and Chaim were awarded the Nobel Prize in Medicine. Not much else is known about Mary Hunt.
75 years after Fleming, Florey and Chaim received the Nobel Prize in Medicine, Moderna CEO Stephane Bancel’s attention was drawn to news of an outbreak of a pathogen in China. On January 11th, 2020 he received the digital genetic sequence of the Covid-19 virus that had been identified by scientists in China in a Microsoft Word file attached to an email. He inputted this data into Moderna’s analytical platform and after two days had the theoretical prototype for a vaccine that would start testing trials only 60 days later. Working together with the US government, Moderna received $1 billion in government funding to ramp up production of a vaccine production process that they already knew how to scale, and their vaccine is now being used to inoculate people around the world to prevent the spread of Covid-19. The US government also promised a $1.5 billion purchase agreement if the vaccine was effective, which it was. The most appropriate comparison for vaccine development would be the SARS vaccine, which took 20 months to develop.
The embedded technology of Moderna’s vaccine is astounding, as is the efficacy, the analytical power of their platform and production methods that print rather than grow their vaccine. Every step of the process had been carefully thought out, and Moderna’s “overnight success” has actually taken over ten years and $3 billion in operating costs to put together.
Ostensibly, Moderna’s vaccine targets the messenger of the spike protein that attacks cells during Covid-19 infection. Put simply, it’s as if they capture and destroy a messenger who provides the body with the enemy’s battle plan, readying cells in case of attack.
Whereas penicillin basically bombs any non-resistant bacteria to oblivion, Moderna’s vaccine is surgical and elegant in its dismantling of a potential virus attack.
So how did we get here and what does this mean?
If we were to take the 200,000 year history of humankind and condense it into a single year, then most of the advances in medicine would have occurred in the past four hours. Much of this progress was attributable to the compounded knowledge gained from countless episodes of trial and error.
As computing power has increased to heretofore unimaginable levels, biology has come to be seen as a problem of large numbers. If we can print billions of transistors onto a microchip, then surely we can begin to apply such engineering techniques to biology.
Venture capital firm Andreesen Horowitz once said that they would never invest in biotechnology companies. Their rationale was sound: researching, developing, and testing new drugs is extremely expensive and is not guaranteed to succeed. Put simply: it was too hard.
However, given the advances in computing, they have now become enamored with the possibilities that lie ahead in biotechnology and its confluence with other disciplines:
“We are at the beginning of a new era, where biology has shifted from empirical science to an engineering discipline. After a millennia of using man-made approaches for controlling or manipulating biology, we have finally begun using nature’s own machinery—through biological engineering—to design, scale, and transform biology.”
Venture capitalists are not the only ones taking notice. Baillie Gifford is an investment manager that was founded in 1908 in Edinburgh, Scotland. Their focus is on investing in companies with spectacular potential and being patient and supportive shareholders along the way
Baillie Gifford’s Health Innovation team “believes that society is on the cusp of a revolution in terms of our understanding of human biology, and our approach to health and wellbeing. It is now time to redefine healthcare, to shift drug development away from trial and error to being data-driven, from one-size-fits-all medicine to personalized therapies, and ultimately from treatment to prevention.” As costs for genetic testing, live health monitoring, cell visualization and imaging continue to decrease while computing power continues to amplify, the future is more exciting that most of us could hope to imagine.
We are at the beginning of new scientific revolution. There will be little room for lucky cantaloupes going forward. The governments, institutional investors and individual investors that invest in new fields of biotechnology and have the patience to see them through will be handsomely rewarded. From the very beginning, Moderna knew that they were taking a massive risk by investing in building a platform based on a new, untested technology – mRNA – and that if they were not successful they would go bankrupt. Yet as the CEO of Moderna said on his podcast interview with A16Z: “But if mRNA could have worked, we will have failed society…and that was just unbearable.”
As it happened, Moderna’s shareholders have benefitted tremendously from their tenacity, courage and devotion in developing their platform, and their tremendous impact on the world has just begun.
Biotechnology is a primary pillar of our investment portfolio strategy. Unfortunately, many asset managers still stick to the view that Andreesen Horowitz once had, without considering the game changing advances that are taking place today. The world has changed and so should your investment strategy.