The first BioTalk of 2020 kicks off with Andrea Alms, MS, MBA, Co-Fund Manager of BioHealth Capital Fund as she discusses her background, the world of Angel Investment, and her vision for the Fund
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Andrea Alms is the co-fund manager of BioHealth Capital Fund. The BioHealth Capital Fund is a venture capital early stage investment fund created by the BioHealth Innovation (“BHI”), located in Rockville, MD, the center of the BioHealth Capital Region. BHI manages a for profit subsidiary BioHealth Innovation Management (BHIM) which owns equity in 27 of the 108 client companies of BHI and has had 3 exits. Our lead investor is Alexandria Real Estate Equities; and, our reference is Joel Marcus. Andrea is recognized for her abilities in guiding venture capital, private equity, mergers and acquisitions (M&A), and other transactions involving early stage companies. Andrea assists limited partners, general partners, investors, and entrepreneurs as they create, build, and buy or sell businesses, primarily in BioHealth, healthcare, technology, and digital health products industries.
TRANSCRIPT
Narrator: You’re listening to BioTalk with Rich Bendis, the only podcast focused on the BioHealth Capital Region. Each episode, we'll talk to leaders in the industry to break down the biggest topics happening today in BioHealth.
Rich Bendis: Hi. This is Rich Bendis, your host for BioTalk. We have a lot of new things to talk about in 2020, with this being our first BioTalk of 2020. In addition to my getting a brand-new left knee over the Christmas holiday, which is new, we also have a new Super Bowl champ, which is the Kansas City Chiefs. And since I have a residence in Kansas City but am committed to both the BioHealth Capital Region and Kansas City, we celebrate the chiefs’ first Super Bowl victory in 50 years. So, in addition to that, we're going to have our sixth annual BioHealth Capital Region BioForum on April 14th and 15th. So, save the date, as we’re going to have a fantastic list of speakers for this sixth annual forum, and a few surprises for the attendees we're working into this event.
0:01:08 But today, for this 51st edition of BioTalk, we have Andrea Alms, who is a fund manager with the BioHealth Capital Fund and lives in Charlottesville, Virginia—so it’s the southern part of our BioHealth Capital Region—to give us a new perspective on venture capital, and also about a new fund that is forming within this region. So Andrea, welcome to BioTalk.
Andrea Alms: Thank you so much. I'm thrilled and excited to be here. And congratulations on the Kansas Chiefs. That’s huge.
Rich Bendis: Kansas City Chiefs.
Andrea Alms: Kansas City—
Rich Bendis: —City Chiefs.
Andrea Alms: —Chiefs, excuse me.
Rich Bendis: Right. Which we know is in Kansas City, Missouri, versus Kansas City, Kansas, which some others thought it was in. But anyway, we won’t go there. And what I think the listeners would enjoy hearing first is a little bit about your background, academic life, some of your life outside this experience you're bringing to this industry. So, let’s give the BioTalk listeners an intro to Andrea Alms, please.
0:02:05
Andrea Alms: Thank you so much. I think my past, from there to here, as fund manager and VC, is luck in falling backwards. I really wanted early on in my career to combine science, business, law, and finance, but I didn't really know what that meant. I mean, there’s no one course, there’s no one college course or degree that you can say you could do all three. So, I started out at Wellesley College in economics, and it has very a strong economics and Wall Street path. And as I graduated with that, I knew that I then needed more science. And as a result, I got a job at Harvard University for the rising dean, Jeremy Knowles, in his lab. The chemistry department is housed in the Mallinckrodt building, which is arguably, I think, the cradle and birthplace of Boston biotech. That’s where George Whitesides and all these really famous founders of Genzyme, Genentech, et cetera, began, with their research, R&D.
0:03:00 And I saw firsthand the bench work that I helped do, and I was working on with Jeremy Knowles doing oligonucleotides with the big machine and pumps, as opposed to now it’s all done within seconds. And I remember another BioTalk speaker I heard—before you used to sequence on gels, this is what I did, as a young, young research tech. And then from there, I wanted to do more cancer research, because that was a special place in my family, and I wanted to devote part of my life towards cancer research. So, I went to do bench work again at Harvard Medical School, in the labs of Phil Hinds, cell cycle dependent kinases. And he came from the Bob Weinberg lineage. And from there, I knew then, “OK, now what? How do I integrate my original thesis of wanting to do business, so econ, science, but now law and intellectual property?” And one step towards that was to actually come on down—I was recruited to come to graduate school at the University of Virginia in Charlottesville, Virginia, and that was at the pharmacology program, where I got my master’s.
0:04:03 But that that time, it was taught through the School of Medicine. So I took the first two classes, at least specific certain ones, of med school classes. And that was really interesting, because I was taking med school classes and also going to graduate lab and doing independent research, so it was a really contrast in brain thinking. I mean, one is pure rote memorization, quick and fast. “This 50-year-old had this heart rate, blood pressure—boom, what’s the answer? What meds? What drugs?” And then the other is really designing what kind of genes, what kind of machines do you use to put these genes or pieces together to find the next best path, or to elucidate the black box of cancer. And so as I was finishing up in my master’s, I was asked to help with the tech transfer office at the University of Virginia. And that really was my entrée into contract law, SEC, building companies, and tech transfer licensing and marketing technologies.
0:05:01 At the time, UVA had a new administration in technology transfer, headed up by Dr. Robert MacWright, and he was Skadden, Arps, which is a top law firm in New York, and he was a patent litigator. So, he came on down from New York City, from Skadden, Arps, to head up that incarnation of the tech transfer office at UVA. And I was employee number three. And that was an amazing experience, because then at that time, just being a new licensing person, I helped manage the intellectual property for all of the life science and pharmacology, and working through the constructs of negotiating and drafting trade secret agreements all the way through to credos to research development, confidentiality. And one of the first companies—because I know companies and starting companies is a really big deal, here and anywhere—is there was—Pinnacle Pharmaceutical was a spinout, more or less, or merge creation, between UVA and Bristol-Myers Squibb, backed by SR One.
0:06:01
Rich Bendis: That’s a good combination.
Andrea Alms: Excellent combination. I was the licensing associate that read the thousand pages of contracts and SEC documents to create that company and the private placement. So that was really a deep dive into contract corporate governance and that. And as we were doing the tech transfer work, faculty kept coming to us saying, “Listen, I don’t really want to license my technology to GSK, Merck…”—or whomever the biotech was—"…we really want to license it to ourselves.” And at the time, this was a time when doing something commercial as an academic was déclassé. It was, you know, dirty work, and you didn't talk about it. You didn't want to do it. And so every so often, we had faculty coming out of the closet saying, “Listen, I really want to commercialize on my own. How do we do this without me getting in trouble?” And we would do it one at a time, but slowly we had so many that we decided—that is, at the UVA Patent Foundation—to create a for-profit subsidiary called Spinner Technologies—so that was UVA’s incubator—to hold not only some of the equity but also to birth these companies.
0:07:03 So we had about anywhere on average about 15 companies’ equity. We birthed them. That means we either got equity or a fee. We had lab space for them. We built lab space for them. And as we were building these companies, they kept on running out of money. And so as they—
Rich Bendis: Surprise!
Andrea Alms: Yeah, [laugh] surprise, surprise. And as they kept running out of money, we were trying to figure out who were investors. So, we were trying to put them in touch. And then at this point, we had an idea. Why not make an angel group? And that was the birth of the Jefferson Corner Group. And it was an amazing time. We raised just a small little bucket of money, and we closed. Luck is everything in the finance business, and I guess in everywhere, but particularly this. We actually were one of the few little funds to close before the crash in 2008. So, as a result, with our little money, we had people all over the country coming to us, big name companies that just couldn't make cash flow for salaries. And the purpose of what we were doing was simply just to help faculty members move their companies to the next level. That was fascinating, having that.
0:08:04
Rich Bendis: And were you the managing partner of the Jefferson Corner Group?
Andrea Alms: The way we did it was much like you have BHIM. Spinner was the managing entity or the fund manager, or fund administrator—it comes under many names, but same idea—to help with this member-managed group. And so, Jefferson Corner Group, member-managed group, much like your MAG one and two.
Rich Bendis: In Philadelphia.
Andrea Alms: In Philadelphia, but smaller, and in Virginia. And that was where we had about, I think, eight companies they deployed into.
Rich Bendis: And how many angels were involved in that fund?
Andrea Alms: Sixteen.
Rich Bendis: Sixteen.
Andrea Alms: However, it was because of the connections and network that UVA and that environment had—we had not only just individuals, but also family offices and also some other fund-to-funds. And of course, UVA—
Rich Bendis: —was involved. Yeah. So how long did the Spinner last, and also the Jefferson Corner Group fund?
0:09:00
Andrea Alms: So, Jefferson Corner Group—as most funds, we raised the money, deployed it, so it took about over—I think that we were talking about this earlier—385 meetings at least, just to get the 20. And then to finally get 16 to sign up, that took about—surprise, surprise; it was the first angel member-managed fund in our area in recent history—it took at least three, four years.
Rich Bendis: To form the fund?
Andrea Alms: I mean, all that—
Rich Bendis: And how long did it actually stay operational?
Andrea Alms: Another two, three years. I mean, we really deployed the money in about two and a half years. I mean, just quickly, we wanted to get it out there. And still, to this day, it’s amazing—we’ve already had half exits, a few didn't quite make it, and we still have one that’s a stellar company that is hitting it out of the park, and it’s still going. And it has over—I can’t remember—$20 million in revenue. It sells worldwide. All this.
Rich Bendis: So, the fund is alive because it’s still harvesting, but not making any new investments at this time.
Andrea Alms: Correct.
Rich Bendis: Gotcha, OK. But I understand you also have been involved in other venture capital related activities in addition to Spinner and the Jefferson Corner Group.
0:10:06
Andrea Alms: So as the UVA Patent Foundation morphed and changed—and also at that time, President Casteen stepped down; he was the longest-standing UVA president in the history of university presidents in the U.S.—a lot of things changed and a lot of programs changed. And as that happened, Jefferson Corner Group then came with me, and I formed BrookDell, and BrookDell is a small managing firm for small microfunds and also for angel funds. And out of that, I got to meet Ben DuPont, and Ben was also forming his funds. He was specifically secondary directs. So, what are secondary directs? In this case, it was a Japanese $1.6 billion entity that had over 300 assets. And this was once again during the crash of ’08, ’09, 2010, and they couldn't make all those calls. Imagine making calls on over a hundred-plus companies—
Rich Bendis: Right.
Andrea Alms: —and not having the money. Secondary directs are funds that buy out the equity position in those portfolios.
0:11:02 And so he acquired that portfolio of those whatever, several hundred, of companies, about. Somewhere between 20 to 80, arguably, were in the BioHealth space, everything from consumables to digital to therapeutics. And Ben asked me to help in that one and shepardize those companies, which were everything from startups all the way through to publicly traded companies global. And then from there, I also helped in every shape or fashion—he wanted me to help in four other subsequent private equity funds that were both a mix of secondary and then primary.
Rich Bendis: So, you've had experience with early stage spinouts from universities, secondary investments. You've also, through this experience, had to deal with strategic partners or bio or pharma companies that got engaged in some of these companies we’re involved with. So through all of that experience, how did you find the actual deal structuring from a difficulty standpoint, the partnerships with an academic institution verse large strategic partners plus major family offices, and balancing all of the different objectives and missions that each of these potential partners or investors had?
0:12:09
Andrea Alms: So, it’s called a schizophrenic brain to survival, I like to call it. I particularly felt that way when I was working in the academic slash tech transfer slash angel group, where you're really serving two masters, and extraordinary difficult. And in many ways, why I'm so I guess a devotee of what you're doing here at BHI, where it’s really quite focused on raising these companies, not with all the politics of a government entity or a state university, et cetera—it’s really admirable and more pure in its mission and also more executable. So, I think that those were challenging times, and patience and constant communication is the only way to do it, and constantly typing the emails, explaining to people, and saying the same thing in like three different languages.
Rich Bendis: And then you were in Charlottesville, and you still live there today. And as we look at it as a part of the BioHealth Capital Region, it’s the southern part of the region, but really is not as connected as it could be, which we’d like to tie more into the future.
0:13:10 So how is it trying to do these types of venture and investment activities in Charlottesville, Virginia, where you're sort of sitting as an island down there, compared to being in a large metropolitan ecosystem where you have a lot more resources around you?
Andrea Alms: Honestly, from my personal perspective, it’s plane, train, automobiles, and boats. I've really expanded from the Charlottesville area to—as you know, I worked for KURRAY, a publicly traded Japanese company in Tokyo, doing an M&A for their life science company business division unit. And I think coming back and forth, I think a lot of people are also very remote. I think maybe long ago, that was an issue when we first started Spinner and the tech transfer office decades ago. But I think now with all this virtual, all this digital, and people just more accepting of being—I think that it’s it not such a big divide to just get in a car or plane to come up here or even go down there and check out some companies.
0:14:07 I don’t see that as much as before. But of course, I love the concentration and clustering. I mean, there’s no doubt there’s success in that. In terms of even Alexandria Real Estate, they have the clustering theory and that’s very successful and it’s very true. I've listened to a variety of your other biotech talks, and everyone talks about how you could just walk down the street in San Francisco and talk to so many investors, advisors. And in our little microcosm in Virginia, whether it be Charlottesville or Blacksburg, it does happen. It may not happen in such great intensity as here. However, I would like to think on the Twitters or chats or BioTalks or pods, people can at least simulate some of that, “Oh, I'm walking by, listening to a deal.” Is it perfect? No. But are we on that path? Yes.
Rich Bendis: So basically, I didn't know you until several months ago, and you got introduced to BHI through one of the BHI resources.
0:15:03 So talk a little bit about how that introduction came by, and then where it has evolved to.
Andrea Alms: I think that’s an excellent example of how we're all so remote and interconnected, even though we're in desperately geographically different areas. So, I'm a member of the Angel Capital Association by virtue of both BrookDell and Jefferson Corner Group. And we belong to the Life Science Sector, which is headed up by Faz Bashi, who’s an excellent leader. And every month, we have these calls, and every so often, we have visitors. And some of the visitors—or slash sponsors, I think, or collaborators—is NIH, from what I understand, and in particular Ethel Rubin, who is the EIR here at BHI. And she said, “Hey, Andrea, why don’t you come get to know us?” And from there, she introduced me to you, and then the rest is just history.
Rich Bendis: It’s history, right?
Andrea Alms: [laugh]
Rich Bendis: It’s history in the making.
Andrea Alms: Exactly.
Rich Bendis: Yeah. So I guess the key is, is that Ethel and the EIR team over at NIH, one of their primary missions is to help the companies that NIH funds through their SBIR programs, which they call America’s Seed Fund, or a billion dollars’ worth, and really help them with their commercialization, their business planning, their pitch decks, and introductions to investors, which is one of the biggest things that they're trying to do, is how to get a greater return of NIH funded companies, small businesses around America, and try to get them into more into the commercial world.
0:16:28 And so I think that’s one of the things that brought you and Ethel together—
Andrea Alms: Yes!
Rich Bendis: —with some of the common interests that you have, and what she’s trying to do with the BHI EIR team at NIH, and what you've been doing for a couple decades.
Andrea Alms: Ethel and your team did a wonderful job getting out there, really networking, getting to know folks, connecting the dots, and making the geography less of an impact than you would think.
Rich Bendis: And so what you're doing now as a fund manager for an emerging BioHealth Capital Fund that BHI is hoping to form, which would be a $50 million BioHealth fund that would have a for-profit motive, and would have an emphasis within the BioHealth Capital Region but would look for the greatest investment opportunities in the United States or internationally that we think could create a great return for the fund.
0:17:20 So give me your little vision related to the direction the BioHealth Capital Fund is going. What do you think about the opportunity for it? How it can leverage resources that differentiates it from some other funds that are out there today.
Andrea Alms: I was just amazed by what you built and intrigued—I mean, you're right. In July, I had no idea who you were or what you did. And since July 2019, I must say I think I drank the Kool-Aid now, and falling in suit. I mean, to think that you from eight years ago started this organization—one, branded it—created a brand called the Capital Region—
Rich Bendis: With our partners.
Andrea Alms: —with your partners—is amazing.
0:18:00 And then from there to create a brand that has impact, aggregate it in a way that now this Capital Region is the fourth top biotech region, according to Gen Engineering bypassing San Diego, RTP, and then to have the vision to say, “In 2023, we want to be the top three biotech hub” is stunning to me. I mean, I was just so impressed. Along with the programs you have and the international soft landing, where you help other companies overseas create a subsidiary here that’s 51% U.S.-owned so that they may pursue or apply for federal grant money so they can advance science and also hire people in this area and pay rent and pay gas, which helps our economy, and helps not only our economy, but the greater world, and patients. I mean, the angle of all this is really—as I said earlier on, I devoted my life to cancer research at one point because I really believed it couldn't be in the lab the whole time, but for me it was then through investing, and advancing that, and making our lives better and our community better.
0:19:05 I mean, yeah, money’s important, but I think the real passion for me was really getting those medicines, those modalities, those therapies, where they were most needed to save those babies, mother, father, brothers, and sisters.
Rich Bendis: Yeah, I think you give me a little too much credit, because we have a dedicated team of associates at BHI, all very talented. And as you know, it takes a village. They're part of that village, and they have all been successful in helping grow BHI to what it is today. So, you're just an extension of another team member that’s coming on to help forward the mission, which ultimately is to get commercially relevant products into the marketplace that can improve the quality of health for patients around the world. And so that’s what would be the purpose of the fund as well.
Andrea Alms: Exactly!
Rich Bendis: Because we know that there’s a tremendous gap for early-stage capital not just in the BioHealth Capital Region but internationally and nationally, and we think that by creating hopefully a $50 million fund that can make anywhere from $500,000 to $5 million investments in promising companies that really have difficulty in raising that kind of money within our back yard in the BioHealth Capital Region, we can be a potential impetus to bring other investors here to co-invest with us, and also have people recognize that we have tremendous assets that are equally as good as what there is in Boston and San Francisco here, and create the visibility and the introductions for them.
0:20:30
Andrea Alms: Absolutely. I mean, just knowing the exits—I mean, what is it, 110 BHI clients? Of those about equity, and 41 are active. You have three recent exits—BeneVir acquired by Johnson—J&J—for 1.4 billion. I think that’s what it was?
Rich Bendis: A little over one billion.
Andrea Alms: Yeah. These are just numbers that are on par with any city in the world—Tokyo, New York, Munich, Berlin, San Francisco. More of it is happening all the time, and to be part of that is just such an honor and thrill, to be able to then raise the money, deploy into these great companies with these fabulous technologies.
0:21:09 And like I said, I still really think, at the end of the day, it’s really helping those patients.
Rich Bendis: And having been in the investment world for a couple decades now, trends change from year to year or from decade to decade. And you just had a chance to spend a week out at the JPM Healthcare Conference in San Francisco in January. So what are some of the recent trends you're seeing evolving within the BioHealth industry and the direction it’s going in the future, and what promise might that offer to an emerging fund in the BioHealth space?
Andrea Alms: There were so many trends at different levels, so one was just private equity VC trends. One other track was valuation trends of the company. The other track that I picked up was also just the science. I’ll pick on science. I think a lot of people are thinking in the forefront of more personalized medicine. That seems to be really hot or talked about a lot.
0:22:02 RNA medicines and modalities. I think also doing more big data analysis to get to a solution for anyone. So, this is more of a HIMSS kind of digital health mining of how to get the optimal operation room with the optimal surgeons and nurses in the right room. In terms of the trends for financing and VC, I think I would like to go back to, I think, the data and the presentation that Peter Meath from J.P. Morgan presented at one of UVA’s events, showing that really this whole micro VC—I knew it anecdotally, but he really had the data to back it up—micro VCs, what is that? That means it’s a fund that’s $100 million and below, and that they have pretty much disappeared after 2008, and what had filled it, and how that has changed. That before, micro VCs had a pile of money, and then they built this ecosystem and this platform of mentoring—what you have done.
0:23:04 And so that hasn’t been so successful a model, and now what’s emerging as a new model is you build the ecosystem like BHI has, with the mentoring, with the services, with the resources, and then at the apex, to have a fund that will then capitalize or maximize the impact of those hard work, super hard work of commercializing, building technology, building the teams, et cetera. So I think that was one trend. And the last trend was valuations. That’s a really hard one. So there were valuation trends in the angel market and then valuation trends in VC and then PE, and of course done by sector. But I think that what had happened in ’08 and 2010 was that there was a real haircut, and there was—a new floor was set. And I'm not sure we've necessarily bounced back to where it was at the heyday, and I'm not sure we ever will.
Rich Bendis: So, where do you think we're going to end up?
Andrea Alms: I think something that’s more realistic, where people—they actually have to put in their time, put real value behind the company, and not so much powder and puff, in the heyday.
0:24:04
Rich Bendis: Yeah, and even though we haven't rebounded, if we look at the National Venture Capital Association data, over the last two years, this whole BioHealth/Biotech sector has enjoyed the greatest amount of investment as well as the greatest returns, so that there is some rebounding right now. I don’t know how long it’s going to last, but the trends we're seeing, there’s a lot of money on the sidelines. There are some more funds being formed, but a lot of those tend to be larger funds rather than the microfunds. And, there still is a need for early-stage capital to fill that Pre Series-A to Series-A gap, which is sort of what the focus of the BioHealth Capital Fund is.
Andrea Alms: Oh, absolutely. Thank you for helping crystallize that. Indeed, it’s a gap that has disappeared. And at least—I was really surprised when I met you in August and July, that there really wasn’t that type of money here in this region, for that somewhere between half a million to five million per company investment.
0:25:00 I was surprised because coming from the rest of Virginia—ROVA versus NOVA—I think you guys have piles and piles of money, but that wasn’t really the case when you dove down. And so that’s why I feel strongly that I don’t want the fruit to die on the vine of these excellent companies and excellent entrepreneurs. And I really do feel very strongly about raising a fund and deploying it.
Rich Bendis: So that has something to do with what your personal vision is for the future and goals you'd like to achieve. So let’s tell the listeners—and we're talking to Andrea Alms, who is a fund manager for the BioHealth Capital Fund, which is really in the BioHealth Capital Region, but Andrea happens to live in Charlottesville, which is still part of the BioHealth Capital Region. So talk about what your future vision and goals are that you'd like to achieve personally.
Andrea Alms: I wish I could say I had some magnanimous vision and goal, but I really must say right now, we're so laser-focused on raising and closing the fund I'm not sure I can actually think of anything else. And I think to entrepreneurs, I just want to say—listen, please, I always want to be approachable.
0:26:00 I think entrepreneurs sometimes don’t want to approach investors or VCs or whatever the case may be. Please do. Call me, text me, LinkedIn me. I'm happy to—if I can’t help you, and I'm sorry I can’t, I will try and send you in the direction of someone who can.
Rich Bendis: Well, that’s great to hear, because that’s sort of what the BHI mission is, too. We may not be able to assist everybody, but we also want to give them direction that can help advance them personally or their company. And I guess I would be remiss if we didn't bring up that the BioHealth Capital Fund has received a commitment from a lead investor, which is Alexandria Real Estate Equities, and it was brought through a relationship we cultivated with Joel Marcus, its founder, who serves on the BioHealth Innovation board, and really has a major commitment to this region, because they have developed over three million square feet, which is over 10% of the total portfolio of rentable square footage that is in the Alexandria seven markets, leading life science markets in the country. But we appreciate the faith they have put into us, since they're one of the most prolific life science investors in America, and also one of the leading, if not the leading, life science real estate firm with the 30 million square feet that they have in these seven largest markets. So—
0:27:16
Andrea Alms: Thank you, Joel, Conley, and Larry.
Rich Bendis: Yeah. We appreciate ARE, Joel, Larry Diamond here, who is the Maryland manager for ARE, but also the chief operating officer for them corporately now, and then Conley Jones, who is also one that has placed some faith in us, because a recent thing that they have done is made an investment in miRecule—
Andrea Alms: Excellent.
Rich Bendis: —one of the BHI portfolio companies, which is one of their first investments in a BHI company but probably the first of many. So again, we thank them for what they're doing for this industry nationally and what they've done to help grow the BioHealth Capital Region with their presence here in Montgomery County.
Andrea Alms: Great. Well, thank you so much, Rich. We're thrilled and delighted for the vision, energy, and strength you've brought to us. You're really a pillar of our community, and I'm grateful to serve with you.
0:28:03
Rich Bendis: And Andrea, we're glad to have you as a part of the BHI team, and we look forward to when we can toast that first closing, which seems that they take forever, but anything that is worth working towards, you have to be patient and persistent, and I know you have that.
Andrea Alms: Thank you, sir.
Narrator: Thanks for listening to BioTalk with Rich Bendis.