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he is going to be running what is a pretty substantial group within GSK that finds and invests in new technology. He’s been put in charge of that group, and I know he’s going to drive it with a lot of energy. Christoph also likes to work within the Boston area, so I think it’s going to be a good thing for Boston biotech. He believes, and I agree with him, that the best opportunities in biotech are in the Boston area. So I think it’s a great thing. It’ll be a great thing for GSK, and it should be fun for Christoph.
X: The Biotechnology Industry Organization (BIO) is lobbying Congress for what could amount to billions of dollars in tax breaks for the U.S. biotechnology industry. What’s your take on this effort?
A: Let’s just say that I’m not a big fan of all the bailouts that are being given and being proposed in Washington. It’s very scary to me when you think about the cost and how all this is going to be paid for. At the same time, when you look at what [the government] has done for various banks and investment banks, it’s very hard to argue against others that are seeking bailouts, particularly companies that produce products or better treatments. In principle, I’m not in favor of bailouts; I’d rather let the market decide. But under the circumstances and seeing what’s going on, it’s hard for me to argue against BIO trying to get its share. I think it will be a difficult sell, though.
X: One of our readers recently commented that Alnara Pharmaceuticals, the Cambridge, MA-based biotech startup that you helped found, might be behind the competition in oral delivery of protein drugs. What are your thoughts about that?
A: [Alnara] has a different angle than what people have historically done to orally deliver proteins. (Luke earlier this year wrote about the Alnara’s different approach to orally deliver protein drugs, which are typically injected into patients). There have been a lot of attempts at orally delivering proteins, and there have been failures. What Alnara is going after are metabolic diseases where you are treating the disease locally even if it’s a systemic disease. The molecules you’re looking to interact with are generally found in the gut. We’re not talking specifically about programs yet, so I don’t see how one could say that Alnara is behind the competition. I think the programs that we are going after, we feel that we are in a very good competitive position.
Many hedge funds aren’t expected to survive the recession. What makes you think RA Capital will make it?
A: I think one of the biggest things is that RA Capital doesn’t use leverage to drive returns. In recent years, many hedge funds used leverage, sometimes borrowing 20 to 30 times their equity, to amplify what was really a small return. In a rising market, a monkey could make great returns using that strategy. The problem is that when the underlying investments drop in value, your equity gets wiped out quickly. So you’re seeing a lot of people struggling. RA Captial uses very fundamental analysis to try and sort out what we see as the winners and losers amongst biotech companies, generally small- to mid-cap companies. It’s been a challenging year for everybody, but we’ve done pretty well and we’re actually still in positive territory for the year. Not many others are.