The best ideas often emerge from the lowest moments in one’s life. For former Goldman Sachs Asia managing director Simone Song, that was when she was lying flat on a hospital bed in 2015, waiting for a colon tumour biopsy. In what turned out to be a life-changing resolution, she vowed to dedicate the rest of her life to fighting major diseases, if she could be cancer-free.
To be sure, Medical research and biotechnology are not exactly foreign territory for Song. Both of her parents were biotechnology pioneers in China, with her father being a member of the prestigious Chinese Academy of Sciences, the highest scientific body in the People’s Republic. Her mother invented China’s first biotechnology drug with global intellectual rights. Both of them also had an entrepreneurial bent, starting companies to bring their research to market.
Despite growing up in such a scholarly environment — her cousin even did a PhD under her mother before going to Harvard for post-doctoral studies — Song instead decided to enter investment banking, taking charge of Goldman Sachs’ investment banking business in greater China for healthcare. But surviving the removal of 15cm of her intestines convinced her to join the family trade. No longer a banker, she would instead be a soldier fighting on the frontlines against disease.
That is not to say that Song’s long years of expertise in finance and economics has been for nought. She decided that VC would be the area where she could be the most effective, melding her investment skills and domain knowledge. In 2015, she started ORI Capital, with the aim of using its finite financial resources to make the greatest possible impact.
ORI Captial takes aim at large-scale diseases such as cancer, acute chronic diseases caused by metabolic disorders, and neuro-degenerative diseases like Parkinson’s and Alzheimer’s. ORI Capital also is looking to combat very rare diseases caused by genetic disorders, which Song notes could potentially kill children.
ORI Capital invests in three tools to fight these four categories of diseases: therapeutics, delivery and diagnostics. “Cancer is an AI disease. It is just too smart. it keeps changing and evading. So, to combat cancer, we need to be able to diagnose it accurately and detect it early,” Hong Kong-based Song tells The Edge Singapore in an interview.
“We want to be impactful in addition to being financially successful, impact has only one meaning — saving lives,” she says empathically. Investments are selected based on the number of patients that can be benefitted and the likelihood that their solutions will be able to succeed.
AI-enabled research system
Now, most VC firms suss out investments via personal networks, referrals and outbound research. But Song notes that human intelligence is subject to certain limitations when it comes to uncovering hidden gems, getting connected with the corporate leaders of potential acquisitions and minimising binary risks. ORI Capital thus sought alternative methods to stay abreast of technology and market intelligence as well as link up with good companies.
The solution to this problem was to develop ORIzon, a proprietary AI-enabled research system developed in 2018. The technology was developed based on a “quantamental” strategy that combines fundamental research and quantitative analysis to create a watchlist for potential investment targets. It provides key market intelligence to ORI Capital and its portfolio companies and connects the ORI Capital with potential investment targets.
To keep abreast of the latest scientific developments, ORIzon houses a large database of top academic journals, which are then fed with keywords relevant to ORIzon’s investment direction. The system then creates a shortlist of essential papers to read based on the most essential industry trends. ORIzon also follows 600 key opinion leaders (KOLs) in the healthcare sector to get ORI Capital up to date with their thoughts.
The firm employs two in-house scientists with PhDs in Biology, Maggie Wang and Otto Cheung, to read and rate the papers recommended by ORIzon based on relevance, using the ratings to teach the AI to be more accurate. They would then assign “must-read papers” to their colleagues and investees to summarise.
These summaries are then reviewed at a company-wide “internal symposium”. The findings are then compiled into an “investment bible”. These comprise insights from ORIzon, firm advisors and in-house knowledge about the science and practical application of a given technology, and information of all firms developing such technology. Updated weekly, they define ORI Capital’s investment strategy regarding a given technology.
“On a daily basis, scientists are watching the technology advancement; the investment team are watching the universe, meaning the players,” explains Song. ORIzon also follows over 15,000 global healthcare companies daily, which is further whittled down to 3,000– 4,000 firms that fall into ORI Capital’s “four kinds of diseases, three weapons” focus area. It then further generates a shortlist of around 20–30 firms for initial consideration, with the analysts potentially manually adding firms they come across into the mix as well.
The human dimension
It is only after this extensive automated sifting process that human intelligence kicks in, through ORI Capital’s simple “10 Finger Test”. This can be broken down into a further two sets of tests, with one set examining the scientific robustness of a given technology solution, including the crucial human clinical trial data.
The other set of tests looks at the business aspects too. For one, ORI Capital examines the quality of a firm’s management team. For example, Song prefers CEOs who are not also the firm’s scientific partner. “These are two separate roles. A CEO requires a set of completely different skills,” Song explains.
To ensure that these young firms are well-grounded scientifically, ORI Capital prefers firms with strong translational experts and an established scientific advisory board to balance out business risks associated with their relative youth. Song likes boards staffed by members with extensive experience in scientific discovery and clinical development. The firm’s board of directors is also an important criterion since they can provide resources and support the firm’s business operations, she says.
Finally, Song hopes that a firm’s investors will all be patient enough to stick with her young firms through thick and thin. “Biotech companies will not grow overnight. They will make mistakes, they will break their arms and legs...as long as they don’t break their neck,” she remarks, hoping that investors can have the passion to support biotech firms trying to do good for society.
Naturally, few businesses can fulfil all these lofty expectations completely. “If no company can pass these 10 fingers at the 90% mark, what we have to do is the art of balancing,” says Song, who would still consider a firm if it comes through the test looking relatively sound. ORIzon possesses a patented relationship mapping tool based on ORI Capital’s existing networks that can help management identify the right people to contact to propose investment.
“I don’t mind telling you all of this because if someone can learn, it is good for the industry. We need more smart investors [and] more fund managers to break away from the traditional model and do things more strategically and efficiently,” Song says, hoping that the proliferation of ORI Capital’s rigorous approach to VC will mean more money for young biotech firms in future.
After the pandemic
While Covid-19 has been a highly disruptive event for the global economy, Song sees the pandemic as not so much changing ORI Capital’s approach to the pandemic as validating its mission to pursue biotechnology research.
“What Covid-19 enlightened us about is that now we can see how mature DNA technology is and how mature RNA technology is,” she remarks. The latter in particular is the underlying technology behind the leading Pfizer-BioNtech vaccine.
What has changed for the industry, however, is that there are now many different types of investors deploying capital into the lucrative healthcare industry. This is a positive development, she notes, as this extra capital has the potential to bring more capital allocation into healthcare in general, spurring technological advancement in the sector. The risk, however, is that the excess of liquidity in financial markets could create bubbles that make it difficult for one to conduct smart investments without following the bubble.
For now, ORI Capital is launching ORI Healthcare Fund II (Fund II), the “sequel” to its ORI Healthcare Fund I (Fund I) which is currently entering its harvesting period following the exit of portfolio companies Semma and Kymab. Fund II finished its first closing on Jan 1, raising US$112 million ($149.1 million) out of a targeted US$400 million. It has also secured an additional US$120 million in funding, bringing its total funding to US$232 million — more than 50% of the way towards its target.
Song aims to have a second close by the end of June and finish fundraising by the end of 2021. With this money, Fund II is looking to invest in around 15 firms with an average ticket size of between US$10 million and US$50 million including follow-on investments. To ensure diversification, it will not invest more than 20% of the total fund size in a single company. The fund hopes to complete at least two investments this year.
From her experience with Fund I, Song intends to make doubly sure that her Fund II investments have both strong scientific and business capabilities sufficient to bring a viable product to market. She also plans to place more emphasis on the ability of a firm’s shareholder base to nurture a strong biotechnology firm, which she likens to a child with special gifts. This is far more important, she notes, than the absolute size of a firm’s shareholder base.
“The biggest lesson we learnt from investing in Fund I is that people make a big difference,” muses the venture capitalist. She hopes that her work will be able to contribute towards making cancer a chronically manageable disease, preventing children from dying of genetic disorders and developing more successful therapeutics to combat the corrosive effects of neuro-degenerative diseases. Even as AI takes over the healthcare industry, the human touch remains an important factor in its quest to reduce suffering and save lives.
