Nasdaq, Inc. (NDAQ) Earnings Call Transcript & Summary

Good morning. Welcome to the 2021 LifeSci Partners Private Company Summer Symposium. My name is Jeremy Feffer, Managing Director with LifeSci Advisors. It's my pleasure to welcome you this morning to our panel on perspectives on capital markets in which we will discuss trends in capital raising, IPO readiness and listings, and public market valuations. Joining me this morning are 4 esteemed speakers. Please welcome Jordan Saxe, Senior Managing Director of Listing Services at Nasdaq; Mark Charest, Portfolio Manager of the AlphaCentric LifeSci Healthcare Fund; Scott Janssen, Managing Director with LifeSci Associates; and Ryan Cinalli, Chief Scientific Officer with LifeSci Venture Partners. So we want this to be a free-flowing discussion. We're going to cover a wide range of topics.

I want to start just quickly, 800-pound gorilla question. Recent activity has been driven, I think, largely by vaccine distribution and general reopening of the economy. More recently, we've seen Delta variant and potentially other variants that have caused some renewed concern about potential new restrictions or lockdowns. Mark, maybe start with you. What could this potentially mean for capital markets? And then we'll move to other speakers.

Yes, Jeremy, thank you, and good morning to everybody joining us. I think that certainly, the headlines have been sensationalized to some extent, I think, with COVID coverage, and I think Delta variant is no different. I believe that the protection offered by the vaccinated population and those that have already been exposed should prove to be robust. And I think the early hospitalization and admission data continues to look pretty favorable in that regard. So I think there's a difference between new infection rates and actual morbidity, mortality associated with infection. I'll just share one data point hot off the press from HCA Healthcare that reported yesterday. They reported that hospital admission rates for COVID were 3% in the second quarter versus 10% in the first quarter. So that's a trend going in the right direction. Obviously, we'll see how that holds up. But I think if that holds, I think the testing numbers will continue to disconnect from the actual outcomes numbers, and I think that will be considered positive.

Jordan, what's -- what are you seeing on the -- from the exchange side?

I think what we've seen on the data side of the IPO activity is just extremely robust. Obviously, the last 2 weeks have been choppy with the market noise, but we look at this as a very long-term picture. I think the investor lens that these folks are reading with, the crossovers and in the road shows and the long-term kind of investors that they're positioning for around IPO also have that view. So when you think about the last 2 years and what's happened and why I think there's so much interest, it really boils down to the fact that these investors are looking to invest in innovation in the long-term horizon. So if you have that lens, I think we're just -- we just saw some positive news in the genome medicine space from Intellia, these things take a long time to play out. So I think that will smooth out any kind of market noise that you see in the short term, and that means like it could even be years. So our pipeline of companies that we're talking to, we have over -- about 290 companies that are looking to go public in the next, call it, 18 to 24 months. Now not all of those companies will go public because there's some clinical data milestones that they're going to launch off of and there's going to be some M&A and maybe some SPAC activity. But of that cohort, we've seen about 65 of them submit applications into Nasdaq already. Just to give you a sense of what is under -- what the iceberg looks like under the ocean. There's definitely a lot of inventory and supply that we have coming to market, I think, over the next few years. The real question, I think, is on the demand side and on the investor side, is how they respond and what they're looking for as far as pricing outcomes go. We look at basically how these deals are priced and what the pricing ranges look like. And if you go back, probably back as 2017, '18, you'll start to see where the price ranges had -- more companies pricing below range getting out. Whereas if you look in 2020 and also this year, very few of any companies are priced below range. And most of them have priced above or within range, which is a really great barometer, I think, to look at the health of this IPO market. So we have a whole slew of companies coming out in the next 2 weeks. And we're going to be very busy July into August closing out the month, and that will give us another kind of set of data. But so far, from the data that we've seen, it's still very active, very open window. The only thing I would mention is that valuations have seemed to creep up from the step-up. So that's kind of -- you may see less of a first day pop, and people talk about how the group has performed as a whole. I think we have to take into consideration that the whole bigger picture of what valuation they were brought out at now versus 5 years ago. And you could argue that some of those companies that went out historically were maybe undervalued or a little cheaper than they are today. Or companies are realizing the full potential monetization on the IPO versus discount through the states. So I think that's -- I'll pause there. I know I covered a lot of different things, but that's kind of what we're seeing right now in today's market.

No, I appreciate that perspective. Yes, we will -- we're going to put a pin in the valuation discussion. We're going to get to that and others. I know the others are going to have thoughts. If I take a quick step back, Ryan, on the private venture side, what is -- in light of this market environment, what is driving investment decisions? And what criteria are private investors like yourself using to deploy capital?

Yes. Well, thanks for having me, Jeremy. I appreciate being part of the panel here. For us, our thesis is essentially to invest in enduring companies. And that hasn't changed in a post-COVID world. We're still looking for those opportunities, those businesses that are putting together pipelines that over the course of the next 5 to 10 years will bring tremendous benefit to patients. So when we're looking at the current deal flow, I think it continues to be extremely robust. I would say maybe over the course of the last 2 months, it slowed down a tick or 2. But as you appreciate, last year was obviously a record year. We saw close to $30 billion raised across life sciences in the private markets, I think north of 700 deals. And so looking at 2021, we're definitely on pace to -- it appears that we're going to exceed that $30 billion in capital raised. And we're going to be probably right there on the number of deals, again, somewhere in the 600 to 700 deal range. So there's -- as far as investment decisions goes, I mean, we're just looking at those opportunities where, again, there's a real interest in both the -- in the private markets as well as the public markets where we're paying a lot of attention to the teams the public market investors are gravitating towards. I think, for example, Jordan just mentioned the Intellia news. Not surprisingly, post that news, we're seeing an uptick of gene editing companies, I think, out trying to raise capital. And certainly, I do think that, that's going to be a theme that we see over the course of the next 12 to 18 months, that next-generation gene editing technologies. You'll note that there was another very large round announced by a company called Prime Medicines, which has a base editing technology. It's these types of companies that I think are going to capture the hearts and minds of the types of investors that Jordan was alluding to, those folks who have a real long-term view.

The line we hear all the time from investors is there's more money on the sidelines than eyeballs that can do the work necessary. How do you -- so for -- so if you're not in the gene editing space or you're not in that sexy space that might be capturing hearts and minds, as you put it Ryan, how do companies get that mind share in an environment like this when there is so much deal flow?

Yes. What I would say is that I think at the end of the day, all of us sitting on this side of the table, we want to invest in companies that have candidates that have a high possibility of success and ultimately getting to that sort of approval milestone. So 24 months ago, if you would have asked me, would you be focused more on looking at preclinical opportunities versus clinical opportunities? I would have told you we'll spend 90% of our time looking at clinical opportunities. The ability to sort of assess clinical data, benchmark it far easier, obviously, than trying to translate preclinical models into human benefit. So I think going back to your question, there's definitely a challenge for companies that are maybe not marketing the high science stories. But at the end of the day, if the investor sees that there's, I think, real clinical data, right, that suggests that there's a drug, you will have strong investor interest. I can point to a couple of situations that I think maybe speak to this. There's a company called Longboard Therapeutics (sic) [ Longboard Pharmaceuticals ] that was spun out of the Arena team. And they're developing a CNS drug. And it's a small molecule chemistry program, nothing super sexy about it. The molecule itself has a lot -- has some interesting activities. And I think if you look around, the investors in that crossover round, it was a very strong syndicate. Now post-IPO, interestingly enough, it hasn't performed very well at all. And so I think that speaks a little bit to sort of the dynamics of the syndicate. But at the same time, it points out that there is real interest in companies that have interesting conventional drugs.

I appreciate that perspective. Mark, sort of following up on that, how do you manage sort of your bandwidth? And obviously, more on the public market side. But again, given all the deal flow, given all the sort of elevated valuations, how do you prioritize what you're looking at?

Yes, Jeremy. So we have a pretty broad aperture to invest as well. So we're looking at commercial stage and more mature companies. So I mentioned the HCA data, right? We follow hospitals to some extent and some other providers, the large pharmas, et cetera. So we're looking at a lot of things. Obviously, the deal volume is challenging for folks to keep up with. I keep all the new IPOs on a single screen, and I've had to add a second one, because there's just not enough room on it. So I think that just speak to the volume. I think along the lines of what Ryan was talking about. We collaborate a lot with Ryan and the venture team. And we're trying to, I think, look for -- on the innovative company side and for the disruptive innovators, looking for new solutions to critical unmet needs. I think the one thing, as much controversy as it caused, was Biogen's Alzheimer's approval cause. As much controversy was surrounding that, I think that the lesson was -- is that if you're operating in a space of critical unmet need, and patients don't have an alternative, there is a lot of, I would say, regulatory interest and certainly interest from the clinical community and, obviously, from patients to get things over the goal line. So operating in a space that you really have a differentiated solution, I think, is very important. So we spend a lot of time thinking about what are the most differentiated solutions? And there's a couple of thematic areas we like, right? Autoimmune and inflammation is one we talk about a lot. We think that some of those new mechanisms, if you could bring them forward, could be broadly applicable and create a lot of NPV value and would be of particular strategic interest. So those are some of the considerations that we put together. In terms of filtering through deals, it's the other -- there's a practical component, too, Jeremy, about looking at new issues because access can be challenging, right? And so sometimes, we'll prioritize more companies or opportunities where we have a relationship, we know the management team. Because we think we can actually get access to the deal where some others we may not. So there's also a practical component of, in a hot market, participating in deals.

Thank you for that. Scott, wanted to turn to you. So in light of this activity we're seeing, how should companies be thinking about planning over the short and medium term? Obviously, the window is open. But if we are going to be in a position where the window starts to close at some point next year, how should companies be preparing now?

Yes. Absolutely, Jeremy. So I'm shouting from the rooftops to all my clients to plan and prepare and practice, right? So if a company needs -- to everybody's point that we've been talking about, companies from early stage need to put together, call it, it's the Olympics, right? Put together the Olympic team to make sure that they are executing all along the way, whether it's raising a Series A to putting together their S-1 and going together for a public flip. So the best way that I'm advising our clients and our clients are we have a combination of early stage, Series A companies that we're helping get set up and put together the team to. We've got 4 clients that were -- 2 of them just did a public flip, and they're heading towards the markets. So -- and we have one client that's public as well that we're supporting. So all along that spectrum, the key that we're shouting is to prepare and plan. And so if you're an early stage company and you're going after that -- around, or you're talking to Ryan or Mark, we want to make sure that you're assembling -- Jeremy, I know you and I've worked on some companies where we're getting together, looking at their investor deck, making sure that they've got all their ducks in a row before they go out and go talk to and get that series -- preferred series raise before they go talk to Ryan. Make sure that they're -- they've looked at the landscape. They've talked to as many investors as they possibly can, so that, again, they're planning, preparing. And then as they look towards the public markets -- we're having supply chain issues as well. COVID has -- we've got some supply chain issues in the broader markets. But when it comes to the volume that we're talking about, a lot of the professional service providers have backlogs. So we want to make sure our clients have set out a time line such that there are no long poles in the tents, right? So we're going to make sure that our clients have everybody on board, the dream team all assembled, so they can hit their time lines. Such that if the markets are available, which they are right now, they're not going to miss out, if that makes sense.

It does. It does. Let me move over. Another, obviously, hot topic this year has been the SPAC market. We've seen, obviously, an explosion in the number. And as a result, we've seen SEC start to crack down. Maybe want to hear multiple perspectives here. Jordan, maybe start with you on what Nasdaq is seeing. What the elevated, sort of, discussion from SEC is? What impact that's had? And what your perspectives are?

I really -- I think SPACs are going to be here to stay. We may not have always as many as we've had earlier, previous numbers. But it's a viable product that's evolved to have some of the A+ health care investors behind them. I think you cannot compare all SPACs to be equal. Every SPAC is a little different based on who the sponsor is, based on the structure of the SPAC, based on incentives, long-term alignment of shareholder interest versus short term. There is also something unique about SPACs, which is the warrant structure. And we won't go in too much of the details. But health care SPACs have been really the only sector of SPAC that didn't even need to have a warrant because the deals were so popular. There's so much interest in investing in these sponsors' ability to create successful business combinations. So some of the SPACs didn't even get held up with all the other SPAC noise around the warrants. But for most first-time SPACs, even in health care, they will have some warrant to it. And obviously, the SEC has worked through how that warrant, accounting should be disclosed. And we've moved past that, and you're starting to see a healthy kind of flow of SPAC sponsors come to market. But more importantly, you're starting to see SPAC business combinations be announced and completed in the health care space. So we have a small group of companies that have completed their announcement or combination in health care. It's still very early, in my opinion, to judge them on it, if they've been successful or not. Because as you know, these things take years to play out as far as how well they've done and how viable, long term the business is. So what I would say is there's no agreement about what the time frame to measure a SPAC performance is. But I have heard -- I do kind of like the number of 12 months from close of business combination. So if you think about -- not the announcement, because that's still time before it starts trading under the new entity. But if you go 12 months out from when they completed their business combination, next year, we'll have a good 10 or 12 companies, hopefully, that will fit into that data set. And I can then tell you on average, they performed this and did that. And then I think that will be a really interesting number to compare and look at versus performance of the IPO market. That being said, not every company needs to be doing a business combination or a SPAC. Some actually makes more sense. For others, it doesn't. I think in the health care space, what I've heard anecdotally is that a SPAC does give you a little faster access to the market because you can basically do your crossover round and your IPO in once versus 2 separate rounds, which is interesting if you're looking to accelerate time lines. I think there is probably now going to be multiples. Your business is SPAC-able, the SPACs will be calling you, right? If the SPACs are not calling you, there is a reason for it. And it probably means that for whatever reason, the structure, the early stage or valuation is just not very fit. But if your business is able to be merged with a SPAC, you will have multiple companies and SPACs knocking at your door, and you'll have different amounts of LOI, interest. And you'll have an opportunity to choose if you want to go that route. And there are some things that are important there. Like determining your valuation. But more importantly is you can control your investor base, right, so you can see who -- and kind of structure who's in your pipe. And what differentiates a lot of these SPACs are the ability to bring certain investors in through the pipe. I think that's really interesting if there's a certain investor strategy that you have and you find value in which type investors that SPAC brings to the table. And I think that's where a lot of the conversations have been focused on with these companies that are doing the SPAC business combinations. But there have been some really great health care sponsors out there who are very smart and know what they're doing. And I think we're excited because so far, it's been I think -- I look at the SPACs if there's a subsector of just the health care SPACs. I don't really focus on EV SPACs that have future earnings off a 2026 multiples. But if you look at -- it doesn't matter. For -- mostly for health care, but I think there's not much revenue anyway. So when you look at the subset of SPACs from health care, I think we're going to have a really interesting and probably positive data story 2 years from now. And that will have enough data to give real answers on how these perform. But to say right now how they're doing, it's kind of early. It's kind of hard to call it.

Scott. Yes, because, Scott, you seem to have some thoughts. Go for it.

Yes. I mean Jordan, spot on, right? I agree with everything that you said and just a couple of data points from my clients. To your point, my clients are looking towards the public markets. They're having conversations on the IPO and the SPAC. There's like, Scott, hey, you and your CFOs, what advice do you have? Are we dual tracking this? And we absolutely say, absolutely, let's dual track it. Most of these companies that are heading towards the markets have the interest from the SPAC sponsors. So it's a great way to go. And the other thing. I like that you kind of said we're kind of through that warrant thing. I've been doing -- dealing with the SEC for the last 30 years at my clients. And they're always trying to fill a hole, right? The SEC is always trying to poke and prod, whether it's stock comp or whatever, rev rec and things of that nature. So they were just looking at warrants, and so it's a pretty easy remediation that happened with the SPAC sponsors on disclosure. So let's put all that past us. SPACs are completely viable. Our clients are looking at them. And yes, I totally agree with what you're saying, Jordan. That's -- it's a really good way for a lot of our clients to dual track it. And when you're dual tracking, you're keeping the bankers and other people honest, right? You're creating tension. So it's a great way to go for a lot of our clients.

Mark, how about from the investor perspective. How do you evaluate SPAC opportunities versus potential IPOs?

Yes. So I think the profile of a company that's appropriate for SPAC is maybe, there's a spectrum and perhaps there's some overlap in the middle. But I think it's a little differentiated. So I would say that I think there's a company that has a more modest capital footprint and capital needs and can be brought together at a valuation that is comparatively attractive to what's in the public market. I think that's a good SPAC candidate. Something that one of these hot area stocks, gene editing stocks -- so Caribou Biosciences is on list right now. We're going to see that IPO later this week. They're going to raise a couple of hundred million dollars. It's going to be well oversubscribed. There's going to be tons of demand. A company like that needs to do a front door IPO in this market. I think that something that you can bring out. It maybe doesn't have a gigantic audience for, but there's a lot of specialists that would look at it and say, wow, this makes a lot of sense. And boy, I'd love to get in there at an attractive valuation. I think that's where I'd focus SPACs for.

I agree, Mark. I think that's a fair point that the hot IPOs are well oversubscribed fully. There's -- it's just not a matter of if it's covered, but how many times covered it could be. They don't need to go the SPAC route because there's plenty of demand in the public markets. I think there are some companies that will need a larger amount of cash or in other areas of health care, where you're carving out a piece of another larger business or a hospital or something, that you can kind of see some interesting transactions kind of come together. So I wouldn't be surprised if we start to see more and more of those creative transactions starting to happen over the next 12 months. Because they're running out of companies that I think are on the traditional IPO path that have already had the conversations on the valuation. And say, no, we're going to stay with the IPO routes. And now they have to really think through what is the right profile for a SPAC business combination. And to Mark's point, it's probably going to be more of those characteristics than your traditional straight IPO.

I want to come back to the valuation discussions. I think there's sort of a lot of angles to that. Ryan, maybe on the private side, as you're discussing sort of the profile of the companies that are more appealing and -- to you and help drive your investment decision, what role is valuation playing? I think we have seen probably broadly valuations elevated relative to certainly this time a year ago, but even probably more historically. How is valuation playing a role? And at what point do you say, God, it's a great company, but I just can't get my arms around this price anymore.

Yes. So again, going back to 2020 post March, what we saw was obviously a dramatic increase in deal flow. And same time, valuations were already high and they seem to sort of creep higher, believe it or not. And so there were a lot of opportunities that were coming across our desk that we looked at, where we said, yes, well, the fundamental science here is fantastic. But we just -- we can't get there at a $600 million or $700 million pre-money valuation on something that is 12 to 18 months from the clinic. Now in retrospect, looking at some of those situations, I think what we learned is actually that, again, for those select stories where there's -- back to what Jordan was talking about, the folks that are looking for the 5 -- on a 5- and 10-year horizon, they -- actually public market investors wanted those stories. So those companies that had $600 million or $700 million pre-money valuations on the crossover rounds were now -- are now public and are now multiple of that valuation. So they worked. Now what I would say is like in a couple of those cases, the step-ups to the IPO, I think the bankers are smart. And they compressed them. So we're looking at step-ups that were maybe sort of 1.8 and 1.2, 1.3, 1.4. You weren't seeing the 2x step-ups. There are other situations that we looked at, right, that were -- valuations were very well and they looked like, wow, this is a cell -- oncology cell therapy company at a $200 pre-money. On the crossover round, you look at all the public -- their peers in the public markets, they're trading at $1 billion plus. This looks like it's going to work. There are only 6 months from the clinic or 12 months from the clinic, but you couldn't get there on the fundamentals. Once you got sort of a little bit into the weeds, you started to realize, well, is this really the right application of this technology? Should they be going after this tumor type versus that tumor type? And lo and behold, even though stories -- even though those stories were cheap on the crossover and they were cheap on the IPO, I think what's happening is we're seeing that they're not working in the public markets. So again, the public market investor right now that is supporting this sector to a large extent, I think, is really focused on a select -- a handful of technologies. And they're going to buy those technologies, whether or not they're 12, 18 or 24 months from the clinic. Everybody else, I think you have to be really careful. And that includes some of our portfolio companies. Not to sort of go into any details, but I think with some of the rounds that we did last year in 2020, which were set up to be crossover rounds. And these were companies that were -- again, on the order of 18 to 24 months away from the clinic. I think what they did was, because there was demand, they upsized the rounds. And that has positioned them really, really well going forward. Because instead of having to force entry into the public market today, they could say, well, look, it seems like there's less investor -- public market investor appetite for these early, early stories without sort of the high science. We can -- we have enough runway to wait until the first half of next year where maybe the public markets look a lot different. So I -- when folks are out there thinking about these crossover rounds and when there is the opportunity to upsize, back to sort of what Scott was saying around being prepared, that's something we certainly consider. That extra capital can certainly come in handy if the window becomes highly selective.

That's helpful. Mark, I'd have you follow up on that as certainly from the public perspective.

Yes. No, I think that -- I think if I could maybe summarize some of what Ryan was saying, is the word divergence in valuations is what we're seeing. And there clearly is a Pareto distribution in how companies are valued. And there are the haves and there are the haves not, and let me go into some examples just to provide a little color. Something I'm struck by is I'm starting to see structural factors in the market play a bigger role in certainly public valuations. Where, depending upon the size of the perceived buyer universe for a stock, they can overwhelm fundamental valuation metrics, right? So we talked a lot about the gene editing stocks. Great data, but they're preclinical gene editing companies that are publicly traded that have $5 billion, $6 billion, $7 billion, $8 billion market caps. If you would have told me we would see that 10 years ago, I would've fell out of my chair. I never would have believed it, right? I think all of us that have been following valuations and companies for a while, wouldn't have. I think there are some structural factors there. The other thing I talk a lot about with LifeSci analysts and folks is look at the valuations of companies after they get their approval, right? The -- in some cases, preclinical companies that don't have a shred of clinical data are worth more than companies after they get their approval with presumably addressable markets that are projected to be of equivalent or substantially equivalent size. So it's sort of speaking to the old biotech adage, right? When you can believe the hope-ium, right, when you're not burdened by data, you can make the valuation anything you want, right? I mean gene editing can cure every disease. So what's the NPV of that? It's incident. Now when you have data, certainly when you have an approved product with a label and you're staring at commercialization and thinking about actually getting reimbursement, that's a different situation. So I think it's very interesting that companies that are further along in their development process, that are more derisked, commercial-stage companies are trading at a discount. And there's a lot of these early launch companies. There's -- something that I don't think we talk enough about is there has never been more independent companies launching products than there are in recent years, right? And a real fun exercise to do is plot out the revenue of these things. Plot out the market cap as they progress and compare it to where some of these earlier stage companies or the ones Ryan is talking about, preclinical platforms that are in the stratosphere, and there's a huge divergence there. And so I think at some point -- let's just step back, right? We think that there has to be a value proposition for therapeutics in the health care space, right? The way the system is set up for a provider and a payer to prescribe and reimburse the medicine, it has to have a value proposition to a patient. And there is some value associated with that, right? And we can track that by looking at end market performance of commercial-stage products, right? At some level, that's what we're talking about, discounting those cash flows back. And I think it's -- we're in sort of uncharted territory with this -- the level of skew with some of these early-stage companies. We think over time that's going to flatten.

So I want to drill down just a little more specifically now to particular drivers. One of the biggest discussion points, sort of broadly, has been inflation. What could the Fed potentially do. It seems right now not much, but keeping an eye on pockets of inflation. Jordan, I might start with you. Are you -- obviously, activity continues to be incredibly hot. But -- have you started to see signs that things are overheating? Or are there any kind of inflation-related sort of headwinds that we should be looking out for over the next 12 to 18 months.

I guess it depends if you're doing like a home renovation or we're talking about the stock market. I think the stock market is cyclical, right? Everyone knows the story. There's times when biotechs can't raise money. And obviously, this is a very open window. We use the word selective. I like that word. So far, we're not -- this is -- last year was a record year of number of IPOs. I've been here for 18 years. I remember when we had like 6 biotech IPOs in 1 year, and people were like that's a lot. That's relative to 90, and we're on track this year to have another 90. So from a data perspective, that's a lot of IPOs. And is there going to be the next 10 years of 90-plus IPOs year-over-year? Probably not. It just doesn't seem sustainable from all the constraints that are in the system. I mean I don't know how many -- let's pick the hot, sexy topic of the year, gene editing. How many portfolio can you necessarily have in genetic editing before they've got exposure to too much concentration, right? So I think you're going to see different areas of health care evolve. I don't think you're going to see the same types of companies. The market won't support the same type of company, preclinical, same story, interesting tech, not really proven. But what you're going to see, I think, are these newer companies emerging, leveraging the fact that there's technology available now that wasn't available, whether it's in the pre-genomic space or we're looking at innovation that's going to bring a whole new cohort of biotechs that, to be honest, probably haven't even been created yet, and they're just an idea at this point. So I do think we're starting to see saturation in some of the areas. But to that point, the market is very receptive of it. I think everyone that invested in Moderna when they came out as a platform and -- remember when they did like a platform investment and technology company, has been rewarded and done very well. So I don't know what the math is. But someone told me the stat where if you bought $1 of every biotech last year, you would have been up like $40 or so. It's just the math is there, and it's working. So every investor who's taking the risk and bought into these IPOs on average has done very well. And I think until that trend starts to reverse, you're going to continue to keep seeing the same momentum. And now could this go through all the way into the second half of next year? Sure. But it's definitely something we watch. But so far, when I look at these deals that are 12, 13x oversubscribed, these are like tax oversubscriptions on these IPOs. It's kind of crazy, but there's just a lot of demand out there right now, and there's a lot of dry powder. We talked about that earlier. So right now, I think the sector is working very well for all the reasons that we've discussed. And besides enterprise tech, there's really only health care biotech that's really where the true innovation is. And that -- if you want exposure to that, it's the only place to deploy capital.

Scott, do you have thoughts?

Maybe. I remember, Jordan, you and I were at a panel at this time last year talking about the markets, and that resonated strongly with me, is this is where people can -- where innovation is truly happening. And so investors love innovation and disruption. So totally agree.

Mark, from sort of the public market perspective, following on Jordan's comments here, it seems like we still do have legs. But if we put it into sort of historical context, right, where we are now versus, let's say, a year plus coming out of the financial crisis of the late 2000s, how should we be thinking about this in that historical context?

Yes. No, Jeremy, that's a good question. And for those of us that were trying to do IPOs back then, right, it was, first, the window is completely closed. And then second it was the insiders need to put up 50, 60-plus percent of the deal. We saw some 70% insider participations as a prerequisite to get underwriters interested to even engage in a conversation to get a company out. So I think it's good just to compare and contrast how different things were then. Certainly, there was little or no step up to the valuation. And it was nearly impossible to get a deal done. And obviously, this environment we're in, getting the management team to acknowledge that you're interested in a deal, that could be a challenge. So it couldn't be more different. I mean I think that Jordan made a great point about if you're looking for innovation and value creation in the broader economy now, biotech is a great place to be. And we're very bullish on the capabilities of this sector. I think obviously, the success in vaccine development and managing COVID has really put a spotlight on the capability that the sector has. So I think that's a positive. But I think it's also good for us just to remember where we were not all that long ago in terms of availability of capital and cost of capital and how that's different today.

So as a reminder to the audience, you are -- we can open question -- Q&A up to you. We do have one question here from an audience member, which I'm going to read. What are your suggestions to get the attention of investors for a company with a platform that could produce significant patient benefit and developed around a decades-old asset where bioavailability issues that prevented success have been resolved? Scott, do you want to take that?

I think that investors might be a better answer to that. I mean, what I would say is put together -- talk to the valuation teams, start talking to investors and test the waters, right? That would be my advice and talk to folks like Ryan and Mark.

Ryan?

Yes. I guess my suggestion would be whenever you're approaching investors, you always want to put your best foot forward in many cases. You get one shot and one shot only. So I think you do as much work with Scott and other members of the team to really refine the story and get it all ticked and tied. And then you go out and you market to a group of investors, who in the past have demonstrated appetite for similar stories. I mean the fact of the matter is there are plenty of companies out there that have had platform technologies with let's say, decades-old assets, as you've described, where there was some aspect of the technology that needed to be tweaked. And once that problem was solved, they went back out and they got funded. It happens all the time. A lot of times, it's a conversation around valuation. And I think, ultimately, if the entrepreneur believes in the underlying technology and the fact that one day, this will be an improved product, then valuation at these early sort of rounds, early stages of development -- folks on both sides need to sort of be flexible. And I think it's one way to bring people into the conversation.

Yes, and chiming timing on that. So when we sit down with those clients, we put together their forecast, their budget, take a look at their investor deck, and that's why I alluded to that partnering group. So go out and have a -- like our LifeSci Partnering & Analytic group. Have them take a look at your company and the comps and do a full market analysis, so that when you're -- when you do go talk to Ryan and the investors, you're going in eyes wide open with some benchmarks. And to your point, Ryan, so you kind of get one chance to go back to these investors. So make sure you are putting your best foot forward, and you're not using old data or old valuation models. And you're ready to kind of hit the sales objectives for the VCs as well as just having realistic expectations on valuations and what the overall market is, real-time analytics.

So we've talked a lot about how -- what criteria investors are looking at. I think if -- maybe if we want to drill down a little more specifically, and maybe particularly for Ryan and Mark, what -- you mentioned gene editing. What other specific areas do you think are going to be most interesting even if we go beyond therapeutics into other areas of health care. What areas do you think are going to be most interesting over the next 12, 18, 24 months? Maybe Ryan?

Yes. I'll just go first, Mark. And look, I think we all have sort of our personal preferences for areas that we're most excited about. But I think stepping back, one way that we think about where we should be focused is speaking to large pharma. Obviously, knowing where strategics are, where their mindsets are with respect to technology classes, with respect to therapeutic areas, that helps us really inform our investment decisions, how we're filtering opportunities. So while I may be in love with, as an example, gene editing, I think it's always important to make sure that we're tapping into the BD&L folks and understanding what they're looking for. So what we've seen from those groups is that there is, not surprisingly, a focus on oncology. But the other 2 areas that I think are very prominent right now are obviously CNS, and then to Mark's point, immunology and inflammation. I think those are the 3 areas that when we're speaking to the BD&L folks, they're focused on that. When we look at their venture arms, we also see that their venture arms are investing there. So not only are we getting information from the folks who are doing the deals, but then we're also seeing where they're actually putting money to work. So that again, I think those areas, looking from a therapeutic standpoint, it's going to be oncology, it's going to be immunology, it's going to be in CNS. From a technology standpoint, and maybe there's -- this is just my view, obviously. I think at some point, we're going to be saturated with the gene editing technologies and maybe we're getting very close. But I think moving forward, one area that folks are going to be particularly focused on is technologies for cell-type specific drug delivery, okay? And so what I'm getting at there is with some of the first-generation gene editing and gene therapy technologies, we have vector that basically impact the entire organs. But as we get more and more sophisticated with the design of these next-generation therapeutics, we're going to be -- we're going to want to edit very specific cell types, not just edit the liver. And so the companies that we're focused on are the companies that are developing some of these next-generation technologies for cell-type-specific drug delivery. I would say another area that is of keen interest for us is actually the stem cell area. Induced pluripotent stem cells, you've probably all heard of, there's a couple of publicly traded companies out there right now that are -- that have those technologies. But I think they're first generation technologies, and there's going to be a whole wave of companies that are going to come in with stem cell products and candidates. These technologies, these stem cell technologies, have applications across all 3 areas that we just discussed, whether it's oncology, immunology or CNS. And so as those companies push those stem cell technologies, as they're able to generate universal stem cell sources for patients so that really do have an off-the-shelf product, I think that's an area that's going to be very, very exciting going forward. So what -- maybe I'll just end there with one last point. I think the other area that's going to become I think increasingly hot over the course of the next, let's say, 5 to 10 years, is this regenerative medicine space. The idea that we can somehow intervene and attempt to delay the aging process. Can we initially start by regenerating our joints so that we're not coming down with arthritis, and we're keeping our body better intact. So that's an area that is obviously sort of 10 years out. But I think that we're going to start seeing a lot of activity in the anti-aging space.

Mark?

Yes. And then maybe to complement Ryan was saying. Obviously, I agree with the big thematic areas. I would also add just in terms of disruptive innovations, we're always looking for kind of one-off-type products that meet a critical unmet need, where there's nothing else. So Bristol Myers bought MyoKardia because there really isn't a lot out there in heart failure, right? So we look for things like that, things in the orphan disease space that are treating these populations that don't have any alternatives. It could be in any disease area. If it is a potential first and best-in-class, that's something we're always looking for. And as we're speaking to thought leaders, we always end the conversation with a question, what's the most exciting thing you've seen that you think can change practice? And if we hear the same thing once or twice, we're going to be taking a look at it. I think the other side, to complement what's going on in the disruptive innovation side, we have a broader aperture in our investment, as I mentioned, and we're looking at commercial-stage companies. And there's a lot of interesting companies out there that are trading at very attractive valuations, right? So a lot of large-cap biotechs are trading at single-digit multiples, more than a 10 turn discount at a broad S&P multiple. Same thing with a lot of the pharmas. I mentioned earlier, some of these early-launch-stage companies, a lot of them are heavily discounted. And if you believe at all in the potential of these therapies and the potential strategic interest, there could be some pretty attractive risk-reward opportunities for, I think, some of these underappreciated commercial-stage assets that just perhaps don't have the sizzle in some of these other areas. So I think those are a couple of other areas that could be pretty interesting and things that maybe a lot of folks aren't chasing or not chasing yet. We think that if you see 1 or 2 acquisitions for some of those companies of that profile, I think you can attract capital to that space very quickly.

Yes, go ahead, Scott. Yes.

Yes. So our clients are in this space, all these spaces as well. And I'll just add on like AI and big data. So we have some clients that are using AI and big data for some innovation. So that's a good space that we're seeing, and then some digital health plays as well. So those are 2 areas that our clients and we're seeing investors excited about in the private markets.

Jordan, where are you seeing most of the activity as sort of look out to your calendar for the rest of the year? Where is most of the activity going to be, do you think?

I think outside of the area that we all mentioned, which is you're always going to have a great ecosystem around these large TAMs in oncology and gene editing and -- we're starting to see more and more health care IT. That is, as telemedicine has been highlighted as such a huge advantage over the last few years, people are getting that. We're having this conference via Zoom. So people are more likely to talk to their dermatologists over Zoom, video conference. So I think that continues to expand. I think it's still early there. There's a whole side of that business to be solved for on the payer side. But -- the protein space is interesting. We're starting to see really tech-enabled. I think we have our first ever digital therapeutic company go public recently. So there's probably going to be more expansion there. We have really interesting companies that are using AI to develop drugs, which I think people say that word a lot. I don't -- every company has different meaning. But that is probably the direction where you're going to see a lot more of these biotechs heading in the future just because of the efficiency in bringing smarter targets to the clinic. And then overall, we're just -- I think the data play around health care is really interesting, because we're starting to track and collect a lot more data points than we've had historically. And that all is going to be becoming a very meaningful asset when you think about how you not only select targets but also develop them. So my thesis is that in 10 years from now, you're going to see a much higher level of drug approvals historically than you have in the past. Because all of these companies are going to be able to bring more drugs quicker, faster to market than in the past.

I think that ends our session. Gentlemen, thank you all so much for your time today. Really appreciate your insights and generosity of your time. Please, to the audience, please reach out to us if you have any questions. Happy to connect you. And please enjoy the rest of the symposium. Gentlemen, thank you again.

Thanks, everybody.

Bye.

Thanks, Jeremy.

Thanks.