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Khosla Ventures’ Alex Morgan on biotech’s challenges and solving drug delivery

To hear venture capitalist Alex Morgan tell it, investors shouldn’t be in the business of predicting trends.

“There’s often a public perception that we’re in the prediction game,” said Morgan, a partner at Khosla Ventures who oversees the firm’s biotechnology investments. “We’re not trying to be. As an early-stage venture investor, we’re trying to imagine the possible future and bring resources, people and technology to bear, to shift reality.”

Morgan’s optimistic outlook isn’t too out of place on Silicon Valley’s Sand Hill Road, home to some of the best-known names in venture capital and where Khosla’s offices are located. Headed by entrepreneur Vinod Khosla, the firm has invested in technology companies like DoorDash, Affirm and GitLab, and is expanding in the life sciences.

While none of Khosla’s largest exits have been in drug development, the firm sees opportunity in biotech, like with stem cell therapy specialist Cellino and nucleic acid delivery biotech Liberate Bio, both of which it has backed.

Morgan spoke with BioPharma Dive about his view of the biotech industry’s direction as well as some of challenges it faces. This conversation has been condensed and lightly edited for clarity.

BIOPHARMA DIVE: Where in biotech is Khosla investing?

ALEX MORGAN: One [area] is in cell therapy and manufacturing. We have two companies working on that, CellFE and Cellino. They are both working on what is a huge problem with a new approach that we think will have broad impact across lots of different cell therapies.

Another area in the biopharma space we’ve been very active in is actually delivery technologies. In the current molecular genomics toolkit, if you can get into a cell with large payloads, you can transform the cell in all kinds of ways, whether that’s with RNA or CRISPR therapies. But delivery is the issue. We have Bionaut and Liberate Bio [working] on that. Let’s say there isn’t going to be a universal solution. [So] let’s try to invest in different things that we think might work because anyone could turn out to be an incredibly powerful new technology.

We’ve seen a surge in interest in the genomics field. Why?

MORGAN: Biology is very coupled. What’s happening with a protein is often influenced by gene expression, and is often influenced by the DNA itself. By measuring one thing, you often can get a lot of information about the thing that you’re not exactly measuring. Genomics in general has a wonderful property in that we have very good measurement tools.

Sequencing is like a Swiss army knife or duct tape in biology. You can use it for lots of different things. You can put genomic tags on things and read those out. Even if it’s not quite what you want to measure, there may be a way that a genomic measurement gets you most of the way there. Genomic modalities — RNA therapies, ASOs, CRISPR therapy, mRNA therapies — are a programmable type of therapy. But it’s predicated on delivery.

Genomic analyses are helpful as we continue to understand transcriptional networks. We’re understanding what things we want to perturb in what way. So in my mind, only two things in history have ever really changed the probability of success [in drug development]. First was the Orphan Drug Act. And the second was biologics, because by moving to a targeted lock and key, if you understood the biology and you could spin up the antibody, then you could solve the problem.

What field are you working in now that you think could have a dramatic impact on the sector?

MORGAN: Delivery. If we can solve this for lots of cells and tissues, if I can arbitrarily deliver large payloads of RNA and DNA into the cell that I want to in vivo, we can solve all kinds of problems. That would unlock a whole lot of potential. If I can only do it for some tissues with one technology, and another technology is good for some other class, that’s still huge.

I’m interested in cell engineering technologies. A lot of it is manufacturing efficiency, cost efficiency and quality. If I can solve that, and I can create [from cells] nanomachines that I want, that’s incredibly powerful.

What are you tired of being pitched?

MORGAN: There’s this idea of spending a lot of investor capital to collect a dataset, and then [thinking] that dataset will generate value. It’s one of the things I think is often underappreciated in fields like machine learning or data science. The value returned for data is basically logarithmic. The first 10 pieces of data are super useful. But then you need 100 pieces to get the next equivalent lift in knowledge. And then you need 1,000 pieces. You need to collect more data, and if you’re spending linearly to collect that data — let’s say you’re sequencing people — those are fundamentally divergent functions. If your spend is linear, but your value creation is logarithmic, your company is going to fail.

Maybe it’s because we’re also big tech investors. We care a lot about scaling, which is very different from many people in biotech. In a lot of cases, it’s like, ‘If you give me $100 million and I collect all this data, I will discover something useful.’ Yes, but that’s also not very interesting. It’s not a really clever insight.

What longer-term challenges face biotech?

MORGAN: There are very interesting questions around curative therapies, such as how they’ll be paid for. Are we coupling some payment model with tracking so that you maybe don’t get paid all at once? Or [perhaps] you’re responsible for monitoring and having a relationship with patients, which will not be easy.

In general, we need to plan for longer relationships with patients. We’re moving into a world where we have to think holistically about care delivery. A therapeutic is actually part of a whole package of care. We’re moving that way in oncology and infectious disease, where people do combination therapies, and that will be important in how we manage many conditions going forward.