🎙️ Interview w/ Perlara CEO Ethan Perlstein
A new model for Biopharma
👋🏽 Welcome to Doing Well by Doing Good, a newsletter and podcast series highlighting the companies aiming to be profitable with a purpose.
Happy Wednesday folks! I am super excited to share the latest in our Podcasts, with a very unique company Perlara. Ethan Perlstein, the CEO of Public Benefit Corporation Perlara, wears many hats, from scientist, to cure-sherpa, to non-profit owner. His career revolves around helping patients with rare diseases, and in this episode, we explore how Perlara is bringing a Doing Well by Doing Good model to the BioPharma space.
Listen to the episode on Apple Podcasts, Spotify, or click below for the Anchor FM Podcast. Or scroll down to read through the transcript and click right to the section of interest.
Background
Anand 0:56 What was your founding journey at Perlara? How did you get to where you are today?
Ethan 1:01 So Perlara started initially as Perlstein lab actually, because I couldn't think of a better name on my own. It started in early 2014. And I started this as the first time CEO and entrepreneur coming out of my postdoctoral training. And before that, had come straight out of graduate school before that straight out of college. So I had been on the academic path. And then, through a set of circumstances, including not getting an academic job, in any of the places I applied, decided to check out some other possibilities and startups at this time were getting more and more into the popular culture seeping into the popular culture through Shark Tank. And in other ways then the startup JOBS Act was passed in 2012. And that kind of opened up this new crowdfunding space, and Kickstarter was just making waves. So there was all this enthusiasm about startups. So I got caught up in that and decided that I, instead of trying to get an academic position as an assistant professor somewhere, I would just start a company. And that's kind of how Perlara was practically, you know, came into existence. And sort of from there, there's been a roller coaster ride. But right now, Perlara is, I guess, in a kind of reboot to transition state from 1.0 to 2.0. And can get into that story and I have in other other forums, but really excited to think about the future in a couple years from now, when I think that the company can reconstitute. But right now, it's a virtual clinical development company. Basically, just me unpaid as the only employee, sort of pushing it, pushing the once embers of a project now into the clinic.
Anand 2:50 That's pretty awesome. So I mean, well, you know, you obviously have a very interesting history here. So what are some of the challenges that you faced along the way, obviously, in particular, as a biopharma public benefit corporation?
Ethan 3:05 Well, in the beginning, when I was going out talking about Perlara as a PPC, and I had heard about other PBCs, and thought, this is really a cool experiment that should be running biotech, because it's been running in other industries. And this idea of, you know, Doing Well by Doing Good is not a new concept. I mean, PBCs have become maybe associated with like, airports and other utilities in the economy. But this concept of Doing Well by Doing Good, I think, is one that has been kind of resuscitated in the form of a PBC. And that movement kind of started in 2010. And so I thought it'd be a cool idea to run a PBC experiment in biotech. And I think the initial challenges were, no one knew what that was. And it didn't necessarily scare investors or, or others, but people just didn't know what to make of it. But for me, it was a great recruiting tool, and it helped define the company culture, help differentiate Perlara from other startups in the biopharma space. And it kind of it addressed a glaring need because there was a lot of complaining about especially today about drug pricing, and how pharma kind of doesn't get the reputation it deserves. And so I wanted to go to the root of that problem, this kind of public perception problem, and also get to the root of a lot of the inequities and inequalities we see in healthcare. And that's kind of where the PBC concept came about. But again, it was very new then. It's gotten validated today, but I think the biggest obstacle was just getting people to understand that this is an experiment worth running in biotech and that there should be more biotech PBCs.
Mission & Culture
Anand 4:52 Yeah, and definitely we'll get to that part later on in the podcast. The next question I have is what was Perlara's or what is Perlara's company mission, right as you're going through this reboot, and how does being a PBC play into that? And has that changed in your history? Or has that been the same since the beginning?
Ethan 5:11 I think there's been a consistent thread line going back, you know, to the earliest days, where it's a pretty simple sort of value proposition and a pretty simple mission. You know, the value proposition is if you work with highly motivated families and foundations in rare diseases, they're the most amazing business partners I think you could ever find.
Anand 5:32 Because they are really motivated by the problem, right?
Ethan 5:36 Absolutely. They're really motivated by problem. They, they act like a startup on steroids, right, using urgency, you know, they're struggling to find product market fit, there's only limited runway, you know, constraint breeds creativity, and so forth. So they're just natural partners in drug development, which is a very fraught and, you know, failure prone process. So that's the value proposition. And I think that that's worth a lot. And then if you take that value proposition to its extreme, it says, well then you want to form companies with these people, you don't just want to take their data or use them to fundraise for you, you actually want to go to the logic stream and make them your business partners, and you want to be 50/50 partners. And so I think that's kind of to me how we're embodying that the PBC or at least how, how we're taking how we're using that to differentiate and to encode in the company's DNA that this is the business activity we're doing. And we want investors who are aligned with that. And then the challenge comes when you go to the public markets, how do you kind of maintain that, that mission? So we haven't gotten to that point, the experiment, but yeah, I think there's been a very consistent vision, at least, you know, I believe, where I thought, geez, when you work with these highly motivated families, and foundations, you can just kind of move mountains, and they're just things, just things happen. And then and then if you view that as not just a one off kind of thing, then turn it into a business and industrialize it, then that's, to me the big opportunity.
Anand 7:14 Cool. And so if you had to give the mission in one sentence, what would it be?
Ethan 7:18 Partnering with highly motivated families to cure rare genetic diseases.
Doing Well
Anand 7:23 Yeah, that's a powerful one. So I thought we could move on to another part, which is, so this talk is about doing well, by doing good. And you mentioned it a couple times. So the first part is doing well. How do you know, biopharma companies and typically have have done quite well. So the question I have is, you know, how at Perlara are you thinking about becoming profitable? You know, what are the levers that you can pull? And how does again, PBC play into that?
Ethan 7:51 Yeah, I mean, I think there's multiple ways to get profitable and working with families, developing disease models, doing repurposing screens, you know, that business cannot break profitably. It's challenging to do so if you're based in the Bay Area. But if you are not, and we're in a less expensive market, that business is already kind of profitable on its own. It's not a venture scale business. And then, of course, you could even abstract that another level and say, Well, you can also provide sort of cure sherpa consulting services to families, where you don't even have to do the research in a lab for them, you just actually organize the research plan and help them execute it. That's a profitable business, especially in the age of COVID, where you can do that, you know, or you can do that through conversations like this. And then when the real challenge is the profitability on the drug product side, which is, you know, what Bio Pharma is really supposed to do. And there I think with repurposing, the way to get that to be profitable is, you know, identifying opportunities that exist off the shelf to take medicine, old medicines and give them new life, to the margins, there are killer because someone else already paid for all the safety, all the other kind of expensive clinical trial pieces, especially if it's for a drug that was for a large indication. So yeah, I think where the PBC part comes in, is to sort of think about well, how would you price things? And what value are you offering to patient communities? You know, are you just sort of offering the same static product and hope to extract you know, rent from it over the course of its patent life? And if you can command orphan pricing, do you do so? Or do you take more of a tech model of delivering value where it's not just about a product that works? In this case, a drug that helps, but also a product experience? You know, what if you could reimagine what would it would if you could imagine the consumer experience you get from an Apple product you got from a drug, or there was an app and there was thought to delivery and there was thought to design and to, you know, to dosage forms and...
Anand 10:07 Recurring revenue which can be valuable, right much more valuable for a company, as opposed to you know, a one time fee.
Ethan 10:12 That's right. But also the idea that you're going to every year release an improved version, right, and you're going to continually iteratively improve this, it's not just a static product where you're trying to squeeze out the value, maximize value over a patent life, and then it falls off a cliff, and you're done with it. It's like, how do you turn this into a long term sustained relationship? And that's where PBC I think, is initially a marketing and branding advantage, or it can kind of, you know, it can talk to talk because it actually walks the walk. But then yeah, the more creative challenges ahead, when like, a PBC actually does go into the public markets, and then how does it I was able to sort of keep its mission, honor its mission, while having access to a global capital pool, where maybe not everybody is interested in what you're interested in, in terms of, you know, maximizing patient experience, they might be interested in maximizing profits. So yeah, I think there's multiple ways to get the profitable, and then the ways that really matter, are the ones where you're actually delivering to patients. And what can you do to not just command orphan pricing, because you can.
Anand 11:17 Yeah, so like, the key difference between Perlara and a standard biopharma company would be, you know, the profitability angle is sort of covered in many different formats, it seems like you could do it through the consulting and beginning of the process, or later on, when you're like actually selling the drug make margins on that. But it seems like the key difference is one what you focus on, which is you know, focus on patient care, focus on making sure they get what they need, versus like, just trying to make money off of the drug, like just profitability. And then it seems like the second thing might be sort of the way that you combine or maybe match, you know, shareholder value with the social good mission of helping the patient.
Ethan 12:01 Exactly, exactly. And I think ultimately, that means, basically, just kind of, like what Airbnb is doing, and other companies are thinking about is, how do you turn your users or your customers, into owners, to fractional co-owners? And again, biotechs are not the place where these ideas are originating. But you know, not a lot of people are doing these experiments yet, because there isn't discipline as there are in other verticals.
Anand 12:29 Basically, you're saying that the patient have like a part of the profit as well, or like the patient.
Ethan 12:34 Potentially, why not think about profit sharing in that way? And why not think about, again, more cooperative types of structures, or just place or opportunities for customers, or users as you use a tech example to be co-owners and to have, you know, like, what if the average Twitter user could not just be monetizing, you know, your content? But actually, what if you can actually capture the upside of the platform business?
Anand 12:56 Yeah, like, basically, because your data has been used. Right. So then how do you capture some of the upside.
Ethan 13:01 Exactly, exactly.
Anand 13:04 That's very interesting. Okay. Yeah, so that's pretty clear. So then, you know, there's many ways to do well, there's many ways to make profits. But this is very different from a normal biopharma company because of the PBC structure also, because you're kind of focused on the venture scale, the, you know, you're using concepts from Tech in order to try to apply them now to biopharma. So that you can have more recurring and more sort of tech margins, because I think your point, if I understand correctly, and you know, please correct me if I'm wrong, is that if you focus on adding additional value throughout the cycle, right, as opposed to just like getting the value one time through the drug, then what you're doing is helping the patient because the patient really cares about the entire process, right, that entire care process of getting cured.
Ethan 13:50 Exactly, exactly. Yeah, exactly.
Doing Good
Anand 13:54 Makes a lot of sense. So actually, that's actually a pretty good segue into the next part, which is Doing Good. You know, this is a question I asked everyone, which is, with Perlara, you know, it's gonna be a huge success in 10 years. Right. So what global challenge will you have helped solve?
Ethan 14:11 Well, I mean, the problem I think will be solved, maybe in geographical chunks first, but I think to your point, we can't just provide access to cures or treatments to rare diseases for families that are living in the United States alone, or in the richest countries, we have to ensure that these kinds of treatments are affordable, and even still profitable anywhere in the globe. So I think that's sort of, you kind of nailed it on the head in terms of, I think, actually achieving global follow through is really the challenge here.
Anand 14:50 Yeah, totally. And so you know, you touched upon this a little bit about why you created a PBC but let's say that you had an option at the beginning, maybe and maybe you had this option anyways, which was why build a for profit PBC versus a for-profit generally C-Corp or a nonprofit.
Ethan 15:11 I mean, you could have done it as a just a vanilla C-Corp and just sort of say, I'm just gonna be different, right? And maybe these companies will put out pledges about, you know, we promise not to do X, Y, and Z. But the thing with pledges is that pledges can be broken, and, you know, management teams can change. And so I think, yeah, it could have been done as a C-Corp. But again, that's about running an experiment here from start to finish, in terms of starting as a private company, eventually going into the public markets and maintaining that, as you said, find that match between shareholder value and honoring the social mission. So you might have thought, well, maybe you could do that as a nonprofit. But then yeah, I mean, you know, I work as a CEO now is a nonprofit that's focused on N-of-ones. And, you know, nonprofits are good for certain kinds of activities. And they're not necessarily optimized for other types of activities where a for-profit might be. So that's why I feel like the PBC gives you this ability to kind of have a hybrid or partake of kind of the best of both structures, potentially. Because, you know, you could argue that one, one form or the other, if it's sort of done to kind of maximize profit, let's say, or for nonprofit to maximize good, you know, there's a chance you're not going to miss your mark, if you just sort of too faithfully and dogmatically pursue that and so a PBC that can kind of take on shades of both, maybe ends up in a more agile position.
Anand 16:33 And I suppose you know, you're in a unique position, running a nonprofit, as well as a for profit, PBC, which is interesting, because then you'd have the concept that really, choosing one of these just means, how you want to go about it. And it's really just a matter of, you know, what is the what is the method you want to take? And is one of the reasons growth in Do you believe that growth, venture-scale, for example, can be easier achieved if it's a for-profit versus a nonprofit?
Ethan 17:03 Yeah, absolutely. So I think that's the point is, if you set it up as a nonprofit, then you can avail yourself of venture capital, if you can offer that kind of growth. And I think, if you're able to sort of show that a few rare disease drugs can be, you know, expanded into a blockbuster market. That's the growth that's venture backed right now with growth potential for biotech platforms. So you'd be kind of silly, you'd be shooting yourself in the foot, if you really had a big aspiration, but you cut yourself off of certain funding mechanisms, you know, because it's the opportunity to dovetail shareholder value, or in this case, VC value with with the mission, because if you get it right, it's a win-win.
Anand 17:44 Yeah. And everybody wins. And I think that's interesting, because that's one of the common themes that we've been hearing, which is that build a for-profit, because when you build that for-profit, you can actually prove out some of that shareholder value. And then when you can prove that out or even if initially, you kind of have a plan to do it, and then eventually you'll do it, VCs, right, early early stage or later stage, whatever they'll want to invest because they want to see that growth. Yep. Okay, that's actually very cool to see. And it's really interesting to see that that's also the case in biopharma. Right.
Big Pharma Trends
Anand 18:16 And, you know, I'm curious, this is more personal curiosity, but you know, how many biopharma startups are that mean, I've seen a lot recently. And so, you know, I'm curious, is it sort of commonplace to think that in biopharma specifically for-profit, high-growth, a lot of VCs want to invest in it. Or do you feel that, you know, maybe it's, it's still a growing field from the startup side, at least, like the big players really dominate?
Ethan 18:40 I'm not sure I quite got the question. Sorry.
Anand 18:44 This is again, this is like my own personal question. I just came out of nowhere, but. So basically, do you feel that large companies dominate the market? Or do you feel that startups actually have an advantage in the biopharma market? Because you know, they can attract venture capital, they can do new things, and they can really disrupt the complete space.
Ethan 19:04 Yeah, I mean, I wouldn't frame it where they're sort of either-or right. I mean, because the way the biotech ecosystem works, unlike tech, and a lot of ways is that, you know, you've got the big pharma, but what do you think are the LPs and all the biotech VCs? Right? The big pharma companies, right? And so, you know, that money is being used to create companies, which then guess what get acquired by those same pharma/LPs, right? So it's like, in biotech, it's sort of like this cycle where there, it's this capital ecosystem, where there's a cyclical flow, right, from the incumbents to creating new companies, which then eventually, you know, get absorbed by the incumbents, and the VCs are basically just making money on kind of on both sides. So a marketplace but yeah, you know once upon a time bio, biopharma companies were fully integrated, and they did everything right. And as they all started to get outsourced in the 90s. And even late 80s. But now you have the state where big pharma companies are basically just these kind of holding companies that are really good at running clinical trials at scale. But they're sourcing all their R&D, from the earliest stages to like Phase 2b assets and everything in between. And there are some companies like Novartis that are old-school that can still that are truly fully integrated and global, but they're still sourcing a lot of their discovery from from outside it because they realize, like anybody else that the greatest discoveries aren't always generated in-house.
Anand 20:37 Yeah that totally makes sense. Yeah. And this was a personal question, because, you know, I don't understand biopharma as well. So it's actually really helpful to get that background. And I think it's probably true in other sectors as well, but probably not as not as much true, as in biopharma where it really there's like a lot of big players that play in all fields, right, including VC funds. Cool. All right. Well, I think that's pretty clear on how Perlara and PBCs, do good.
Advice for DWDG Listeners
Anand 21:05 I thought the last thing I wanted to touch on was really advice. So do you have any advice for either founders that are trying to start a company that's Doing Well by Doing Good, either in biopharma or otherwise? And/or professionals that want to do something positive or want to work for a company like Perlara?
Ethan 21:23 Yeah, I mean, the best advice is, if someone's got a really great scientific idea, and they realize they don't want to just kind of mouth talking points about patients first, and patients health first and if they actually want to help change this healthcare system, writ large, even within Pharma, like they really want to affect change, then yeah, maybe they can kind of consider these other other corporate structures, maybe they can consider a company mission and a company culture that is going to attract people away from maybe startups that don't have that same vision. So, yeah, my advice would be if some, if a founder or founding team sees an opportunity to be a PBC, and it will help make their business stronger than they shouldn't hesitate, you know, they should do it. And if anyone wants to sort of, you know, have a discussion or debate about PBCs, I'm more than welcome to do that. You can find me on Twitter anytime. But yeah, I mean, other voices are having, you know, this similar conversation. So, you know, the best advice is, obviously, to really do your homework and to listen to all perspectives. So if there are people who, you know, are thinking about ways to reform the health care system that are not highlighting PBCs but are highlighting something else and listen to them to just soak up as much information as possible.
Anand 22:49 Well, that's great advice. Thanks again for taking the time. I really appreciate it.
Ethan 22:54 No worries. Thanks for the questions and the opportunity to answer them.
If you are interested in how this new model for Bio Pharma is being developed or are interested in curing rare diseases, check out Perlara or follow Ethan on Twitter or Clubhouse (@ethan) to hear more live.
Hope this gives you just the lift you need this Wednesday!
If there’s a company you think we should talk to, reply here, email hello@doingwellbydoinggood.co or DM me on Twitter @anandsampat.
✌🏽Anand