Doug Drysdale - Cybin - Part 2

Intro - 00:00:01: Welcome to the Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee. In our last episode, we spoke with Doug Drysdale about growing up in a working class setting, his life-changing scholarship, and his early passion for biology. We also discovered his formative lab experiences, his transition to work at DuPont Merck, and his time at Elan, where he combined his scientific and commercial expertise to excel in his business development role. If you missed it, be sure to go back and listen to part one. In part two, we talk with Doug about his experience in BD, his move from crunching numbers to leading deals, and the challenges of a global BD strategy. We'll also touch on his move from the UK to San Diego, the intricacies of licensing and acquisitions in the pharma industry, and his experiences with Elan, Alfama, and Activist.

Doug - 00:01:19: Yeah, so back then, because I was still pretty new to dealmaking, I guess the biggest value that I brought was the science piece of it. And so being able to contribute to that assessment. So you have obviously a business development team, multifunctional team that's looking at opportunities. And I was able to use my science, but also some of that marketing and business practical background to jump in. But the way I got to the deal table was to become valuable to the team. And I started out by just, I was crunching all the numbers in the spreadsheets. We were looking at oncology products. And so lots of chemotherapy products. And I was building these models that were across 20 countries. And you have all these different treatment regimens with oncology. There's lots of permutations of what goes with what And we were using multicolored simulations and all that stuff. But eventually, Excel just fell over. It just crashed. It was just too much. I just tried to make myself valuable. And I wasn't experienced enough to sit at the table, but I was creating the models. And then ultimately, I convinced them that the models would be better if I was sitting at the table. Yeah. And then eventually, I did. You take this one, Doug. You take this one. And eventually, I got to lead the deal, which is great.

Jon - 00:02:44: And I think what sticks out to me in that is just the willingness to do the quote-unquote groundwork and not immediately being like, I need to be at the table immediately. It's kind of this thing where you're like, I got to earn your stripes and just get the foundational elements and then ratchet it up versus expecting to just go straight to the top.

Doug - 00:03:07: Yeah, I think that's right. But I think that was normal back then. I think what's happened now is social media, I think, leads to inaccurate expectations, unfortunately, and doesn't display reality. The stories you see of people being a success overnight, it's not. It's like 30 years and then overnight. Yeah, exactly. So, yeah, you've got to put it in the time. There's no way around it.

Jon - 00:03:34: Absolutely. And I know when you were doing BD, you were also covering tons of geographies. So what were the considerations as you were assessing? Like a global BD strategy versus just like, here's one asset and having your kind of more siloed focus.

Doug - 00:03:53: Yeah, so I started out in the UK, but focused on Europe. And that was my geographic focus there. And for the most part, we were looking at just regional deals like that rather than global, some global ones. It was mostly regional. And yeah, I mean, in Europe, I mean, every country is different. But from a regulatory point of view, from a cultural point of view, from the way you sell, and then the pricing and reimbursement. So there were lots of things. And that was a great lesson, too, working out what would work in the most markets there. And then I was fortunate that they moved me to the US. So I moved from the UK to San Diego, actually. So that was a pretty nice place to go. London weather to San Diego weather was a nice change. And then I was looking at multiple markets. So it was mostly North and South America and Asia Pacific. And I think they brought me over because most BD folks in the US are very US-specific, very focused on the US. And it kind of blinds to everything else. And I had grown up in that role of looking at 26, 27 countries in Europe. Because that's just the way things are in Europe. Same size population, but all those countries instead of one. So that was really fun. I got to travel around quite a bit doing that.

Jon - 00:05:17: That's awesome. And you mentioned travel. So every time you were kind of exploring these geographies, it would require you going to you're doing global travel as well and actually immersing yourself?

Doug - 00:05:29: Yeah. Yeah, definitely. And in fact, I'm still in another role in the future. I would spend sometimes three weeks of the month out of the country traveling around. That can get pretty tiring. But deals only get done in person. They don't really get done over the phone.

Jon - 00:05:59: Yeah. And I think like but i think your absolutely right, at the end of the day. Especially large deals like this. There's something about human connection and meeting someone and breaking bread with them. So I love that. And you mentioned moving to San Diego. How is that personally for you, moving to the United States and studying San Diego? 

Doug - 00:06:15: Yeah, actually, the first sort of six or eight weeks or so were kind of stressful. First of all, I had to take my driving test. I was 30 and I had to take my driving test. That was pretty scary. I'm like, what happens if I fail? What the hell?

Jon - 00:06:28: You're stuck in your apartment, basically.

Doug - 00:06:31: Exactly. You can't go anywhere in the U.S. Without a car. So that was a bit stressful but then also, while the U.S. And the U.K. Are pretty similar in many ways, there are thousands of little differences. And when you have all of those differences all at once, so everything is a little bit different, it's just a bit overwhelming. But it didn't take me that long to settle in, apart from the earthquakes. I remember my first earthquake.

Jon - 00:07:05: I was like, am I going to die right now? This is terrifying.

Doug - 00:07:09: Yeah, I'm in my office and just been there a couple of weeks. And the building is moving. What? And it took me a few seconds to figure out what was going on. And then about a half dozen people ran into my office to say, first earthquake, first one.

Jon - 00:07:24: How is it?

Doug - 00:07:25: How is it?

Jon - 00:07:26: Yeah, yeah. That's hilarious.

 Doug - 00:07:27:  That was definitely memorable.

Jon - 00:07:29: Yeah. And so, Addy Lan, are there any kind of like memorable deals that you kind of worked, that you just worked tirelessly on that come to mind during your tenure there?

Doug - 00:07:40: You know, I mean, I've worked on hundreds and hundreds of deals. I remember one that I'd been working on for about a year. And obviously, you use a lot of resources in the organization when you're doing deals because it cut across really every department. So a lot of people have been working on this for a year, and it was an acquisition of an antibiotic product from a very large pharma company. And it was about a billion-dollar deal, something like that. And we were pretty much ready to sign. We were there after all that time. And then the company that we were working with pulled out at the very last minute after a year of doing this. And it pulled out because of something else, sort of a macro event. And you remember a small company called Enron?

Jon - 00:08:32: Yeah. 

Doug - 00:08:33: Okay. So Enron sounds like your lab, doesn't it? And then Enron had all these special purpose vehicles. And as they were pulling apart that structure, the financial structure, SPV became a bad word. Well, at Elan, we had built 55 joint ventures with other biotech companies, a really great infrastructure and network. And we had taken the equity values of all of those and put them into two special purpose vehicles off balance sheet. And we borrowed money against them, about $2 billion. It was a very smart and innovative financing model but as soon as sentiment changes, like it did because of the Enron thing, everything starts to crumble. And then you have issues with valuation and market to market and all of that. And so Elan stock dropped, I think, 95% overnight. And I went from buying assets to selling them. I spent the past months after that. Selling assets, selling sales forces, and then- And teams. And I can tell you that buying is a lot more fun than selling. 

Jon - 00:09:42: Yeah. Holy moly. And talk about, like, I mentioned kind of like a baptism of fire. You're in the wet lab at NHS early days. And now this is like really like almost seems like a. Much broader than BD. It's like you're, this is like you're seeing it from like asset dispositions, asset acquisitions, and you're working globally. So like really it's almost like. I don't know. I'm frankly, obviously very, very, it sounds painful to have to go through like a drawdown like that. And then you're now trying, you're kind of changing your strategy, but. It seems that you're drinking out of the fire hose. You're really just handling a lot for early days. 

Doug - 00:10:26: Absolutely. I had never divested assets before I'd been buying. 

Jon - 00:10:30: Yeah, yeah, yeah. Exactly.

Doug - 00:10:32: And all of a sudden, we had to figure out how to cut costs and survive. And so we found good homes for products and people. We took care of people. And that was a good lesson, too. It was my first sort of big layoff situation so you saw the benefits of taking good care of people on the way out. I think it's really, really important. I've always thought it was important. The people that are left see how you behave. They see who you are. And so, yeah, it was pretty stressful. But this is where the lessons are learned, but always from the tough times.

Jon - 00:11:08: Absolutely. And I don't know who has the same, but I believe in it. Particularly with, with folks that you, you know, you're working with in your team, it's like, we love you on the way in and we'll love you on the way out as well. Like it's, that's kind of like, it doesn't just, just not in one direction or the other. So I totally, I totally believe in that. And kind of talking about these divestitures, did they give you a crash course in finance? Or were you just like, going to figure this out on the fly?

Doug - 00:11:37: So actually, that's interesting. I definitely learned on the job. So back in the UK, I started doing this analysis and realized that I had not taken one single finance class in school and college at all. And still to this day, I've never taken one. And so I bought myself a corporate finance textbook and read it. And there you go. And then I started reading financial statements. As I was doing business development research on companies, I'd be looking at their quarterly reports. And so I taught myself what an income statement, a balance sheet, and the cash flow were. But yeah, all self-taught. And then later in my career, I went on to acquire 15, 16 companies, all with no financial experience. So it was all on the job learning. And you're never alone in those situations. As a BD person, you are the tip of the spear. But you've got your finance team right there, the science team right there, the HR team right there. And I learned from all those people around me. It's a great job, actually, because you get to see every different part of the business and what matters to each of the people in those departments.

Jon - 00:12:54: Absolutely. And it's like, I would agree. It's kind of like you just have to – there's something amazing, too, also about like kind of balancing the stakeholder interests. And like in order to get a deal done, you kind of have to make sure everything is like perfectly balanced, especially for bigger deals. You're mentioning this is like a billion dollars. You can't have – it can't be just like a completely like zero-sum win-loss. You kind of have to make sure all stakeholders are happy. And also love. So likewise for me. I was like, you know, zero finance training and just kind of like learned it on the fly. And again, I went to Barnes and Noble. I was like, OK, corporate finance, let's figure this out. And just like flipping through the pages. And I still remember reading like my first 10K. I was like, oh, my God. Like this. Why are there so many pages? And why are there so many interchangeable names for everything? Like, you know, why do they call like operating expenses the same thing as like, you know, they basically just switch, you know, line items on the P&L. And that took me forever. It's like learning a second language, frankly. So now you're wrapping up your time at Elan. When did you know it was time to move on to your next role?

Doug - 00:14:05: Yeah, I mean, it was fairly transparent, actually. You know, I had agreed an exit with the company. Basically, once I'd sold the assets, there was nothing much else to do. There was no cash to go buy anything. So I kind of just had a pretty visible timeline there. And so I had plenty of time to figure out what I wanted to do. And so I ended up connecting with an ex-colleague from there who's on the medical side of things. And we said, OK, we can start our own company. You know, he can be the medical science guy, R&D guy, and then I'll be the deal guy. OK, let's do this. And we called it Alkenza. And we were mostly looking at inflammation in CNS. And so we managed to convince a bunch of companies to license us about a half a dozen different molecules, some early phase and some ready to go a bit later. And it was all contingent on us getting financing. But we had the deals signed and inked. And so I found a nice pipeline. So then I spent the next 18 months, knocking on the doors of venture capital firms and mostly in the Bay Area during a biotech bear market, it was pretty rough. And this is my first time really raising money because each of the other companies I've been to had money or someone else was raising the money. This is my first time trying to do it. And I've been through tons of savings and home equity lines and all this stuff to keep a business going. But eventually, I just couldn't get any more. So I had to hand all the assets back. But it was a good experience. It was my first time doing basic stuff like setting up a phone system, choosing the color in the office. And, of course, we ended up painting the walls ourselves and putting the pins up ourselves and all the basic grunt stuff you have to do. So I learned a lot about just the annoying little things that it takes to start a company and all of the paperwork and the things that detract from your time actually doing business development. But it was a good experience. It wasn't fun at the time. After about 12 months, it was really not fun. But I made a lot of connections in those VC firms and private equity firms and learned a lot from them about how not to pitch and what they're looking for. So all good lessons. I had plenty of practice at failing in that 18 months.

Jon - 00:16:50: And I think that is it. It's like the lessons you like the ones that sting the most and you feel firsthand are the ones that you just like carry with you to this day. At least that's for me. And, you know, it's kind of the thing where what I say is like. I can tell you how hot fire is, but you don't actually know until you actually touch fire once in your life. And so when someone says like, yeah, fundraising is very difficult. I understand that in concept, but then you go in a bear market. And I think this was like early 2000s and you're going out and knocking on doors. You then realize how hard it really can be. But also the timing.

Doug - 00:17:32: It's also timing. I mean, I've had that happen so many times where something macro happens and completely changes the funding environment. A war somewhere or something like that, or some Greece defaults on its debt, and suddenly everyone's scrambling. These have ripple effects elsewhere. And those things are definitely out of your control, for sure. 

Jon - 00:17:55: Absolutely and now that your startup kind of journey has, you know, you kind of went through it and now you've taken those lessons with you. Where do you see yourself going from there?

Doug - 00:18:04: Well, I wanted to still be in business development. And so looking around at that time, Forest Labs in New York was undoubtedly the best reputation as drug licenses. And they had a team that was really busy, had lots of deal flow. So I took a job at Forest. That was really, really cool, actually. I mean, working with Howard Solomon back then was, you know, and that team learned lots of lessons there. And they've had some really successful people like Bill Murray was head of marketing at the time. He went on to lead Karuna, who just got sold for 14 billion. So a really powerful, strong team. But they were always drinking from the firehose. Because of their reputation, everyone wanted to partner with them. And so they had so many incoming opportunities. That they found that they weren't being strategic. They were being opportunistic. Trying to pick the best of what was coming in rather than asking the question, what should we be looking at? So they brought me in to do a strategic review. And they were focused entirely on CNS at the time. And so I went off and did a whole strategic review. And trying to figure out what the most relevant therapeutic area would be for them to do diversify into. If they should diversify at all. Right? So we decided that inflammation was the way to go. Because it was a good overlap with CNS. But if things didn't work in CNS disorders, sometimes they have anti-inflammatory benefits in other disorders. You know, RA, OA, cancer, etc. So that was what we did. Found 40 or 50 opportunities and uh so i did my job and so um went to howard and uh and said um Actually, the head of R&D said, you know, I found these opportunities. Now we need to evaluate them. So I need access to a pharmacologist, a safety toxicologist, and there's some folks that dig into the weeds. It's pretty early stage things. That was definitely beyond my capabilities to do. And the head of R&D said, nope, you're not taking any of my people. Okay. So then I went to Howard and said, so apparently I can't have any resources. So can I hire a couple of people of my own or some consultants? No, I don't think that's going to work. Okay. And there was just all this bureaucracy and a little bit of infighting and territory grabbing. And, you know, I think that had been my first real experience of that. I've worked in these environments before that were somehow quite entrepreneurial and very focused on getting the deal done and not on that internal stuff. So I wasn't right. I couldn't stick around for that. So I found another opportunity. But on my last day there, somebody came up to me. I won't tell you who it was. Somebody came up to me and said, you know, Doug, if you just stick around for a few more years, you get used to how we do things around here. You're like, that's exactly why I'm leaving.

Jon - 00:21:21: Yeah, I don't know about that.

Doug - 00:21:22: Yeah. 

Jon - 00:21:23: I don't know about that.

Doug - 00:21:26: Back in the day.

Jon - 00:21:27: That's also super interesting. I think a lot of what's important too is knowing what you don't want and experiencing that and being like, we're going to avoid that. I think it's a Mungerism, Charlie Munger, where he's like, just always invert. And when you're inverting, instead of trying to pursue what you want, sometimes it's just avoiding what you don't want, which can lead you to the right places.

Doug - 00:21:49: I'm all for fast failure. Something isn't working. Let's stop spending any time on it.

Jon - 00:21:56: Absolutely. So now you've wrapped up your time at Forest. What was next for you?

Doug - 00:22:00: So that kind of bureaucracy made me realize I really didn't want to do that again. And wherever you look in Big Pharma, it's pretty bureaucratic. And so I moved into the generics space and spent about a decade doing that. So many people would describe it as going to the dark side. But this is a company that was scrappy. I had grown through some acquisitions. It's called Alpharma. It was headquartered in Copenhagen, but most of the operations were in the U.S. And they needed help. And I love solving problems. So basically, they had a really inefficient R&D process. They weren't generating anywhere near as many ANDA filings a year as they should be for a company their size. And so they got to a point where the pipeline was really weak. And that was and that was dragging down their valuation. And you can't just reboot the R&D pipeline overnight. It takes a long time and a lot of money. And so the only way to really prop it up quickly was to go and do some deals. So I went to India and spent a lot of time in India. I think I've been to India 18 or 19 times. And we signed two licensing deals with two different companies for 10 products. So we suddenly put 20 new products on the pipeline. And that was about $2. But we are getting that out of therological 2018. That's fantastic. Amazing. And it made Alfama very attractive as an acquisition. So in a fairly short space of time, we turned the company into something much more attractive and ended up combining with a company that had a really good geographic fit. Activists at the time didn't really have a U.S. Presence. And Alfama did. Alfama had a big Western Europe presence and activism was in Eastern Europe. So not really a lot of overlap. And the companies were about the same size financially as well. So it was about an $800 million. Acquisition, but I was on the sell side of that. And then I was fortunate enough to be kept on by the company. And I became head of M&A, an activist, and then had a whirlwind four years where we bought 15 companies in four years. So it's basically a company per quarter for four years. And I spent three weeks of every month in Eastern Europe or Asia. And we did a few deals in the US as well, but most of them were overseas, a lot of time in India. And we were the consolidators in the sector. We had plenty of access to capital, mostly debt, borrowing and then deleveraging very quickly, pulling out synergies. So that's a big part of the acquisition. The process I learned was get the synergies identified before you close, have the team before you close, immediately identify who the leadership is going to be and act quickly. I mean, I've seen other situations where companies have been very slow to really define what the integration is going to look like and everyone gets stress and worried about their job and all that. So just make those decisions quickly and move on. So we took that company out into about 70 countries over the time I was there. And I made about 15 acquisitions. I learned, again, I learned a heck of a lot on the job. I hadn't led an acquisition before then. I had done lots of R&D deals, co-promotion deals, co-development deals. I helped to sell a company. We had no one in the company that was responsible for M&A other than me. So we were using a lot of bankers, investment bankers, to help. And I just was the sponge. I just learned from all those bankers. Just tell me. Just tell me what I should be doing and it was really, really a great lesson. The whole experience there was fantastic.

Jon - 00:26:17:  This is amazing. There's so many directions I kind of want to go with this. And just really quickly, too, I early days, I was talking to a lot of bankers as well, not having that traditional, like, I don't know if like traditional training, but like, I guess in finance, like a lot of people take that route. You either go to management consulting or iBanking, cut your teeth at Goldman, and then you go on to do your next thing. So I did the same thing. I'm like, well, talking to these bankers, why don't I just like soak it up? Like, I might as well. It's like, you know, I'm already talking to you. But at Alpharma, really quickly, as you are going out and finding these licensing opportunities, the first question I have is like, How do you identify what you ultimately want to license and what makes for a good licensing deal, in your opinion?

Doug - 00:27:01: Well, at that time, it was really about validating capabilities. It's easy to say that you have X product or Y product. In development. But what does that really mean? What have you generated in terms of data? What capabilities do you have to test it and manufacture it? We would need these partners to go through that entire process and manufacture it in India and have a supply chain there. So I spent a lot of time there visiting many, many companies. And it's a process of elimination to some extent. So educating yourself about the entire landscape, seeing where people do things badly and who does things well, and picking the right partners, not just on the basis of what the products were in the pipeline, which is very important, but also their ability to deliver as well at the end of the day.

Jon - 00:27:56: Absolutely. And you mentioned that during your kind of your inorganic acquisition strategy, there's a lot of debt financing. How are these licensing deals financed when you're at Alpharma? Were you also doing a fundraising type situation? Or was Alpharma kind of like a Merck DuPont kind of fund?

Doug - 00:28:16: Yeah, I mean, it was upfront and milestones type structures. So we paid upfront. And of course, the dozens themselves increased our equity values. That was a way to raise the equity to pay for the markets. So, yeah, we spread it over time, basically.

Jon - 00:28:33: Cool. Very cool. And before you kind of changed seats at the table to the acquisition side, you were going through the sell side. Can you talk a little about that experience of being on the sell side and being on that side of the table? What was it like for you? 

Doug - 00:28:47: It was quite repetitive, actually. You're mostly just giving management presentations over and over and over. And then so I was just doing that with many other members of the team as well, you know, from each department. And then managing minutiae. I mean, I was in BD. So when requests for information came in, you've got to scramble to find it from all across the company. And I think we were in 23 countries or something like that. So, again, business development is just a great way to learn about business and, I mean, I'm an activist over time. We took the company to about 140 different entities. So it was massively complex. And we had internal trading companies and tax structures and all this stuff. And it's just a terrific way to learn. You can't really learn this stuff from a textbook. You know, you've already got to experience it and learn from all the people around you. You know, so, yeah, that was a lot. A lot of fun. Both those opportunities were a lot of fun.

Jon - 00:29:52: Very cool.

Outro - 00:29:55: That's all for this episode of the Biotech Startups podcast. We hope you enjoyed our conversation with Doug Drysdale. Tune in for part three of our conversation to learn more about his journey. If you enjoyed this episode, please subscribe, leave us a review and share it with your friends. Thanks for listening and we look forward to having you join us again on the Biotech Startups podcast for part three of Doug's story. The Biotech Startups Podcast is produced by Excedr. Don't want to miss an episode? Search for the Biotech Startups Podcast wherever you get your podcasts and click subscribe. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website, www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service or company in the podcast is an endorsement by Excedr or its guests.