Say you want to be a biotech VC but are blessed with merely chutzpah and a B. Com. What do you do? I’ll give you the one, all-purpose question guaranteed to provoke a discussion and distract people from discovering your meager knowledge of the subject:
What is the mechanism of action?
Trust me, while the answer often doesn’t matter (and may not even be known), the question is a winner.
[Update] A VC friend writes to say that physical mannerisms are important too:
Nodding works well. Every now and then you should throw in a scowl to keep entrepreneurs guessing.
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you don’t even know how funny that is
Sure…it CAN be a bluffers question. And if they ask it with no followups and nod after 60 seconds, they have no idea of what they are doing.
But having (successfully) invested in biotech/drug stocks for 20 years, I also know that I have never found a more useful predictor of clinical success than a known mechanism of action that fits with the current state of the art understanding of disease etiology.
Companies that say “our drug works, and we don’t know why” always point to discoveries like taxol. There are exceptions…but most of the time unknown mechanisms of actions produce drugs that are inefficacious or surprisingly toxic.
Equally, when a company talks about a mechanism of action that has been discredited by the broader scientific community it is a big red flag. Trying to cure cancer by immunotherapy using a carbohydrate trigger was interesting in 1988…but by the mid-90s most immunologists recognized the immune response to a carbo stimulus would be too weak to deal with larger solid tumours.
If you didn’t know that you owned Biomira at $20…if you did know it, you could have made a lot of dough shorting it. It now trades at $1. And all because of its mechanism of action – management, trial design, and cash have all been fine.