Science Forward: Indie Science

GoodBadScience talks to Dr Ethan Perlstein, Founder & CEO of Perlstein Labs.

Dr Ethan Perlstein founded Perlstein Labs to investigate rare diseases, and to find novel therapies for them. GoodBadScience caught up with Dr Perlstein to talk about Independent Science, launching a biotech startup, entrepreneurship in science, and the future of the biotech economy.

What follows is an edited summary of our discussion. You can watch the whole interview here.

GoodBadScience: Tell us a little bit your research. What scientific questions are you interested in?

Ethan Perlstein: Perlstein Labs is interested in orphan disease drug discovery: orphan diseases are also referred to as rare diseases — these are defined as illnesses that afflict 200,000 or fewer patients in the United States, with a similar threshold in Europe. These diseases have traditionally been neglected by both Academia and Pharma for the same reason — basically there’s just not enough money in it, either in terms of government research dollars or market value to attract pharmaceuticals to the space.

We’re trying to approach this problem from a different angle in a way that we hope that is both lean and capital efficient, but also scientifically valid and likely to generate more effective drugs.

GoodBadScience: Perlstein Labs has somewhat of a new and unique business structure. Can you tell us a little bit about how Perlstein Labs operates?

Ethan Perlstein: Because we’re working on the rare disease space, I realized that there was an opportunity to do something a little bit different here. In the early stage of company formation, I spent a lot of time with my brother, who is also an entrepreneur in a different space — he gave me the idea of a thing called a B-corp, or Benefit Corp. This is a different form of incorporation than maybe most people are familiar with; there’s only about a thousand in the world, with most of them in United States and some in Canada as well. Basically, it allows a company to be for-profit, but with a constitutional balance that shares the profitability with a social and environmental mission. I think it’s appropriate for the space we’re operating in.

Other than our organization’s social mission, we’re operating on the ground just like many other biotech start-ups. Although, I think culturally speaking, we have more open-science indie flair to it! We’re one of the first biotech B-corps out there — I hope it starts a trend.

GoodBadScience: You’re one of the first, if not the first, to try this model. How did you attract start-up funding to actually get such a novel idea off the ground?

Ethan Perlstein: I realized really early on that VCs weren’t going to be interested; most of them are just not interested in the really early stage stuff. That left angel investors, which is a very large category. These are people who have registered with the SEC as having over a certain amount of annual income, and so are allowed to invest freely in premarket companies. I knew that somehow we would have to find someone within this large body of angel investors. I had mostly ruled out grants and other ‘non-diluted’ funding from SBIR/STTR, because the grant cycle is just so long and the pay lines — the probability of getting funded — is not terribly high.

As I made the journey out of Academia into this new world, I used Twitter as a global support group, but it also allowed me the ability to network with people in a very targeted way; you can follow conversations within very specific communities, and begin to chime in when appropriate. I knew a lot of the people in the orphan disease space that were also accredited investors, and figured that those might also be the likely candidates for seed investors because they’ve got money, and they also have a personal interest in a rare disease. I think all the investors that we have in our seed round fit that category: where they have some kind of direct, personal connection to a rare disease.

I think that the fundraising part has been the most surprising, but also most gratifying. Although I only started fundraising at the beginning of this year, we’re closing out the seed round in a couple of weeks — that is definitely way faster than the time it would take to get an SBIR or some other seed grant funding that many people rely on.

Fundraising is a very difficult process, but it also incredibly rewarding. My advice for people who are looking for seed funding is that angel investors are the place to go. You need to realize it’s an 8-million person community, so you have to be really targeted about who are the kinds of people who are going to be seriously interested in funding something that you’re doing. It’s not just the fact that they have money — they also have some kind of pretty substantial connection to the topic your company will be investing in.

GoodBadScience: Your investors, even though they’re already advocates for curing the diseases you’re studying — eventually they’re going to want to see a return on their investment. Could you tell us a little bit about how you plan to commercialize any discoveries you make in this lab? Are you going to be developing them yourself or are you looking to create more of a licensing model like Academia tends to?

Ethan Perlstein: We want to try to do a hybrid model — in a lot of ways we’re already trying to hybridize the best elements of Academia and Industry. For us, the value proposition is a small molecule drug candidate. We’re a hybrid model in the sense that we’re going to take these small molecules that we discover and file patents for them. Because we’re using small model organisms to do screens, and screens can be done really quickly, we think we’re going to have an excess of candidates that we can’t develop internally. We will either develop individual molecules internally [after raising more money to do that], or because we think that we’re actually going to generate an excess of candidates, we’ll out-license to pharmaceutical partners who could take those candidates into clinical development with us.

GoodBadScience: You are well-known for blogging pretty extensively about the state of the current job market for science PhDs. Do you think that this indie start-up model is something that’s widely applicable — or is it something that will only really be relevant for a few people like yourself with a very unique set of skills?

Ethan Perlstein: If you listen to my critics (or even my haters!), I’m just some freak out there who is an n of one. I don’t believe that. Do I think it’s completely generalized at this stage? No. I think there are certain personality types, or certain personal circumstances, or certain scientific research areas, and it’s a confluence of all those factors that is most likely succeed within an indie start-up model.

I think “indie” can be better defined culturally as opposed to as a business model per se. We’re getting investors and they’re giving us money in exchange for shares or equity — that’s pretty traditional. But I think the types of investors we have is very different to the kinds of investors you would see in other kinds of biotech start-ups. It is in practice and in culture where I think the indie part comes out. There are definitely already other indie scientists out there that I have come across, but not much in the biomedical space. You tend to see them more in ecology and other sorts of non-medical spaces, but they certainly exist.

I’m hopeful that other people will start experimenting and that they put their own individual stamp on what they call “indie”, and then eventually we will probably see some kind of consensus emerge around best practices. But in this early stage, I think it’s a good thing to see all ideas that people come up with.

GoodBadScience: What would your advice be for a recent graduate, or someone who’s stuck in an endless postdoc, and wants to try going the indie science route? What kind of key skills should they be developing? What kind of support is out there for people trying to do something on their own for the first time?

Ethan Perlstein: I think it could start really simple. There’s a lot of folks, a part of generation “postdocalypse” who have not worked outside of Academia, and may not even have an understanding of what options are out there.

What worked for me was that I had a part time consulting gig that helped me land on my feet and helped me deploy some of the skills that I had acquired. It made me feel good about myself after the rejection of Academia which really feels like kind of intellectual rejection of you. There’s really no other way to spin it — it was nice to be able to work on something that was different than I’ve done before, but where people valued my effort and paid me to do it! Then of course, I was also lucky to do this in the context of a young start-up [Experiment.com] where I got to see company formation in action — I saw a group go from two co-founders to their core team, to closing out their first round, to trying to maintain their week-over-week metrics. That was really invaluable to really just see with my own eyes how another startup company was doing this.

I guess what I would say is to start small, and I think consulting is catch-all phrase and there’s a lot of ways you can do that. Recently, I’ve heard people talk about micro-jobs. Perlstein Labs uses a virtual lab manager called HappiLabs, and they’ve been talking recently about creating micro-jobs where trainees (post-docs, residents, etc.) work on very specific focused projects, to give them to get a taste for a timetable, deliverables, project management, stuff like that. I think there are definitely examples and you can find a lot of this on Twitter — folks who are putting out not exactly recipes, but their stories of how they found their consulting gig. People just need to do a little bit of digging, but I think they’ll immediately find there’s a broad community of folks who are trying to do this.

GoodBadScience: Perlstein Labs is located in the QB3 incubator — what kind of support has that been able to provide you in lowering the barriers to create your own business? What could other cities learn from what is happening up in the Bay Area with the various bio incubators?

Ethan Perlstein: There are QB3 incubators across the Bay Area including Berkeley and the East Bay; that has definitely opened up possibilities for us to be capital efficient. For us, that means incubators, the ability to rent per bench, rent per office, or per desk. This definitely keeps down our burn-rate because we don’t have to worry about getting our own 5,000 square foot or so facility or lab. We have basically one long bench — five of us work in a room, which is perfect for us to prove our concept. Being in QB3 and being able to incubate has been invaluable to what we’re doing, and allowed us to raise an initial $2 million investment round instead of having to raise $10 million or $15 million.

We also save quite a bit in terms of having access to communal equipment and other aspects of communal science here, meaning that we don’t have to buy things we otherwise would for a large, standalone lab. The other piece I would say is that not just the incubation facility itself, but the fact that we could avail ourselves of sourcing through QB3’s partners. We use Science Exchange, which is an online marketplace for matching people who need experiments done, with facilities that can supply those experiments. We’ve used them to contract with core facilities to do some work for us, so we can keep things running along.

What can other cities do to emulate this? That’s a great question. I think what’s interesting about QB3 is that the facility where we’re at is the sixth in the succession of incubators that they started years ago. It’s clear that they learned from each generation. For other cities, the recipes are there for seeing how you could setup an incubator, what services they should provide, price points, and stuff like that.

Boston is already doing this, and San Diego as well. When it comes to those cities that are smaller bioclusters like Seattle, Chicago, LA — what can these cities learn? That’s really going to be key. All of them have great institutions of higher learning. All of them are producing professionally trained life scientists. Is there a critical mass? I don’t know. You can ask why there aren’t more biotech VC dollars flowing to these other towns as well. I think there’s a lot of things that these other cities face in terms of challenges. The big bioclusters are already doing what’s happening here [in San Francisco]. I think ultimately the model has to be able to be exported to other cities.

GoodBadScience: One final question, where can we hope to see Perlstein Labs in 5 to 10 years’ time? What’s your ultimate goal?

Ethan Perlstein: People talk about the 100-year company, and although it’s kind of grandiose for me to be saying this in such an early stage of company formation, that concept resonates with me. I don’t want to just create a company that I flip in a couple of years; that’s partly why I put my family name on it. I think that’s a signal, an intentional signal I want to send, that I want to build something of value that my team is going to make possible. It really is all about the team.

I think the long term goal for us is to eventually go down the IPO path as opposed to the merger-acquisition path. It would be foolish of me to predict too much into the future. But that is the long term vision, to build a company of value.

The fact is, we’re trying to build a platform that could address potentially thousands of diseases — that’s going to keep us occupied for some amount of time. Most other biotech start-ups focus around one asset or set of candidates; either those succeed, or they flail and the game is over. For us, there’s a huge space of orphan diseases — we’re trying to build a platform to address this. That already is putting us in the five- to ten-year time frame.

Thank you so much for having me and I hope this generates a discussion. Anyone who wants to follow up they can find me on Twitter: @eperlste.