First in Human Episode #12 featuring Vijay Karwal

For episode 12, we catch up with Vijay Karwal, CFO of Affamed Therapeutics. Find out where there is still a preference for stories that are de risked from the perspective of being closer to revenue and closer to market. First In Human is a biotech-focused podcast that interviews industry leaders and investors to learn about their journey to in-human clinical trials. Presented by Vial, a tech-enabled CRO, hosted by Simon Burns, CEO & Co-Founder & guest host Co-Founder, Andrew Brackin. Episodes launch weekly on Tuesdays & Thursdays.

Simon Burns: Thank you for joining us on First in Human, Vijay.

Vijay Karwal: Hi, Simon, pleasure to be here.

Simon Burns: I’m Simon, co-founder and CEO Vial and pleased to be here today with Vijay Karwal, CFO of AffaMed Therapeutics. Vijay, tell us about your background. You’ve had a very expansive global career that’s led you to now be CFO of AffaMed. Take us on the journey, how did you get to where you are? 

Vijay Karwal: Thank you. And, you’re right, I’ve been fortunate to have enjoyed a career that’s perhaps more global than most. I’m originally from Europe, I’m a native of the Netherlands, I was educated there and in the United Kingdom. I Started my career in investment banking the United States. I spent the first half of my career there, principally, in New York City.

And early on in my career, started specializing in covering the healthcare industry as a banker. My background is in education, is in finance. I did not have any scientific background or, background in medicine. But, I had an opportunity to start working with the industry and really built a passion that has carried me the rest of my career.

I came to Asia about 14 ears ago, now, after having spent about a dozen year in the States. I continued my journey in healthcare in finance here. You’ll find that many professionals who are in service industries, be they bankers, consultants, executive search or lawyers; many of them harbor a desire to move from an advisory into to a principal position and really have an opportunity to take responsibility for driving and, building a business. And I fall into that camp, and had been looking for some time for opportunities to apply myself in that way.

I had a first go at that a few years ago when I spent a couple of years in healthcare services, working with a well-known American company called DaVita, a kidney care company, helping them build their presence in Asia. But then came back to banking for a few years as head of healthcare in Asia for a global investment bank headquartered in Japan, called Nomura.

 I was very intrigued by the emergence of what is truly a global scale biotech ecosystem that has come principally out of China. But there are important dynamics taking place in other markets in Japan, in Korea, in Taiwan, increasingly in Singapore, as well. I felt that a period back in finance would, be a great perch from which I’d be able to explore what was happening there and who the principal players were.

As part of that effort, I found myself being recruited by one of my clients which in Asia is the largest dedicated healthcare investor, called CBC Group. CBC stands for C-Bridge Capital. They invited me to join the firm and the fund as an operating partner. In that capacity, I was appointed CFO of AffaMed Therapeutics, which I’m sure we’ll speak more about momentarily. And I also support value creation, and deal sourcing and the fund more broadly. But my principal responsibility is in helping build out AffaMed.

Simon Burns: It’s been an exciting 2022 from AffaMed. What are you most proud of and give us a sense of what you’re most excited about for 2023.

Vijay Karwal: Thank you. So, first of all, by way of brief introduction. AffaMed is a company that was incubated and built by CBC in partnership with a number of other leading healthcare advisers in Asia to serve as a platform to in-source and develop innovation and different shaded therapeutics targeting two major disease areas. Ophthalmology and CNS or as we sometimes more colloquially say, diseases of the eye and the brain.

We do that with the objective of ultimately building an integrated pharmaceutical company in, China and Asia with capabilities from discovery to development to re-commercialization. But we are also very conscious that being based in this part of the world comes with a number of potential strategic advantages, in terms of the size of the talent pool, the cost of doing business here from a clinical development perspective, as Vial would be well aware, obviously you have an addressable and a target patient pool that is unmatched in size.

All of that happening within an environment that is becoming increasingly integrated from a regular a regulatory and business practice perspective, with the rest of the world. We are also very keen to leverage those benefits embedded from being here and being able to apply our R&D capabilities to advance compounds in development for global markets, as well. Although we may not have an ambition to be fully integrated outside of Asia.

Now, 2022 was arguably one of the most challenging years that the life sciences industry has faced in a very long time and probably among the most difficult years the industry has faced, ever. The confluence of the pandemic, the impact on the financial markets and the access to funding all create a very challenging environment.

But within that, we’ve been able to continue to advance our business in a number of important capacities. I think the principal areas are we’ve been able to continue and advance the number of studies that we had already initiated. We’ve continued filing new regulatory submissions and initiated new trials and we’ve also [00:05:00] made some some good starts in initiating our commercial activities in a number of the markets in Asia, as well. So we’re steadily progressing, albeit in a tough environment. 

We, think of our business around three principal value drivers. The first one is a number of near term opportunities in neurology, in terms of close to market. One achievement that I highlight there is our advancements in developing digital therapeutics and among others, we are initiating as we speak, what will essentially serve as a proof of concept trial for a first treatment for patients who suffer from cognitive impairment after a stroke. Which is an impairment that currently has no solution. We have identified digital interaction, evidence based as a potentially very useful way to address such impairments.

The second value driver we are focusing on in our business is an integrated package of solutions for cataract surgery in our ophthalmology business. Cataract is a very significant unmet need in China compared to OECD averages China only performs about 1/6th of the surgeries that you might see in developed markets. And that will lead for some time to come, to very significant double-digit growth. We may see as many as 10 million cataract surgeries a year by the end of this decade and we have a suite of both pharmaceutical and device interventions to treat that.

In devices, we have what we think are some of the most advance efficacious lens implants, for use in surgery. We also have a drug that is used to optimize post-surgical care by minimizing the risk of inflammation and pain for patients after surgery. For both of these programs, we anticipate starting registrational trials or bridging trials really, as they are better described, in China next year. We have initiated, during this past year already, real world evidence studies both of these.

Our third principal value driver is, what we call innovation in, retinal disease. Where we have two priority programs. One is a next generation anti-VEGF for the treatment of neovascular age-related macular degeneration and other retinal diseases. And that’s a program for which we are currently in a phase one study albeit one that’s designed to hopefully generate some efficacy signals as well, in the United States. 

That’s our first US trial, which we initiated during this past year. We are looking to initiate participate with our partner in a global phase three trial for a program that is a molecule that promises to be potentially the first compound to deliver improvement in vision for patients suffering from intermediate dry AMD. We’re very excited about that opportunity as well. It’s a disease area that is attracting significant attention in the market right now, and we look forward to participating in that as well.

 Those are some highlights on the development side. As I mentioned, we have initiated commercial operations in some of the greater China markets, meaning Hong Kong, Macau, Taiwan we are preparing to enter Singapore and southeast Asia. we anticipate potentially being able to launch our first product through our own commercial organization, in our largest target market, which is mainland China as possibly as early as the end of this coming year. So, all of that paints a picture of activity and advancement that we’ve been very pleased to be able to sustain in, this difficult environment.

Simon Burns: Congratulations again on AM uh, 172’s first patient in that’s very exciting. Let’s transition to talk about financing. You came from a banking background you, think a lot about markets. We’d love to get a sense of your series B, 170 million, lessons learned for early stage biotech founders, and then also, a commentary on the market today. If you were fast-forwarding that fundraising to today, what advice would you have for biotech founders in the more difficult climate right now?

Vijay Karwal: If we look back at our series B, I’d love to say that it was all done with the benefit of foresight, but, the reality is that we have found ourselves being fortunate by doing what was a large raise. We raised 173 million dollars in our series B which was one of the largest fundraising certainly in China and possibly globally among biotechs during last year. That quantum of funding more significant in retrospect than we might have appreciated at the time given that the funding window effectively closed or was significantly limited not too long thereafter. We closed this round in the second quarter of 2021 literally on the cusp of when the downturn in the market really started taking effect. 

That has provided us with some three years of cash runway, at least based on our business plan at that time. And that of course puts us in a relatively comfortable position, relative to many of our peers and we’re very conscious of that. Having said that, when looking at the market today, unfortunately the reality is that one has to factor in the probability that this environment may continue for some time to come. And I think particularly. For later-stage companies that are [00:10:00] relatively close to IPO, the appetite among investors to take new risks is more limited, valuation to be a bit higher.

There tends to be a greater reliance on an identifiable IPO event as a benchmark against which to set valuation. So I think for, companies like ours and to the extent that could still take the liberty to, suggest or advised peers is that it’s important to find ways obviously of extending the existing runway as long as you can. 

In practice that means we have to prioritize. Companies today are realizing that they cannot do, perhaps, everything and develop everything that they have in their portfolio at full speed. You have to be conscious that perhaps you should not be doing everything alone anymore. I think clearly the benefit of partnering perhaps out-licensing maybe earlier than it was initially planned or anticipated outweighs the financial risk of burning cash too quickly.

Of course, we are in an environment where inflation is driving up interest rates and cost of capital. It really results in a fundamental reset of risk and return in the eyes of investors. What that means is that you not only need to adjust your business plan to provide perhaps a better risk profile fewer programs perhaps focus more on later stage programs. But it also means that in order to provide better return outlook you need to be conscious of valuation.

You need to be conscious perhaps of, structural features and how you put your deal together, to offer more protection. To investors convertible structures obviously are seeing a lot more use the use of warrants to provide upside at a future date but still managing valuation. At the entry point all of these instruments become important.

I will say that there are still important geographical differences. The nature of the investment environment I face here, being based in Hong Kong and Asia, is distinct from what might be taking place in North America or Europe. I think certainly in the US and Europe, the focus still continues to be more on truly breakthrough innovation and a continued appetite for early stage, but genuinely different and innovative.

I think in Asia, maybe also because the level of scientific experience among the investor community is not as deep, there is still a preference for stories that are de-risked from the perspective of being closer to revenue and closer to market. Thereby have an ability to hopefully just generate internal cash flow to reduce the independence on external funding. There are some different dynamics there, but it’s a complicated environment. And, I think we all need to prepare for the fact that it may go on for another, one to two years. 

Simon Burns: I think it’s good point to segue to talking about the Chinese biotech community. You’re, close, you see it hands on. Where do you think it shifts over the next five years? The last five years we’ve seen now host truly global Chinese biotech companies take clinical programs forward in a way that appears they’ve been more focused on the domestic market. Where do you think that takes us in five years’ time?

Vijay Karwal: I feel fortunate that I got involved in deal making in Asian healthcare and Chinese healthcare a long time ago. it’s been almost 14 years now. I’ve seen this evolution from an industry that frankly used to be domestic in its orientation and frankly largely generic into what is now on a path to I think, becoming a force in global innovation.

What, is interesting was that there was a long time where people thought that China was actually gonna go the way of India and leverage the ability to quickly re-engineer and file generic copies innovative drugs and become a part of the global supply chain that regard.

What’s been fascinating, and there’re a variety of reasons for that, including a fantastic human talent pool often trained with professional experience developed in the United States. But saw an opportunity to come back home and build, real innovation. And I think even the innovative paths started perhaps with a little bit of a “me too” and a “me better attitude.”

Many people will share anecdotes about how there are 60, 70+ PD-1s, or PDL-1s in clinical development in China and clearly not each of them addresses a particular unmet need anymore. There is now a very clear awareness that the next step in this evolution has to be to develop truly unique innovative global IP similar to other parts of the world. There’s tremendous interest in gene and cell therapy and other innovative approaches.

So many people have observed that from a number of patent filings in China is now second only to the US. It is logical to assume that this path ultimately will lead, over time, to the emergence of truly global biotechs out of China. I don’t think you’ll necessarily see the next Pfizer or J&J or Lilly coming out of China, in terms of building truly globally [00:15:00] and marketing oriented platforms.

But look, could a next big biotech ultimately emerge out of China operating in a truly global basis and on truly global standards? Because many people will always continue to raise question marks about IP protection and other compliance aspects, I think that is something that Chinese business leaders are keenly aware of, and absolutely want to build world-class organizations in that regard. I do believe that is a path that we will continue to see developed.

Simon Burns: One last question for you, Vijay. We think a lot about clinical trials, here at Vial, of course, we think a lot about the application of technology in clinical trials. Where you see room for clinical trials having a big impact in terms of driving down inefficiencies?

Vijay Karwal: Companies like Vial who are building tech-enabled solutions in clinical trials offer a particularly interesting opportunity for China to address gaps or obstacles on a path to building a clinical trial capability and capacity in the country that’s well-matched not only to the amount of R&D work that’s going on but also helps the industry generate data that is truly usable and applicable for an industry that aspires to be on the global path we just spoke about.

Aspects of data management, integrity, tracking, traceability, China is shifting to an e-filing process where the large stacks of paper that we use to generate are luckily disappearing. So all, of that demands tech-enabled solutions to be able to achieve all of these aspects at a greater speed, greater cost, greater quality. Make it more scalable in the process. 

As almost as a competitive warning to you: do not underestimate the resourcefulness and the dynamism that exists among entrepreneurs in China itself. Clearly, there is tremendous interest in the country in building solutions in that regard. We’ve spoken about China as a source of R&D and innovation, but when we look at the ecosystem that supports pharmaceutical and therapeutic development from a service perspective it’s not inconceivable. 

We’ve seen the emergence of companies like WuXi AppTec on the CMO and CDMO side, that when it comes to clinical trial management and development, obviously is the number of well know CROs coming out of China as well. Look at the target meds of this world. This is an area, too, where you will see China evolving. Not just in the actual therapeutic innovation itself but in the whole ecosystem that supports R&D as well.

Simon Burns: Great. Well, with that, thank you for joining us on First in Human.

Vijay Karwal: My great pleasure, thanks so much.

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