Immortality in the briefcase
How Billionaires Invest in Life Extension
Danil Sedlov, Forbes, 10.12.2018
Today, the longevity industry is associated not with alchemy, but with revolutionary biotechnologies, which attracts large investors, ensuring the rapid growth of the market
People in developed countries are living longer and longer. By 2050, the world's population over 60 years old may exceed 2 billion. Longevity is not only new drugs that prolong life, but also goods and services for older people. The size of the longevity economy is estimated at trillions of dollars. What opportunities are open to investors?
Eternal youth
"I am absolutely sure that the first people who will live more than 150 years are already among us. And it's just amazing. This will change the whole world," British billionaire Jim Mellon, founder of an investment company with the talking name of Juvenescence ("Youth"), reasoned in an interview with the scientific publication Neo Life. The 61-year-old Scot once earned money on privatization in Russia – in the 1990s, his Regent Pacific fund bought vouchers from the population, as well as on uranium mining in Africa and commercial real estate in Germany. In recent years, the financier has been at the forefront of a new direction – investments in biotechnologies aimed at prolonging life. In 2017, Mellon co-authored the book "Youth: Investing in the Age of Longevity." The billionaire is convinced that longevity will radically change the lifestyle of a person and the entire world economy, and this already opens up tremendous opportunities for investors today: "If you remember the mania that we have experienced over the past two or three years - cryptocurrencies and investments in medicinal marijuana, then the very fact that the development of the science of longevity is spurred by universal inspired by the idea of an ultra-long life, it can lead to a major boom in the stock market."
Mellon himself is bringing this boom closer as far as possible: Since its foundation in October 2016, Juvenescence has already raised $63 million from international investors and funded five startups. Among them, for example, the California developer of anti-aging drugs and technologies AgeX Theraupetics; the Maryland company Insilico Medicine, which uses artificial intelligence to create new drugs and conduct research in the field of life extension, and the LyGenesis project, born in the laboratories of the University of Pittsburgh, working on organ regeneration technology. In addition, together with Insilico Medicine, Mellon's company launched a startup called Juvenescence AI with an equally ambitious goal – to create a senolytic drug that will help the human body get rid of cells that have stopped dividing and pose a threat to the entire system. The billionaire's contribution to Juvenescence, according to Crunchbase, is $12.3 million, while Mellon separately financed AgeX Theraupetics for $ 10 million. He works closely with the Buck Institute for Research on Aging in California, with which he has concluded several deals (their amount is not disclosed), and also preaches new approaches to life extension in every possible way by his example.
"I take mini-aspirin for three weeks out of four, and I take 500 mg of metformin (a drug to reduce blood glucose levels) daily – gradually, throughout the day. You will not notice the visible effect of this until you are 90 or 100 years old. So for now, I just believe that it helps," the businessman admitted.
Alchemists from California
Jim Mellon, like other players in the longevity market, no longer looks like a follower of the glorious traditions of the past, when the powerful of this world spent hundredweight of gold in search of the philosopher's stone and the elixir of life. It is worth remembering at least the Emperor Rudolf II and the ruler of Saxony August the Strong, who, according to legend, flooded the streets of Prague and Dresden with alchemists from all over the world.
Today, the longevity industry is associated with revolutionary biotechnologies, which attracts large investors, ensuring the rapid growth of the market. It covers many segments of the medical and pharmaceutical market, which are of interest to all biotech-oriented players. "Companies working in the field of longevity, or longevity, as it is called all over the world, are working not only to prolong youth – they are finding solutions for the treatment of age–related diseases, including Alzheimer's syndrome and other diseases of the central nervous system, diseases of joints and vision, and much more," explains the managing partner of the venture company "RMI Partners" Maxim Gorbachev.
According to CB Insights, in 2018, startups dealing with life extension issues raised almost $800 million in total. This is a record for the industry. A year earlier, biotech companies in this area were funded by about $300 million, and in 2013 - by $70 million at most. CB Insights experts attribute this year's unusually high figure to two major deals: a successful round of investments in the biomedical company Samumed, which raised $438 million in August, and the financing of the Celularity project for $210 million in February.
The American company Samumed, founded by Turkish engineer and former poker player Osman Kibar, is estimated by the market at $12 billion – it is one of the most expensive startups in the world. She focuses on the development of medicines for diseases of the elderly, including arthritis, baldness, Alzheimer's disease, and conducts research in the field of anti-aging therapy. Samumed techniques are built around the impact on the Wnt signaling pathway – a key process in the regulation of the body's cells. The project team believes that ultimately its research will help in the fight against aging.
Not only the largest venture fund Vickers Venture Group, which is well-known after investing $ 1.3 billion in the Chinese search engine Baidu, believed in the wonderful possibilities of this biotechnology, but also, according to the PitchBook database, the Russian Direct Investment Fund (RDIF). Among the investors are a group of family offices from the Starling Gorup holding and the IKEA investment fund. At the end of October, Samumed partially managed to justify its astronomical estimate of $12 billion – the startup reported successful clinical trials of the flagship drug SM04690, which promotes the regeneration of cartilage tissue.
The second favorite of venture capitalists, Celularity, founded in 2016, has high hopes for placental stem cells, which it plans to use in the treatment of autoimmune and degenerative diseases of the central nervous system. The startup has already raised a total of $290 million, including from investment companies Heritage Group, Celgene and Genting Berhard.
Silver shares
According to CB Insights, the most notable players in the longevity market, in addition to Jim Mellon, are Laura Deming's The Longevity Fund and Kizoo Technology Ventures. The longevity industry as a whole remains the domain of venture capitalists – there are very few instruments traded on the market, which limits opportunities for investors with more conservative strategies, says Yaroslav Podsevatkin, partner, head of Aton trading.
In the future, the situation may change – successful startups will start entering the stock market. "Now almost all billionaires from Silicon Valley are investing in life extension in one way or another, and perhaps in 10-15 years we will see the first results. So after a while it will be possible to invest in something," Podsevatkin predicts.
One of the first participants in the longevity market who managed to conduct a successful IPO is the California startup Unity Biotechnology, founded by molecular biology specialist Nathaniel David. Unity is working on drugs that kill the so-called senescent (withering) cells, the accumulation of which causes old age. The main trump card of the company is the successful trials of the drug UBX0101, designed to combat arthritis: the tool allowed to re–grow cartilage tissue in the laboratory. By the end of 2019, Unity hopes to start testing two more drugs.
Following the results of the placement of shares on the NASDAQ stock exchange in New York in May 2018, the company raised $85 million and received an estimate of $712 million, before the transaction it was financed by venture funds for more than $ 200 million. Among its investors are The Longevity Fund and financial giant Fidelity. At the end of October, the shares of the project, however, are trading about 26% below the placement price.
The securities of this company are not the only opportunity to invest in longevity. The beneficiary companies of increasing the life span and aging of mankind form the so-called silver economy, which is disproportionately larger than a narrow segment of biotech startups. "Longevity as an investment idea is not only about pharmaceuticals and future great discoveries. People in rich countries, and in many not so rich countries, are living longer and longer. The elderly need special services and goods, they have their own approach to consumption and accumulation, they make their own demands on politicians. They buy other products and cosmetics, settle in other houses and go on other trips, not like 30-year–olds," explains Pavel Maly, partner at Matrix Capital.
In 2016, researchers from the American non-profit organizations Oxford Economics and AARP in their report The Longevity Economy estimated the size of the longevity economy in the United States alone at $7.1 trillion. In 2032, this figure, according to their forecasts, should almost double, amounting to $ 13.5 trillion. According to the Swiss bank Lombard Odier, in developed countries, the number of representatives of the age group "over 65" (baby boomers) is growing three times faster than the younger generations. By 2050, the total population over the age of 60 may exceed 2 billion people. At the same time, older people are often much richer than younger citizens, because they found the era of high interest rates and growing financial markets, which allowed them to save for a decent pension.
Unlike biotech projects working to prolong life, companies belonging to the "silver economy" are widely represented on the stock market. They include both issuers from the pharmaceutical sector, as well as manufacturers of home medical equipment and rehabilitation products, consumer goods, and food. In the American market, for example, the exchange-traded fund The Global X Longevity Thematic ETF is traded, which invests in 99 public companies belonging to the "silver economy". The ten largest investments of this fund (an average of 3%) are distributed among issuers from pharmaceuticals and healthcare, such as pacemaker manufacturer Boston Scientific Corporation, Alzheimer's drug developer Biogen, implant manufacturer Stryker, etc. Since the launch of trading in May 2016, the shares of this ETF have risen by 26% to $19.45 (at the close of the session on October 30), which, however, is comparable to the dynamics of the S&P 500 broad market index over the same time – plus 27%.
Back in 2009, Lombard Odier Bank launched the Golden Age mutual fund, which invests the funds of wealthy clients in "silver" companies. About half of the fund's investments fall on the healthcare sector, 13.6% – on consumer companies, 12.7% – on the financial industry, about 9% – on manufacturers of materials and essential goods. The remaining investments are distributed between different segments of the economy, including industry and real estate. Nestle, Allergan Pharmaceutical Corporation and Anthem insurance company can be found in the top 10 largest investments of the Golden Age. Since its launch, the fund has shown a yield of 98.55%, slightly inferior to its benchmark – the MSCI World index (105.18%).
Golden Age managers Johan Utterman and Meret Gaugler warn that the boom of the "silver economy" will not last forever. "The next generations after baby boomers are unlikely to have comparable consumer capabilities. But we believe that the current investment trend will be relevant for more than 10 years," Meret Gaugler notes in the fund's video presentation.
Longevity in Russian
"What are Russian oligarchs investing in? Into a large pill that can be divided into two parts: one for old age, the other for cancer," says Alexey Konov, managing partner and founder of the biomedical venture fund RBV Capital. The conversation took place via Skype, the investor was closing a deal in the USA in those days. His foundation sold the biotech startup Bonti, which develops neurotoxins for the needs of aesthetic medicine and anesthesiology, to the Irish pharmaceutical giant Allergan. The amount of the transaction, according to Konov, was about $ 200 million. Allergan previously bought from RBV Capital the project of RetroSense Therapeutics, the creator of RST-001, a drug for the treatment of retinitis pigmentosa, a rare hereditary disease that causes severe deterioration or even loss of vision. The deal passed at a total valuation of $555 million, including contingent payments.
Konov came to the venture biotechnology market from a big science: a graduate of the MSU biofactory at one time received a Ph.D.D in Molecular Biology at Louis Pasteur University in France. Konov knows firsthand about the Russian national peculiarities of investing in longevity, he has worked in a fund managed by the owner of large capital: "I was an investment director in it and left exactly because the founder is a big businessman with a "biological" past invested in very early scientific developments in the field of cancer and aging. When I realized that people were funding a beautiful science, and the horizon for getting out of such an investment was not clear, I decided to leave."
Since the beginning of 2013, he has been trying to raise a multicaptive biotech fund that would be independent of one major investor. However, due to the deterioration of the political situation in 2014 due to the annexation of Crimea, Konov did not succeed: large foreign investors were eliminated, and one Russian investor who fell under sanctions had to be abandoned. Of the strategic partners of the fund, only the state-owned Russian venture company and the pharmaceutical holding R-Pharm, owned by Forbes list member Alexey Repik, remained. When Konov felt that the project risked sliding down to another family office investing in the notorious pill, he turned to Repik and honestly said: in this form, this story does not suit him. "To my surprise, he said: you know, I think we are ready to live in such a paradigm of an independent foundation, and I am interested primarily in the financial result. While this rule is being observed," Konov admitted. Thus began the history of the RBV Capital fund.
Although his investments fully meet the criteria of the "silver economy", Konov does not consider his work an investment in longevity. "Life extension is not even the development of tomorrow, but the day after tomorrow. However, the task of venture capital is still to invest most of the funds in the technologies of tomorrow, leaving no more than a quarter of the portfolio for the development of the distant future. I don't consider myself a visionary, my goal is to earn money for investors, and for a short period of time," he explains. Nevertheless, the former scientist says that he is very interested in this topic and in the future he still plans to address it: "We are seriously thinking about creating a new large fund in which some part of the portfolio - hardly more than 25% – will be devoted to such projects."
Repik from R-Pharm is not the only billionaire interested in developments in the field of longevity. For example, in June, The Bell found out that the former owner of Uralkali, Dmitry Rybolovlev, is the largest investor in the American Apple Tree Partners fund, which specializes in investments in companies developing drugs for the treatment of cancer, bronchial asthma, ophthalmic and genetic diseases. According to The Bell, Rybolovlev invested over $500 million in the fund. "These are investments of his family office. They are absolutely clear: developments in the field of oncology and genetic diseases are a hot investment topic that attracts large capitals. Most of the Russian oligarchs investing in biotech do it more in the hope of making money on a cancer drug than prolonging their lives," a source in the venture market who has consulted on the topic of biotech family offices of owners of large capital told Forbes.
Roman Abramovich also actively invests personal money in biotechnology, an interlocutor from the field of venture financing and a source close to the businessman's private investment company Millhouse Capital noted in a conversation with Forbes. "Norma Investments, which is actively investing in Israeli biotech startups, is not just one of Abramovich's businesses. This structure can be called a family office tool, it invests the oligarch's personal money," one of the sources said. According to the second interlocutor, the interest in Israeli biotechnologies is due to diversification considerations, besides, this market, unlike the American one, does not look overheated yet. In May, it became known that Norma Investments invested about $8.8 million in the Israeli medical startup BrainQ Technologies, which is developing a headset for the detection and treatment of neural devices. They did not respond to Forbes' request about the venture company's investments in Millhouse.
The Russian project Gero, which positions itself as a biotech startup working on the therapy of aging diseases, also does not suffer from a lack of attention from family offices and owners of large capital, said the company's CEO Nikolay Kovtunenko, but investors from this category still prefer more understandable and predictable businesses. The state has a similar attitude to developments in the field of longevity. "It's one thing to have something tangible, a pill that you can touch with your hands, and another thing is chemists and biologists who are doing something in the laboratory with mice, and the prospects for these studies are not obvious," he notes.
Gero was founded in 2012 by a team from another biotech startup, Quantum Pharmaceuticals, a resident of Skolkovo. Since the launch, the project, without taking into account the results of the last round, which have not yet been disclosed, has attracted investments of $ 5 million. Among the investors were the shareholders of the pharmaceutical company "Valenta Pharm" Dmitry Shulzhenko and Vladimir Nesteruk, as well as Sergey Filonov, the former owner of the Aviamarket company, engaged in the sale of helicopters.
The research conducted by Gero is based on the results of a joint project with Professor Robert Schmuckler Rees, a leading specialist in gerontology at the University of Arkansas Medical Sciences. He is one of the startup's scientific mentors. The scientist became famous for experiments with the age-1 gene, which affects life expectancy. By creating a mutant version of this gene, Rice managed to extend the life of laboratory worms by 10 times, which became a world record. The Gero international team, consisting of 16 people in the Moscow office and researchers in eight leading research centers abroad, is trying to decide how to influence the proteins circulating in the blood to combat aging. Last week, the researchers began a collaboration with the National University of Singapore (NUS) and launched experiments on mice there under the leadership of another major expert in the field of aging – Brian Kennedy, formerly head of the Buck Institute for Aging Research (California).
According to Nikolay Kovtunenko, Gero's first developments in this area are now undergoing preclinical testing. At the end of the cycle, the R&D company wants to receive medicines for complex anti-aging therapy.
Investments in projects like Gero are certainly high-risk, as Kovtunenko himself admits. "The risk is always higher in those areas where there are no or very few successfully implemented projects. The lack of success means either a lack of fundamental knowledge in the field under study, or a lack of tools for the qualitative implementation of developments and scientific ideas into life. Thus, in the field of life extension, the risk is currently very, very high," summarizes Elizaveta Rozhdestvenskaya, Executive director of the Primer Capital venture fund.
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