Core Values: Skepticism and Unbiased Experimentation

The difference embedded in PureTech

I went back to my interview with Daphne Zohar, the founder and CEO of PureTech Health. Daphne is one of the more interesting voices at the cutting edge out there, and we discussed PureTech's unique approach to drug development, which involves partnering with academic experts and venture capital funds to identify and develop promising new medicines. Daphne contrasts this with traditional biotech models, emphasising PureTech's focus on skepticism and rigorous early testing to efficiently allocate resources - I’d put this firmly in the Asymmetric Learning camp.

PureTech Health, under the visionary leadership of its founding CEO Daphne Zohar, has solidified its reputation as a trailblazer in the biotherapeutics landscape, consistently transforming innovative science into life-changing medicines. In recent years, the company has showcased its unique "hub-and-spoke" model with remarkable success, most notably through the $14 billion acquisition of its spin-off Karuna Therapeutics by Bristol Myers Squibb in 2024—an achievement that generated over $1.1 billion in proceeds for PureTech. Zohar’s strategic foresight also birthed Seaport Therapeutics, a neuropsychiatric medicine venture launched in April 2024 with a $100 million oversubscribed Series A, followed by a $225 million Series B in October 2024, reflecting immense investor confidence. Transitioning to lead Seaport as CEO while remaining a senior advisor to PureTech, Zohar has seamlessly passed the baton to Bharatt Chowrira, ensuring the company’s continued growth. With a robust pipeline of 29 therapeutics and a track record of financial independence, PureTech—nurtured by Zohar’s entrepreneurial spirit—stands poised to keep revolutionizing healthcare for years to come.

The discussion covered PureTech's innovative company culture, which embraces risk and learns from mistakes, and how the company's structure enables nimbleness for innovation, and the company's shift towards developing its own pipeline.

Daphne also shared her personal journey and ambitions for the future of PureTech and biopharma, which she believes will resemble a more diverse landscape with smaller, efficient companies. She expressed concern regarding rising anti-science sentiment and expressed PureTech's drive for taking a chance on young talented people.

Key Themes and Ideas:

Unique Business Model: Operating Company Hybrid & Institutional Entrepreneurship:

• PureTech Health distinguishes itself from venture capital firms, describing itself as an operating company. They identify, invent, and develop programs, unlike a VC that largely invests in other people's ideas.

• Quote: "we've always really been an operating company: the team at PureTech has identified, invented, developed the programs/ the underlying platforms that form the basis of now 24 products and product candidates, of which two have now received FDA clearance and EU marketing clearance; 14 are clinical stage"

• Zohar positions PureTech as an "institutional version of an entrepreneur," actively seeking out the "best horse" (the most promising therapeutic approach) rather than solely betting on the "jockey" (the individual entrepreneur).

• It’s a hybrid, like Arch or Atlas, but with its own labs, scientists, and clinical operations, setting it apart from pure venture creation entities.

Skepticism and Unbiased Experimentation as Core Values:

• PureTech actively cultivates a culture of skepticism, encouraging the identification and rigorous testing of potential failure points early in the development process.

• Quote: "this concept of a lack of bias: that's this concept of ‘we're going to do the experiment that killed the project early’"

• This approach aims to avoid "proof of belief" and instead prioritize "proof of skepticism," ensuring resources are allocated efficiently to the most promising programs.

• The emphasis is on "doing the experiment that could have killed it" early on.

Resource Allocation & Willingness to Kill Programs:

• PureTech is structured to facilitate the reallocation of resources to successful programs and to efficiently terminate those that do not meet pre-defined criteria.

• Quote: "we're set up to kill programs, and the ones that survive this process are ones that we're really excited about, and that have gone through this test of fire"

• This "willingness to kill something early" contrasts with traditional entrepreneurial narratives of persistence at all costs.

• They are comfortable moving resources around, unlike management teams solely focused on a single platform.

Innovation via Problem-First Approach and Modality Agnosticism:

• Instead of starting with a specific technology platform, PureTech begins with a deep understanding of a therapeutic area and its unmet needs.

• Quote: "the idea was to work together with leading experts to deconstruct a particular therapeutic area disease unmet need"

• This allows them to explore potential solutions in a modality-agnostic way, drawing on leading science from various academic labs and past industry efforts.

• They avoid bias in problem-solving, considering unconventional paths to innovation.

Internal vs. Subsidiary Pipeline Development:

• Initially, PureTech partnered with venture capital firms and housed IP in subsidiary companies. They were actively involved in the early development.

• More recently, they've shifted to developing programs internally, particularly in areas related to immunology and the lymphatic system.

• This reflects a desire to retain greater control and focus on areas of strategic expertise.

Culture of Openness, Honesty and Embracing Mistakes:

• Zohar emphasizes the importance of creating an environment where people feel safe admitting mistakes and learning from them.

• This requires a culture of leadership that avoids ego protection and encourages open criticism.

• Quote: "if somebody's worried about protecting a previous decision, they're not going to be the best decisions going forward"

• They prize self-criticism, but in a non-hostile, constructive way.

Strategic Imperatives with Openness to New Ideas:

• PureTech operates with specific strategic priorities, particularly in disease areas where they have expertise (e.g., brain-immune-gut axis).

• However, they maintain open-mindedness to new ideas that may fall outside their current focus.

• Key criteria include addressing a significant medical need, innovation (protectability and differentiation), and avoiding "me-too" approaches.

Impact of Virtual Working:

• Zohar noted that transitioning to virtual work due to COVID-19 had surprisingly positive effects. The team has continued to work together effectively, and their business has not been significantly negatively impacted.

People and Talent Development:

• PureTech prioritizes identifying and nurturing talent, including individuals straight out of postdocs.

• They offer an entrepreneurial setting where talented individuals can thrive and reach their full potential.

• They focus on identifying potential talent in others, looking past more politically correct or risk-averse people.

Future Vision:

• Zohar envisions PureTech Health as a major biopharmaceutical company, and believes that future biopharma companies will look more like PureTech than traditional pharma giants like Pfizer.

Implications:

• PureTech Health presents an alternative model for biotech innovation that prioritizes intellectual honesty, efficient resource allocation, and a willingness to challenge conventional wisdom.

• Their approach could offer valuable lessons for other companies seeking to improve their R&D productivity and develop breakthrough therapies.

• Their focus on unmet needs and a modality-agnostic approach positions them to capitalize on emerging scientific advances and address previously intractable diseases.

Conclusion:

Daphne Zohar's vision for PureTech Health challenges traditional norms in the biotech industry. By embracing skepticism, prioritizing efficient resource allocation, and fostering a culture of open communication, PureTech aims to create a more innovative and impactful approach to drug development. Her insights offer valuable lessons for companies seeking to navigate the complexities of the modern biopharmaceutical landscape.

How did PureTech Health evolve from initial concept to a biopharmaceutical company?

PureTech Health's evolution from its initial concept to a biopharmaceutical company involved a unique approach to developing new medicines, strategic shifts in resource allocation, and a focus on innovation.

Here's an overview of PureTech Health's evolution:

• Initial Concept: PureTech Health started with a $100,000 check from an angel investor and a vision to function as an "institutional version of an entrepreneur". The company aimed to collaborate with leading experts to deconstruct therapeutic areas and identify the best approaches to address unmet needs.

• Early Strategy: PureTech Health initially partnered with venture capital funds to finance the development of new medicines, placing intellectual property in subsidiaries. This approach led to a perception that PureTech was a VC firm, but it always operated as a company with its own labs, scientists, and clinical operations team.

• Pipeline Development: PureTech Health's team identified, invented, and developed programs and platforms, leading to a pipeline of 24 products and product candidates, including those with FDA and EU marketing clearance and those in clinical stages.

• Internal Pipeline Development: PureTech shifted its strategy to internally develop programs, particularly those related to immunology and the lymphatic system. This shift occurred once the company had the resources to move programs forward themselves. The default shifted from partnering with outside entities to internal development.

• Resource Allocation and Efficiency: Bootstrapping early on taught PureTech Health to be disciplined with its time and resources. The company is set up to move resources to successful programs and terminate those that do not meet predefined standards. PureTech has demonstrated better-than-average success rates from pre-clinical to clinical phases due to its early discipline and unbiased approach, along with the use of signals of human efficacy.

• Innovation and Culture: PureTech fosters a culture of skepticism and self-criticism, encouraging employees to challenge ideas and address potential points of failure early on. The company values open-mindedness, a willingness to try new things, and an ability to identify and nurture talented individuals, even those with non-traditional backgrounds.

• Strategic Focus and Expansion: PureTech Health focuses on specific disease areas and biological pathways where it has leadership and expertise, such as the brain-immune-gut axis and the lymphatic system. The company is open to new ideas that align with its strategy and expertise, but it is not an investment firm.

• Future Vision: PureTech Health aims to become a major biopharmaceutical company, with a vision of future biopharma companies resembling PureTech more than traditional pharmaceutical companies.

What advantages arose from PureTech's bootstrapping era?

The bootstrapping era at PureTech Health led to the development of key advantages that have shaped the company's approach to innovation, resource allocation, and pipeline development.

The advantages that arose from PureTech's bootstrapping era include:

• Resource Discipline: Bootstrapping instilled a sense of discipline regarding time and resource management.

• Higher Success Rates: This discipline early on contributed to better-than-average success rates in progressing from pre-clinical to clinical phases. According to Daphne Zohar, PureTech's success in the clinic is associated with discipline early on.

• Unbiased Approach: A conviction about the potential use of a therapeutic modality and its ability to address a major unmet need was essential. PureTech's approach involved starting in an unbiased way, with signals of human efficacy.

• Efficient Resource Allocation: The company became adept at moving resources to successful programmes and terminating unsuccessful ones. PureTech is "set up to kill programs".

• Cultural Acceptance of Failure: PureTech became comfortable with the possibility of failing.

What bootstrapping lessons shaped PureTech's resource allocation?

The bootstrapping era significantly shaped PureTech Health's approach to resource allocation, instilling key lessons and practices that continue to influence the company's operations.

The bootstrapping lessons that shaped PureTech's resource allocation include:

• Resource Discipline: Bootstrapping taught PureTech to be disciplined with its time and resources. This discipline ensures that resources are used efficiently and effectively.

• Prioritisation of High-Potential Programs: The experience gained during bootstrapping led PureTech to develop a system for efficiently allocating resources, favouring programmes with high potential for success. This involves setting high standards and being honest about what the company wants to see.

• Efficient Resource Movement: PureTech became adept at moving resources to successful programs and terminating unsuccessful ones. This approach ensures that resources are not wasted on projects that are unlikely to succeed and can be directed towards more promising opportunities.

• Acceptance of Programme Termination: PureTech is "set up to kill programs". This willingness to terminate projects that do not meet predefined standards is a critical aspect of the company's approach to resource allocation.

• Data-Driven Decision-Making: PureTech prioritises data and evidence over belief or wishful thinking. The company sets up experiments to test key assumptions and address points of skepticism. If the results do not support the initial hypothesis, PureTech is willing to terminate the project and reallocate resources to more promising opportunities.

• Focus on Unmet Needs: PureTech focuses on addressing significant unmet medical needs. By targeting areas where there is a clear demand for new solutions, the company can allocate its resources more effectively and increase its chances of success.

• Internal Development Preference: The default shifted from partnering with outside entities to internal development. Once PureTech had the resources, it began to favour internal development of programmes, as seen with its focus on immunology and the lymphatic system. The company shifted its default to developing programmes internally once it had the resources to do so.

What makes PureTech's culture distinctively self-critical?

PureTech Health's culture is distinctively self-critical due to its emphasis on skepticism, open feedback, and acceptance of mistakes. This environment fosters innovation and helps the company make informed decisions about its programs.

Key aspects that contribute to PureTech's self-critical culture include:

• Skepticism: PureTech embraces skepticism as a core component of its innovation process. The company actively seeks out individuals who can identify potential points of failure and challenge assumptions. By inviting critical feedback, PureTech aims to strengthen its projects and address key concerns early on.

• Open Feedback: The culture at PureTech encourages open and honest feedback at all levels. Employees are comfortable sharing their opinions and providing constructive criticism without fear of reprisal. This willingness to engage in open dialogue promotes transparency and helps the team identify potential weaknesses in their strategies.

• Acceptance of Mistakes: PureTech acknowledges that mistakes are inevitable in the drug development process. The company fosters a safe environment where individuals can admit errors and learn from them without jeopardising their positions. This approach encourages employees to take calculated risks and explore new ideas, knowing that failure is a possibility.

• Focus on Evidence: Rather than relying on belief or wishful thinking, PureTech prioritises data and evidence. The company sets up experiments to test key assumptions and address points of skepticism. If the results do not support the initial hypothesis, PureTech is willing to terminate the project and reallocate resources to more promising opportunities.

• Willingness to Kill Projects: PureTech is prepared to terminate programs that do not meet its predefined standards. This willingness to "kill programs" is a critical aspect of the company's self-critical culture, as it allows PureTech to focus its resources on the most promising opportunities. The ability to move resources around and incentivise teams to find the right solutions is vital to PureTech's approach to science.

By combining skepticism, open feedback, acceptance of mistakes, and a focus on evidence, PureTech has cultivated a self-critical culture that promotes innovation, efficiency, and informed decision-making. This unique approach has enabled the company to achieve success in the competitive biopharmaceutical industry.

What key cultural elements drive PureTech's innovation?

PureTech Health's innovation is driven by a combination of key cultural elements, including skepticism, open-mindedness, a willingness to experiment, and a focus on identifying and nurturing talent.

The key cultural elements that drive PureTech's innovation are:

• Skepticism: PureTech embraces skepticism as a core component of its innovation process. The company actively seeks out individuals who can identify potential points of failure and challenge assumptions. By inviting critical feedback, PureTech aims to strengthen its projects and address key concerns early on.

• Open-mindedness and lack of bias: PureTech is willing to put aside any biases in the way they think about solving a problem, diving into the problem and considering the best way to tackle it. The company approaches problem-solving without pre-conceived notions, considering unconventional solutions. PureTech aims to approach problem solving without bias.

• Experimentation and tolerance of failure: PureTech is willing to conduct experiments that might lead to the early termination of a project. This willingness to experiment and embrace the possibility of failure is essential for innovation, as it allows the company to explore new ideas and approaches without fear of negative consequences. PureTech fosters a safe environment where individuals can admit errors and learn from them without jeopardising their positions.

• Collaboration and diverse perspectives: PureTech brings together creative thinkers with people who can identify potential problems. This combination of diverse perspectives allows the company to think differently and develop innovative solutions.

• Talent identification and empowerment: PureTech places a strong emphasis on identifying talented individuals, even those with non-traditional backgrounds, and providing them with opportunities to reach their full potential. The company is proud of taking people right out of their post-doc positions, training them in an entrepreneurial setting, and enabling them to run companies or important internal programmes.

• Strategic focus with flexibility: PureTech combines strategic imperatives with open-mindedness to new ideas. While the company focuses on specific disease areas and biological pathways where it has leadership and expertise, it remains open to pursuing ideas that may fall outside its existing areas of focus. This balance between strategic direction and flexibility allows PureTech to explore new opportunities while maintaining a clear sense of purpose.

• Addressing major medical needs: PureTech has a bias toward innovation that addresses significant unmet medical needs. The company focuses on developing differentiated solutions that are not "me too" products, ensuring that its innovations offer unique value to patients and healthcare providers.

What bootstrapping lessons shaped PureTech's resource allocation?

The bootstrapping era significantly shaped PureTech Health's approach to resource allocation, instilling key lessons and practices that continue to influence the company's operations.

The bootstrapping lessons that shaped PureTech's resource allocation include:

• Resource Discipline: Bootstrapping taught PureTech to be disciplined with its time and resources. This discipline ensures that resources are used efficiently and effectively.

• Prioritisation of High-Potential Programs: The experience gained during bootstrapping led PureTech to develop a system for efficiently allocating resources, favouring programmes with high potential for success. This involves setting high standards and being honest about what the company wants to see.

• Efficient Resource Movement: PureTech became adept at moving resources to successful programs and terminating unsuccessful ones. This approach ensures that resources are not wasted on projects that are unlikely to succeed and can be directed towards more promising opportunities.

• Acceptance of Programme Termination: PureTech is "set up to kill programs". This willingness to terminate projects that do not meet predefined standards is a critical aspect of the company's approach to resource allocation.

• Data-Driven Decision-Making: PureTech prioritises data and evidence over belief or wishful thinking. The company sets up experiments to test key assumptions and address points of skepticism. If the results do not support the initial hypothesis, PureTech is willing to terminate the project and reallocate resources to more promising opportunities.

• Focus on Unmet Needs: PureTech focuses on addressing significant unmet medical needs. By targeting areas where there is a clear demand for new solutions, the company can allocate its resources more effectively and increase its chances of success.

• Internal Development Preference: The default shifted from partnering with outside entities to internal development. Once PureTech had the resources, it began to favour internal development of programmes, as seen with its focus on immunology and the lymphatic system. The company shifted its default to developing programmes internally once it had the resources to do so.

What spurred PureTech's shift toward internal pipeline development?

PureTech Health's shift towards internal pipeline development was spurred by the availability of resources and a strategic decision to directly manage and advance its own programmes.

Here are the key factors that prompted this shift:

• Resource Availability: As PureTech Health grew and accumulated more resources, it gained the capability to independently advance its programmes. The increase in resources, primarily financial, allowed PureTech to shift its default strategy.

• Strategic Shift: PureTech made a strategic decision to change its default approach. Initially, the company's default was to place intellectual property (IP) in a subsidiary and seek external partners to fund development. With increased resources, the default shifted to internal development.

• Control and Management: By developing programmes internally, PureTech could maintain greater control over the development process and ensure alignment with its strategic objectives.

• Focus on Interrelated Biology: PureTech chose to concentrate its internal pipeline on programmes related to interrelated biology, specifically immunology and the lymphatic system. This strategic focus allowed for a more cohesive and synergistic approach to research and development.

• Pipeline Expansion: Internal pipeline development allowed PureTech to expand its portfolio of programmes and build upon its expertise in specific therapeutic areas. This expansion aimed to create a more sustainable and diversified pipeline of product candidates.

This shift reflects a strategic evolution towards becoming a more integrated biopharmaceutical company with greater control over its pipeline and a focus on internal innovation. The company shifted its default to developing programmes internally once it had the resources to do so.