Episode 102: Building Patient-Centered Biotech Deals for a Stronger Future in Healthcare

How does a dealmaker raised by therapists impact healthcare deals to put patients first? Find out today.

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Welcome back to Bio from the Bayou. I'm James Zanewicz, your host from Tulane Medicine, and today's guest is Sam Libby. He is the president and managing director, as well as the founder of TCB Capital Advisors, a merchant bank specializing in advising healthcare companies on investment and growth strategies. Welcome to the show, Sam.

James, thanks for having me.

We're really excited to have you here because TCB stands out As it doesn't really just execute transactions, you actually partner with companies before and after the deals close, ensuring that things are going well. So can you walk us through what that advisory model is like for you and why you view that as essential for sustainable growth?

Yeah, happy to. So what we realized in the market is as we started working with early-stage companies, you know, a lot of them are built around a singular mission. And they're very passionate about that, whatever sector it is or the core focus. But at the same point, they need additional support, and it can be from a BD perspective. They're looking for business partnerships, research collaborations. It could be from some of the internal controls and support. There's a lot of areas where we realize that it's kind of like companies start around an idea or a concept, raise a little money, move it forward, and then there are all of these other areas That effectively would just be a deviation from the mission that a company needs to succeed. And so what we've done is look at, based on our experience, I've been a healthcare investment banker for the entirety of my career, and following an exit from boutique advisory firm, started TCB. Myself and the other founders, what we did is we looked at what do companies need to be able to be successful and defining success as they're able to survive their seed or Series A, move on to their B, And keep moving forward to try to impact patient lives and then adding those services. And so we've brought on, we've grown to about 18 people total across our investment banking or advisory business, our commercial operations and strategy, which they do all the things that bankers like to talk about but can't actually do, like building out sales funnels and things of that sort. And then the rest of it sits within the scientific, clinical, and strategic advisory boards, which not only give guidance to us and lend their expertise, but also to our clients as well.

Well, what led you to come up with this model? Because this is very different from what I've heard of otherwise.

So when I exited my last company at the end of 2022, I reflected back on my career and said, okay, I've been in healthcare for my entire career. Have I ever impacted a patient life? My feeling of it was no, that although we've taken companies public, we've helped them move to their next stage from where they were. I didn't think that I've really impacted the healthcare landscape or really just— I think healthcare is interesting because you have to look at the most granular level to see the biggest impact possible. So then I evaluated what I wanted to do, and we wanted to build this around companies that are less likely to achieve their mission if they didn't have the help. I mean, a company valued at $400 million that's about to IPO doesn't need as much assistance from its advisors and from its base to impact downstream that patient life. Whereas an earlier stage company that's coming out of tech transfer or had done a seed round has maybe had some success at the early stage, still needs to get through FDA approval. They still need to do their market access work. They still have to get a CPT code or figure out which CPT code's the right one for them. Then they have to commercialize. There are a million pitfalls where a great company with interesting technology, not because of its own inadequacies, suddenly doesn't get to the market. I mean, I've worked with companies across the spectrum in liquid biopsy or women's health. That had amazing technology but couldn't get there, couldn't get investor support, or sometimes couldn't raise enough money to get through FDA approval process. And we really saw that brain drain, I think is the best example, coming out of the pandemic. Investors had gotten so burned by diagnostics because everything was the next COVID test and it was going to be a cash cow that you saw a ton of companies go into bankruptcy, their IP fall to nothing and be shelved. And that IP and that technology is potentially life-saving for thousands, if not millions of people. And so, you know, watching that, having experienced it, that's what really built the business model. It was, there's a need in the market and we want to be a partner in impacting patient lives.

I love that. That's a great reason to do it. And as you were describing that, you mentioned a lot of stats and numbers. And so I wanted to bring some up that our amazing producer Ian found for me. I sound smart, but I'm not. I just like say things Ian gives me. But you've led over 30 transactions totaling more than $20 billion across therapeutics, diagnostics, and digital health. What are some of the common traits you see in those companies that are primed for success?

You know, I've been blessed in my career to work with amazing, talented bankers. I've been mentored by, you know, the MDs that I worked over throughout my career. And, you know, I've been lucky to be able to take on a lot of responsibility very early on. And that some of it's just opportunity and luck kind of meet, and that's how you really learn. And it's interesting because the first thing that I would say defines how a company's going to be successful is timing more than anything. Are you in a stage of the market where investors are looking at things aggressively and putting money to work? I mean, for the companies that have survived the last 2 years, I congratulate them because the last 2 years have been some of the toughest market environments that we've ever seen. Exits from VCs have been low. The IPO window has been closed. All of the things that these early-stage companies and these investors already know, and the level of diligence that investors are putting on companies is much higher than it's ever been. Now, that's not exactly a bad thing because when diligence gets light, bad times are on the horizon. And when diligence gets tight over time, good times are on the horizon because investors make the right investments and they're not rushing over hype. And so pandemic, there was a need for the technology, and then it created hype, and then it created a bubble, and then we saw that crash, and now we're seeing the aftermath of it. So I congratulate— there's a lot of early-stage entrepreneurs and founders that I speak to, and I'm like, you're still here, pat yourself on the back. And so there is a timing component to it. So I don't think there's a magic formula. Additionally, it's the focus on and development of clinical data, especially for early-stage companies. I mean, a lot of VCs have moved from the venture model to growth where they want to see traction and revenue and potentially EBITDA, that they want to see post-approval, that they want to see a reimbursement strategy. And so there is an area where you're kind of— a company's not seed and they're not Series A, and that's really challenging space. So one of the most important things is when a company raises money, utilize that in the most efficient way possible to show progress and develop clinical data, because clinical data is unquestionable. You can see the results and you're not trying to explain, you know, you can maybe survive one round where you're saying, this is innovative technology, this is what we're going to do. And by the time you get to the next round, they're like, what did you do? So it's kind of like, I think about it, I don't know if it's a great parallel or not, but a college student who gets their first credit card, we all hear stories about suddenly they rack up a $15,000 or $20,000 bill and have no income. A lot of companies end up in that situation where they don't manage costs, they don't manage the expense. They suddenly are dealing with really high hosting fees from AWS or something. And it's important to make sure every dollar counts and the dollars are focused on the clinic and the clinical data generation.

Well, I want to turn to something a little more personal now, because I understand that both your parents were therapists. So can you talk about your upbringing and how that experience shaped your focus on patient outcomes at TCV?

Yeah. So it's funny because it had 2 different effects at different stages of my life. You know, I watched my parents work as therapists. They've been in private practice. They also worked in government-funded programs. So my mother, as an example, ran housing programs for the homeless and mentally ill in New York. And so, you know, I got to see the good work that they did. And then obviously I went into finance. A little different. Yeah. And my sister went the other way. She works with children with disabilities to help get classified so they can receive benefits. She's also a teacher. So she went to the, I'm going to make a difference like my parents in the day-to-day. And I went to the, I've seen how hard it is to survive and succeed in a monetary sense. Trying to make a difference. That's where I went first. And so I went to finance and I went to banking and I was like, I'm going to be financially successful. And then I did that and it wasn't that fulfilling. And it felt there was a lack of purpose and direction because doing big transactions is fun. But after— and I love the skill set and I love what I've done, but I wanted something more. And then when I was in that point of self-reflection and I said, what is it I actually want to do? That's where I really got to, in a more mature sense, not being in my early 20s, take a look and say, I now completely understand why they made the choices they made. They were driven by purpose. My father is an amazing therapist, and I've actually met people after he's worked with them. Obviously, he's never told me, but they've told me, and I've got to see the impact that he's had on people's lives. And sometimes when we think about therapists and people who run these type of Programs, we think about it as like, oh yeah, someone was depressed, they went to a therapist, they got better. But we tend to forget that that market is marred by SMIs, so severely mentally ill people who would not be here if not for the professionals that helped save their life and helped put them on the right path. And I have met people that survived severe psychotic episodes because of my parents, who then went on to get an education, create a career, have a family. And, you know, these are people who very likely wouldn't be here if not for the intervention of well-intended people. And so I wanted that to be my legacy, but it took me a long time to get there. And I think that's understandable. When we're young, we like the shiny things, and then we realize there's no car that's going to make us happier than the car that gets us where we got to go when we have an actual mission.

Right. I love mission-focused things. It's one of the things that makes me very excited to work, you know, in academic medicine or with nonprofits who are in this space and really helping Scientists, physicians, companies who are trying to do the next iteration of things to help people, which is, I think, where you've found yourself now, which is so great.

Absolutely. Absolutely.

Well, and as those companies, those scientists, whoever are going forward, healthcare startups, quite honestly, sometimes they make mistakes. What mistakes have you seen that they make when they're either pitching to or partnering with investment banks?

One mistake that I find that's pretty common is being too clever for their own good. I'm trying to think of a good example offhand, but there's certain things that if you've been doing diligence for a long time, you kind of know what they mean. As an example, the concierge physician market, it is a great market for those that can afford it, and there is the opportunity for growth within it and to sell within it for additional services. But early-stage companies will normally utilize the, we're going to sell into the concierge physician market, When they don't have a commercial plan or they don't have a reimbursement plan, or they don't have a pathway even to code for reimbursement. And then it's almost like investors are going to just accept that, oh great, you're going to reach out to the tens of thousands of concierge physicians and they're going to take your calls and you're going to need to sell individually into each of them, which is quite challenging. I mean, we've seen that even with large companies like GRAIL selling into the concierge market, they were able to do it because they had size, They had scale, they were able to commercialize, they had people who were experts in commercialization. But for like the small companies, 1 or 2 possible diagnostics that are LDT in a lab in the South or somewhere in Southern California where a lot of them are, it's a very big challenge. So that's not to say that it isn't a viable sales channel. I mean, I had a call with an early-stage company and I won't name them, but we were talking about this and I asked him, I asked the CEO, he, he's had multiple exits, he's very experienced. Their initial sales channel is into concierge physicians. And I said, is that the goal, or is that the goal where you work through reimbursement? And he stopped me and he goes, you fully understand what we're trying to do. And it was in a very polite way, but it was like, you know, whereas I've met with a lot of other companies and that's it, there's no further development. They've never done market access work, they've never done commercial work, they've never done reimbursement work. And so like You can't hide from the investor. Like, yes, you might be able to get a couple angel investors locally to put a few million dollars to work. But as you start to move to more institutional money, they've been through the reps. They know what this means. They're going to ask you, is there a CPT code for it? Do you need a new code? What are the risks with the new code and with the CMS decisions? And you have to be able to answer those questions in an honest way. And there's, there's no way to trick them because diligence process is long, and then they're your partner. after the fact going forward. So if you're not fully honest with them, you're going to end up in a big challenge, you know, 3 months, 6 months, 9 months.

And you're going to get that reputation where if you try and be honest the next time, they're not going to believe you because that carries forward. It's huge. Well, you're also embedding patient access into your financial strategy. So how do you balance raising capital with ensuring the affordability and quality of care? Because we talk about reimbursement, those kinds of things, but all those things factor into what the patient does. And our other host, Dr. Elaine Hamm, recently did a podcast on kind of pricing of health healthcare and things like that. And so wanted to get your perspective on how do you balance that with affordability and care quality?

Yeah, it's a really good question. And I do believe that affordable pricing to a certain point is a good business strategy. You know, in the short term, you may be able to get a $1,500 test through CMS and with coverage, but eventually it's going to be pushed down. And then I think a lot of companies fear if we start at certain low, it's going to come even lower. But, you know, and I do believe it's being able to quantify the value that's created to the healthcare system, the cost saving that's downstream, especially when we look at things like diagnostics. You know, are we actually saving money downstream is a real question and it's an analysis that should be done. So one of the companies I'm working with that I really think is innovative is Clarity, and they just got FDA clearance for their Clarity Breast product. And, you know, the founder comes out of Mass General. She is a leader in women's imaging, absolutely brilliant. And then they brought on the CEO, Jeff Luber, and the two of them, one, both brilliant, both accomplished in their respective fields, but also amazing human beings. And so when they look at this offering, they've created a prognostic product in a sector where 34% of diagnoses for breast cancer are happening stage 3 or later. There's a problem in this market. They knew there was a problem. Connie was on the committees that help write the guidelines to treat high-risk women. And so when they think about pricing, there is this equilibrium point of, okay, we're going to have to price the product at a point that is accessible. And the fact is, we had early-stage conversations with them and that was the discussion happening at the beginning. Now, when you look at areas like going back to mental health for a second, this is a sector that the most at-risk patient population has the least financial means. And so pricing a mental health diagnostic test at $1,200, $1,500, $2,000 makes it completely inaccessible to the people that we talk about saving. So it's kind of like on one side, we can either, things can be really, really expensive and that's fine, but then let's stop talking about, we wanna help save the SMIs, we wanna help save the most at risk, or find that balance point between where does good business make substantial and meaningful impact? Then when you look at international markets, that equilibrium point shifts depending on the country you're looking at, things like that, and what accessibility looks like. But the main thing is, this is going to be highly profitable, margins are crazy high, and the cost is fine. That's fine. But let's just be honest. Or on the other hand, we're going to actually impact patient care. And I think it takes some time, but the payers catch up, CMS catches up. And we've seen that with certain decisions it's made with tests that are in the market that were extremely expensive where the value was not defended, and they've come down on those. We've seen those decisions in the last year.

And Clarity, you talk about Clarity, and they were an academic spinout in a smaller company at one point. And there are lots of those out there, like in Formuta, other companies like that. And that's where I think I see your passion now is helping those smaller companies have their impact. And many of our listeners are startup founders or work closely with them to help them move forward. So as we start to wrap up, because Ian's giving me the high sign and he's going to beat me up if I keep going much longer, What is your last piece of advice or pieces of advice for those companies as they scale up to become as successful as possible?

I would say, you know, a couple of things. One, you know, keep focused on the mission because times are going to be tough. Things are going to be harder than you think. You might estimate you need $5 million, but it turns out you need $8 million. So if you're keeping focused on that mission and especially if the investors that come around to support you are tied to that mission and you get the right investors in, you're going to have the people around the table to support you. And so why that's important is sometimes people get so focused on, I need to bring in a couple million dollars to hit this milestone, to accomplish X, Y, and Z, that they're not focused on, am I bringing the right people to the table? And that can hurt in 2 ways. One, the terms of the capital can be really punitive, and you obviously don't want that. We hear the horror stories where someone had a great exit, And the founders make nothing. But even beyond that, the early-stage companies need investors that are going to support the next round. They're going to support the time in between rounds, and they're going to be willing to write additional checks. And the only way that happens if they're fully bought into the mission that the company's trying to accomplish. And the same thing with the employees that they bring on. It's not about a growth blitz or growing quickly. It's about growing the right way, one step at a time, where you're continuing to focus on everything we're just discussing. It's, let's not get lost in charging as much as possible for the test so we can have a great hockey stick upside, but instead, are we making it accessible to the patient? Does our pricing strategy match with our mission that we're selling to the investors who are putting the money in? And so everything being wrapped around that with that singular focus makes a huge difference.

That is the perfect closing thought. I want to thank you again for joining us, especially early on a Monday. This will air on a Wednesday, but it's early Monday morning. we're recording this. We're gonna be sure to keep an eye on TCB Capital Advisors in the future. We hope to get you down here in New Orleans for BIO on the Bayou, October 28th and 29th. I have to get my plug in or I get in trouble with Ian.

Gotta get that plug in.

Yeah, always. Uh, and, and as always, we're gonna have your contact info, the informational links about you, about Clarity, all the good stuff. And by we, again, I mean Ian, who does all the hard work behind this. Gonna encourage our listeners to check it out and say thanks once again. I really, really enjoyed our conversation.

Thank you so much for having me.

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