Longevity Hype in Silicon Valley: Will Traditional Approach to BioTech Investment Lead to a Longevity Boom, Bubble or Bust?

- By Kate Batz, Partner at Deep Knowledge Group and Longevity.Capital

California, the Birthplace of Longevity BioTech, Now Faces Clear Challenges and Opportunities as the Longevity Industry Expands Globally   

        

  • California and Silicon Valley in particular boast the title of the birthplace of Longevity BioTech - currently, they house the largest proportion of Longevity-focused companies globally as well as many prominent Longevity research foundations and influencers

  • However, California’s stronghold on this rapidly developing industry is gradually slipping as other regions begin to catch up in the race, with major government policy and industry-led developments and initiatives now in place in the United Kingdom, Switzerland, Singapore, Israel and other countries

  • Furthermore, much of what originally helped the Golden State establish its global predominance in Longevity entrepreneurship and investment has now become a source of risk: namely, Longevity Hype as well as a specific focus on certain biomedical niches that leave other sectors neglected as well as predominant reliance on the results of preclinical trials using model organisms like mice, which due to the complexity of the biology of aging are likely to have higher failure rates than BioTech in general

  • This combination of factors, if not timely addressed and neutralized, has the potential to lead to a Longevity boom and bust cycle, with the overfunding of overvalued companies leading to a failure to deliver on their promises via positive clinical translation into humans, thus casting a shadow of doubt over the entire Longevity sphere

  • Fortunately, emerging solutions at the intersection of AI, Preventive Medicine and Precision Health offer a new paradigm to therapeutic validation that is more human-centric and more likely to lead to clinical translation. California has the potential to neutralize these risks if it acts now, and to maintain a leading position within the Global Longevity Industry as other Longevity-progressive countries begin to scale up their efforts aimed at the industrialization of Longevity
     

The Current State of the Longevity Industry in California

    

Earlier this year, Deep Knowledge Group’s Longevity-focused analytical subsidiary Aging Analytics Agency released an 1100+ page analytical report titled “Longevity Industry in California: Landscape Overview 2019”. The report provided a comprehensive overview of the history, present state and near-future trajectory of the Longevity Industry in California, profiling leading companies, investors, influencers, research labs, non-profit and governmental organizations active in the region's Longevity sphere.

       

The choice of California as the subject of our regional Longevity industry report series was justified for a number of reasons as the state clearly plays once of the leading roles on the global Longevity scene. It is the world’s fifth-largest economy and, at almost 40 million people, is the most populous U.S. state. California is home to a plethora of top-ranked universities and research institutions - in 2018, the state had 10 universities in the Shanghai Index 100 top universities (the next closest was New York with 4) which lead the nation (at 15.1% or $3.9 billion) in biomedical research grants from NIH, further driving innovation. Academic excellence drives the state’s vibrant life sciences ecosystem, which boasts four mega-clusters in San Francisco Bay Area, Los Angeles, Orange and San Diego counties. For decades, California has been implementing a thoughtful public policy aimed at supporting the life sciences industry through tax incentives encouraging more investment as well via state-sponsored initiatives promoting the use of advanced computing and technology to better understand and treat diseases. Due to the state’s healthy business climate as well as a strong success record of its life sciences companies, California has long been a magnet for biotech investment - in 2018, local life sciences companies attracted more than $7.6 billion in venture capital funding, leading the nation once again. At $3.9 billion, California also attracted the most VC funding in U.S. in the digital health sector.

        

The region views healthy Longevity as a priority, as evidenced by a multitude of government-sponsored initiatives aimed at understanding disease and improving the health of its residents as well as by a network of agencies tasked with addressing the needs of the elderly. Compared to the rest of the nation, Californians take a progressive stance on Longevity - at 80.9 years, the state ranks second for life expectancy at birth (behind Hawaii) and at 69.9 years places third in terms of healthy life expectancy, defined as how long a person can live healthy, disability and disease-free life (behind Minnesota and Hawaii). Since 1980, when the state placed 20th in terms of life expectancy at birth, Californians improved their lifestyle which resulted in significant increase in life expectancy from 74.3 years to 80.9 years - the third largest increase among U.S. states during that time period. Today, the Golden State has the third lowest share of obese adults, the fifth lowest share of adults who do not exercise, and the second lowest share of adults who smoke. In United States as a whole, median life expectancy at birth is 78.6 years (with males’ life expectancy equalling to 76.1 years and females’ - to 81.1 years) and Health-Adjusted Life Expectancy (HALE) is just 67.7 years

        

Although California is ahead of U.S.-wide averages for life expectancy at birth as well as HALE, on a global scale, this accomplishment is rather modest. Japan, at 84.1 years, leads with respect to life expectancy at birth (its HALE is 74.8 years) and Singapore, at 76.2 years, tops the HALE ranking as well as exhibits the smallest gap (6.6 years) between life expectancy at birth (82.8 years) and HALE, with the healthcare spending equalling to just 4.9% of its GDP. Notably, in 1960, Americans boasted the highest life expectancy in the world, 2.4 years higher than the average for OECD countries, however, the U.S. started losing ground in the 1980s - according to Peterson-Kaiser Health System Tracker, since 1980, the U.S. has plummeted to the bottom of the list of countries with a similar GDP and high average income. Today, healthcare spending in the United States is greater than in any other country in the world (approximately 18% of GDP which is projected to reach 19.4% GDP in 2027). Despite that, the nation ranked just 43rd globally in terms of life expectancy and is projected to plummet to 64th place in 2040 (behind China, which ranking is expected to increase from its current 68th to 39th position in 2040) - the largest decrease for a country defined as high-income. Spain is projected to have a lifespan of 85.8 years in 2040, the best in the world, followed by Japan, Singapore, Switzerland, Portugal, Italy, Israel, France, Luxembourg and Australia.

      

The Golden State is following the global aging trend and is becoming the Graying State — its vast Baby Boomer cohort started entering retirement and by 2030, older Californians are projected to outnumber children for the first time in history. This so-called Silver Tsunami or Age Wave brings about a number of significant challenges - while the government of California has been among the pioneers for addressing the societal implications of aging for decades, the state is far from being immune from the exponential growth of the elderly population (particularly in the number of the oldest old); poverty and nearly doubling of the number of residents with Alzheimer’s disease by 2030 (which will drive up the already high costs of nursing home care). Governing a rapidly graying state means dealing with higher overall healthcare costs, particularly for low-income seniors, as well as facing the retirement and long-term care crises. Further, California’s Silver Tsunami places an enormous strain on the state’s already fragile and fragmented aging network - unsurprisingly, the newly elected Governor Gavin Newsom committed to addressing the aforementioned issues by creating a comprehensive California Master Plan on Aging and Alzheimer’s Task Force. Thankfully, the Age Wave not only brings challenges but also a multitude of possibilities - people in the 50+ age group have the largest spending power, many are willing to work past the traditional retirement age and most can infuse societies with transformative social benefits as caregivers and volunteers while themselves benefitting from such purposeful activities. 

Silicon Valley, Longevity Hype, and the Future of Longevity Investments

 

Let's now focus on California as an epicenter of Longevity BioTech. While most people consider the Longevity Industry to be of a much more limited scope, consisting of core geroscience therapies at the forefront of advanced biomedicine, Deep Knowledge Group, through its analytical subsidiary Aging Analytics Agency, has been working for the past 5+ years to landscape and understand the global multifaceted Longevity sphere - such expertise was acquired by means of examining enormous amounts of data and subsequent publication of tens of thousands of pages of open-access and proprietary analytical reports on the topic of Longevity Industry.

               

Compared to other regions (e.g. the U.K. and Switzerland), the perception of the Longevity Industry, in both its scope and main trends, in California in general and Silicon Valley in particular varies significantly. Here, it is most often conflated with biomedical moonshots - very advanced biomedicine not yet on the stage of human clinical trials - this is an angle that severely underestimates technologies which we consider to be within the scope of the Longevity Industry, which are actionable and closer to market readiness.

On a related note, while there is a persistent perception that only early stage venture funds are interested in Longevity, this is not the case. There are in fact dozens of huge, in some cases multi-billion dollar corporations that have become very actively and aggressively interested in the topic of Longevity in the past several years, and the category currently leading the pack are large financial corporations, including investment banks, pension funds and insurance companies. These companies are sponsoring and hosting conferences and producing analytical reports for their HWNI clients specifically on the topic of Longevity - among the names are Julius Baer, Prudential, CitiBank, Credit Suisse, UBS and others.

Our work in this area has led us to define Longevity Industry much more broadly, and to include sectors that lie completely outside of biomedicine - sectors like AgeTech, WealthTech, FinTech and the emerging Longevity Financial Industry, which are also much closer to market readiness and to market capitalization compared to the geroscience sector. These sectors are very underrepresented and undervalued in Silicon Valley and the USA, but are much more recognized in regions such as the U.K. and Switzerland.

One of the defining characteristics of Longevity.Capital, which sets it apart from other investment funds focused on the Longevity sphere, is its understanding and incorporation of these other sectors within the Longevity Industry.

In fact, our target portfolio is spread across 10 distinct sectors of the Longevity Industry, with only a quarter falling into geroscience and advanced biomedicine, and another quarter focused on advanced forms of precision preventive medicine that are already at the stage of market readiness and practical implementation. The other half of our portfolio covers sectors much closer to market readiness, and no less important for the continued, exponential growth of the global Longevity Industry - sectors like AI for Longevity R&D, FinTech, AgeTech, NeuroTech, Advanced Cosmetics and FemTech.

Due to the unprecedented complexity and multidimensionality of the Longevity Industry, the typical approaches used for analytics, investment target identification and due diligence that worked for the BioTech industry are destined to fail when applied to the Longevity Industry.

       

This has created an unmet need for analytical methodologies and de-risking techniques of equal complexity and multidimensionality as the Longevity Industry itself. And this has been a large part of Deep Knowledge Ventures Group's mission - to create a robust and sophisticated market intelligence and analytics platform that can survive under the enormous weight of the Longevity Industry.

        

While it is DKV's Longevity analytics subsidiary Aging Analytics Agency that has developed this framework over the past five years, it is DKV's newest subsidiary investment fund, Longevity.Capital, that will actually deploy and use it to structure its target portfolio spanning across 10 distinct sub-sectors of the global Longevity Industry.

Conclusions

     

  • While California in general and Silicon Valley in particular are in many ways the birthplace of Longevity Industry, and still to this day home to a larger proportion of core geroscience-focused companies than any other region, it is beginning to lose its overwhelming regional dominance due to the rapid development and diversification of Longevity Industry in other locales such the U.K., Switzerland, Israel, Singapore and others

  • Silicon Valley’s focus on certain specific, narrow niches within the biomedical sector of the Longevity Industry, while generally positive, leaves other sectors (such as AgeTech, Longevity WealthTech and FinTech, among others) vastly underrepresented, and puts the region at risk by not exhibiting enough cross-sector diversification

  • Moreover, the majority of leading Longevity investors are still operating under the paradigm and model of therapeutic validation (and, by extension, company valuation) that worked in the broader BioTech and BioPharma industries, leading to unjustified company valuations following successful preclinical trials in model organisms such as mice

  • However, due to the complexities of the biology of aging and underlying science and technology as well as intersectionality in the Longevity sphere, many companies are likely to fail, leading to much higher clinical trial failure rates, and ultimately a failure for many players to provide ROIs proportional to their valuations

  • If this trend continues, it could lead to general pessimism about the Longevity Industry among investors, and harm the prospects of the entire field, including non-biomedical sectors, by association

  • There is, however, still time to neutralize these risks by embracing new, more sophisticated approaches to investment analytics, due diligence, and company valuation, equal to the complexity, intersectionality and multidimensionality as the Longevity Industry itself. This is one of the foremost objectives of our new Longevity-focused hybrid investment fund, Longevity.Capital - a relevant, modern strategy for Longevity investment de-risking and diversification by investing across the entire scope of the Longevity industry (biomedicine, tech, finance) using sophisticated, multidimensional analytical frameworks and market intelligence of Aging Analytics Agency

  • In a similar vein, there is also still time to embrace more sophisticated, and more human-centric, approaches to therapeutic validation, less likely to lead to high clinical trial failure rates, which is a subject that will be explored in further detail in the upcoming book by Longevity.Capital and Deep Knowledge Group Co-Founders Dmitry Kaminskiy and Margaretta Colangelo: “Longevity Industry 1.0: Defining the Biggest and Most Complex Industry in Human History. 

Longevity.Capital is a hybrid investment fund specifically focused on the Longevity Industry, backed by seasoned professionals who have been active in both the investment banking and Longevity industries for 25+ years, long before the sector was recognized as a serious prospect by the overwhelming majority of investors. The fund employs advanced InvestTech solutions for investment de-risking, including portfolio diversification across the full scope of the Longevity industry (biomedicine, finance, tech), and formulates its investment strategy based on sophisticated industry intelligence and comparative analytics provided by the world-leading Longevity Analytics entity Aging Analytics Agency, which uses hundreds of quantitative and fact-based parameters to identify prospective investment targets for the fund, utilizing multidimensional analytical frameworks as complex as the industry itself.

               

Deep Knowledge Group is a consortium of commercial and non-profit organizations active on many fronts in the realm of DeepTech and Frontier Technologies (AI, Longevity, FinTech, GovTech, InvestTech), ranging from scientific research to investment, entrepreneurship, media, analytics and more. Its subsidiaries and associated organisations include Deep Knowledge Ventures, Longevity.Capital, AI-Pharma.Capital, Longevity FinTech Company, Deep Knowledge Analytics, Aging Analytics Agency, Biogerontology Research Foundation, Longevity Swiss Foundation, Longevity International UK - Secretariat for the UK All-Party Parliamentary on Longevity, and AI-Longevity Consortium at King’s College London.

          

Deep Knowledge Ventures is a leading investment fund focused on the synergetic convergence of DeepTech, frontier technologies and technological megatrends, known for its use of sophisticated analytical system for investment target identification and due-diligence. Major investment sectors include AI, Precision Medicine, Longevity, Blockchain and InvestTech. Deep Knowledge Ventures' Pharma-AI Index Hedge Fund combines the profitability of venture funds with the liquidity of hedge funds significantly de-risking the interests of LP’s and simultaneously providing the best and most promising AI companies with a relevant amount of investment.

           

Longevity Swiss Foundation is a leading Geneva-based Longevity Policy Non-profit and Think Tank working to leverage the national strengths and potentials of Switzerland in order to turn the nation into a world-leading Longevity Hub through the coordinated development of Longevity Politics and Governance, the Longevity BioTech Industry, Preventive Medicine, Precision Health and the emerging Longevity Financial Industry. Leveraging Switzerland’s existing reputation as a hub for independent international policy organizations, Longevity Swiss Foundation aims to turn Switzerland into the leading international hub for cross-sector and cross-nation Longevity Development projects and initiatives.