Using Cryptocurrency to Tap into the Wisdom of Crowds
August 26, 2022
Alok Tayi thinks the biggest obstacle to treating patients with rare diseases isn’t finding potential treatments but funding them. Vibe Bio, a decentralized autonomous organization, is building a community of patient advocates and investors where holders of a crypto currency token Vibe sells each get to vote on how to invest its pool of money in rare disease drug development efforts. Once a decision is made to invest in the development of a therapy, Vibe creates a traditional corporation and uses conventional financing mechanisms. We spoke to Tayi, co-founder and CEO of Vibe Bio, about its approach, why he believes it will lead to the development of therapies that would otherwise go unfunded, and how the company’s decision-making model works.
Daniel Levine: Alok, thanks for joining us.
Alok Tayi: Thank you so much for having me, Danny. Really appreciate it.
Daniel Levine: We’re going to talk about the challenges of funding rare disease drug development, Vibe Bio, and its effort to bring an innovative financing mechanism using cryptocurrency to address these challenges. Before we talk about what Vibe is doing specifically, I’d like to start with how you came to recognize the problem. How did your experience with your daughter lead to the development of Vibe?
Alok Tayi: Sure. Well, I’m actually a scientist. I spent about 15 years at the bench doing research and then mid-last year, my wife and I were fortunate enough to have our first kid. The pregnancy went okay. Unfortunately, our daughter was born very sick and spent a long time in the hospital. One of the hardest parts about that experience was that the diseases that she had were somewhat common, the biology well understood, but unfortunately there were no dedicated therapeutic options available to her. And as a consequence, our family felt frustrated, alone, and abandoned by the industry that we worked in, in the life sciences space. Inevitably, as you have a kid who’s in the NICU, you end up spending time with other families who also have sick children and especially those who suffer from rare diseases. And it was interesting in that one thread that tied us all together was the fact that though we all had tremendous hope that a treatment could be brought to bear to treat our child, unfortunately we all lacked the capital required to be able to bring those medicines to market. So it was from that experience that I drew the insight that ultimately, in this domain of rare diseases, the challenge is not finding a potential treatment, it’s actually funding it. And so, we decided to create Vibe Bio, which will hopefully give patients more ownership in this process over drug development, as well as a community. So, we’re building this community of patients, scientists, and partners to help us identify and vet potential treatments in the rare disease space and then fund them in innovative ways. And so, for the one in 10 Americans that are living with the rare disease that everyone is susceptible to, we hope to be able to give them both the community as well as the power to pursue it through.
Daniel Levine: Dive down a bit on the challenges of funding rare disease drug development. There are billions of dollars going into developing drugs for rare diseases. Is there something about the current capital markets that you think doesn’t work when it comes to funding these therapies?
Alok Tayi: For sure. Let me put you in the shoes of a parent who is actually just informed by their child’s doctor that their a loved one has a rare disease. Obviously it’s a very a lonely experience and an emotional one, but oftentimes many of these families, their first instinct is to go and try and beg biotech and pharma companies to work on the disease that their child has now for a variety of reasons. Those organizations, whether its from incentives or capacity and resources, aren’t able to actually pursue treatment for that specific disease. And as a result, families are relegated, on one hand, to depending on the generosity of billionaires, or relying on a myriad of bake sales to actually develop the capital to invest in treatment for their loved one. And so when it comes to the current environment today, if you actually look at how a biotech company operates, many of these organizations have phenomenal, exciting technology at their core, but have to, as any good organization does, focus on those that are going to have the best shot on goal. And in the case of biotech, optimized for the highest potential value for the organization. So what ends up happening is that these leaders and executives end up having to make the tough call of focusing the organization on one or two specific indications where they have capacity and resources, but then unfortunately deprioritize the balance. So naturally the industry just ends up focusing in on a small subset of overall disease and it leaves 95 percent of, you know, rare diseases, especially, with no treatment today.
Daniel Levine: Vibe is using what’s known as a decentralized autonomous organization model or a DAO. For listeners not familiar with this or cryptocurrency, can you explain how Vibe works?
Alok Tayi: Absolutely. A DAO is essentially a digital collective of individuals whose actions are determined based on a collective governance or voting amongst those who own tokens associated with that entity. And so, Vibe is, at the end of the day, a DAO, and we are a community of patients, scientists, and partners that help identify and vet potential treatments in the rare disease space and then fund them in innovative ways. We grant tokens to patients and scientists for participating in our community and then sell a small portion of tokens to external investors, such that the entity can build up a balance sheet. It’s that community then that can decide what specific drug development programs to invest in as a whole using the capital that’s available to the organization. So, in our circumstance, what we do is we’re going and actively partnering with patient advocacy groups and drug developers to help us identify and vet these different drug development programs. Patient communities are walking up to us with high potential candidate medicines that they want to fund and instantiate that interest in the form of a proposal. The drug development experts will then vet those proposals for clinical feasibility, scientific know how, financial plan, et cetera. The community can then release funds from the treasury to then be invested in those specific proposals. So, everything from clinical trials to GMP manufacturing to preclinical testing are within the remit of what we are pursuing here at Vibe.
Daniel Levine: How is this different than crowdsourcing ideas and funding them with say a traditional venture fund?
Alok Tayi: It’s a great question. What I’d first start with is that any given institution, especially in the biotech space, is often focused on what its funders are trying to optimize for. As we discussed earlier, one of the challenges that exists in traditional venture capital is that as an investor you are putting money into a venture fund that is inherently illiquid for 10 years. That means the investors, the general partners in that venture fund, have to go and allocate that capital to specific projects that hopefully allow them to return a fairly high return back to their investors because that capital is illiquid for a decade or longer. As a consequence, those organizations have to focus their resources and their limited capital into those projects that have the highest potential return as well as the lowest potential risk. At the end of the day, the traditional venture fund model has developed a lot of really great medicines to date, but has been less aligned to the rare disease space where you have 10,000 plus diseases out there that merit attention. So, first is that as an asset class, cryptocurrency allows us to be able to tap a completely new pool of capital that’s over a trillion dollars in overall value. You juxtapose that with maybe $10 to $20 billion in biotech venture and early stage investing. Further, crypto, because it’s token based, actually allows you to trade those tokens far more easily because of the liquidity inherent in that technology. So, it allows us to be able to tap a completely new pool of capital that’s different than traditional venture funds, but also bring that to bear in this domain of rare diseases. The second piece I’d also add is that when it comes to developing treatments for the rare disease space, there’s a lot of best practices know how and expertise that could be brought to bear to find a treatment for a given disease. Vibe allows this formation of a community of patients, scientists, and partners such that we can bring not only interesting and relevant capital, but also expertise in the form of drug development, best practices, shared services, et cetera, over time that those other sort of approaches don’t necessarily offer out of the gate.
Daniel Levine: Once Vibe decides to fund a therapeutic development plan, it creates a traditional C corporation to do that. Does that C Corp then turn to traditional funding mechanisms?
Alok Tayi: One of the reasons why we’ve instantiated our process the way we have, whereby the actual drug development work is done within a specific C Corp focus on a given disease, is because it allows that drug program to have maximum optionality in terms of how it progresses to enable that medicine to get to patients, whether it be partnering with a pharmaceutical company or raising traditional forms of capital. What we want to ensure is that that candidate medicine has as many avenues and pathways to be able to get to patients as possible; and in terms of doing the drug development within a C Corp, we believe gives us the maximum amount of flexibility to make that a reality. So, our DAO allows us to be able to build up that community and source capital to invest in these programs, but then the drug development work is actually done by a group of experts within that C Corp such that it can proceed from stage to stage in the drug development process.
Daniel Levine: What kind of ownership stake does Vibe take and how is the team put together to run the company? You mentioned there were some shared resources and infrastructure and management. Is this sort of a Bridgebio type of portfolio approach, a type of approach you’d see with accelerators?
Alok Tayi: I’d say there’s been a lot of really exciting innovation in the biotech space especially from the business model standpoint over the past decade or so. In our case, ownership is still to be determined in part because the initial programs that we’re licensing in, the licensors often take a measurable stake. And so, ask me in a few months and we’ll follow up on that point when details merge, but when it comes to how we operate, we very much see the community as a really key, critical facet of being able to develop treatments in the rare disease space, whether it be rare disease drug development experts from the regulatory perspective, clinical development, manufacturing, et cetera, or whether it be best practices that we can bring to the table around executing a clinical trial or choosing the right program, even when it comes to having common business processes that allow us to have scale over time and expedite the drug development process of across these different portfolios, these different programs. We see this as an opportunity by which we can actually leverage that community and its know how to be able to change the economics of actually pursuing these drug development programs. And I think there’s been a lot of really great work at places like Bridgebio, Nimbus Therapeutics, amongst others, which we draw tremendous inspiration from and really hope to be able to inculcate within Vibe as we progress.
Daniel Levine: My sense is this is a one token, one vote type of arrangement, but how much of the decision making is actually relying with the community of investors, as opposed to the core investors that have funded Vibe Bio?
Alok Tayi: Awesome question. Vibe issues a governance token called the Vibe token whereby a holder is then offered the right to be able to vote on different proposals and actions of the DAO as well as put forth drug development proposals of their own. Our current structure actually allocates substantially more tokens to patients and drug developers than it does investors such that we can ensure that the core community of patients and drug developers are going to be the ones who are in the driver’s seat of drug development. When we look at the overall approach of how our technology is evolving, we’re also enabling those third party investors to delegate their voting power to patients or drug developers, others in the community, especially if they don’t necessarily have the know how or the time to participate in all these different activities on an ongoing basis. So our core is very much going to be the patient. Our goal is to provide them with unprecedented ownership in the drug development process, such that patients, not profit or politics, drive the next generation of drug discovery.
Daniel Levine: You alluded to two companies that you’ve already partnered with. These are two patient advocacy organizations that have launched biotech companies that Vibe is funding. The first is Chelsea’s Hope, which is focused on Lafora disease, a rare and fatal epilepsy in children and adolescents. The other is working on a gene therapy for neurofibromatosis type 2, which causes non-cancerous tumors of the nervous system. Walk me through what vibe has done with each of these.
Alok Tayi: We’re really excited to announce these two partnerships with Chelsea’s Hope and NF2 Biosolutions, which are focused on Lafora and NF2, respectively. These two patient groups are amazing to work with and have already developed a robust community of patients, caregivers, medical KOLs, scientific leaders in the space, as well as develop a robust portfolio of programs that potentially could treat these fatal rare diseases. The challenge for both of these organizations, however, to date has been that they’ve been able to show that these medicines work in a preclinical context, but often lack the capital and focus amongst their partners to be able to get them into a clinical trial. So we’ve been excited to partner with these two institutions and launch two biotechs, New Hope Therapeutics and Merlin Therapeutics, respectively, to actually now in-license intellectual property associated with specific medicines to treat both Lafora and NF2 and advance those programs into the clinic. There’s a lot of excitement around the work that we’re doing with them because we’re hoping to be able to show how this patient- and community-driven model allows us to advance medicines and unlock the development of candidate treatments that historically would’ve sat on the shelf.
Daniel Levine: You’ve talked about putting patients in the driver’s seat for drug development. Help me get a better understanding of how Vibe does that. And is there a risk of a patient organization buying tokens to sort of game the system?
Alok Tayi: Patient communities are a critical part of how Vibe operates and our overall philosophy. I believe that any patient with a life altering disease, no matter how rare, deserves to be a part of a community and have the power to pursue a cure. In our case, Vibe empowers patient communities to be a key constituent within this community and can put forth proposals in terms of drug development for diseases that they care about. Patient communities can also vote and decide what the prioritization of these proposals are and fund them using capital from the DAO. Lastly, patient communities also have economic ownership of the C Corp associated with their disease. As those medicines are being developed Vibe, at the end of the day, is providing unprecedented ownership for patients in the drug development process by giving them a say, in terms of what’s pursued, on its priority. And it’s the capital allocation, as well as the actual development of those medicines.
Daniel Levine: Vibe has raised $12 million, which in the world of drug development, won’t fund that large a number of projects or take them far into clinical development. How is additional funding secured and allocated? Are you free to sell additional tokens at any time?
Alok Tayi: Thanks so much for the question. Let’s take a step back. What we’re really trying to do is ensure that we can empower patient communities to be in the driver’s seat of drug development. And the initial capital that we’ve raised allows us with fairly modest quantities of capital to actually be able to advance these medicines into later stages of development, including clinical trials. The interesting thing about the rare disease space is that it actually only costs perhaps a few hundred thousand dollars, maybe even a few million dollars, to actually be able to advance these medicines to a point where you can get to a clinical proof of concept. And so, what ends up happening is that the initial capital that we allocate allows these programs to advance, but also can attract more traditional financing or other sources of capital to support it as well. So, what we’ve seen in the broader drug development landscape is that there’s so much exciting work that’s happening in the discovery space with interesting promising programs at work in a Petri dish. On the other bookend of the spectrum, you have a tremendous amount of capital and partners available from pharma and Wall Street, et cetera. Once the medicine has started shown that clinical concept, it’s that interstitial phase that ends up becoming a gap. So that’s where Vibe Bio comes in and hopes to be a partner for many of these patient communities whereby we can help advance those programs into a clinical proof concept, leveraging our initial source of capital, help rally other sources as well, but then advance the program and then also hopefully provide financing downstream as well.
Daniel Levine: In the world of drug development, we hear a lot of talk about the valley of death, that gap between basic research funding and clinical development. Do you see this as kind of filling that gap, being a bridge, and de-risking a potential project where you can attract more traditional investors?
Alok Tayi: Absolutely. I think what we’re really hoping to do is again, put the patient in the driver’s seat of drug development. And I think a part of that is helping them move through the valley of death, whereby oftentimes you need 10 times more capital than you did in the research phase, and you need a different pool of expertise in order to be able to perform an initial clinical trial or do GMP manufacturing. So that’s where Vibe, I think, really can be a true partner for many of these patient communities—we can help them from a community and expertise and capital standpoint. But then second, from the biotech perspective, we can help de-risk programs such that when it comes to in- licensing programs and filling up their pipeline, we could be a potential partner, both in terms of taking on programs that might not be high priority, but then also as we start to develop and advance these programs and it becomes clear that the medicine could work, they could then take the baton and take the program the last mile. So, we really see ourselves very much filling that gap, as you alluded to, and being that partner for our patient communities for rare and overlooked diseases.
Daniel Levine: I suspect our listeners are going to be far more familiar with stocks as opposed to cryptocurrency. What are the issues around regulation and how do you address disclosure and transparency for someone buying a token? How can they know what Vibe is doing with that money?
Alok Tayi: It’s an amazing question and I think it’s one of the benefits of using blockchain technology, which ultimately is a public ledger of all the transactions and all the flow of money in the organization. So, it’s all public is the key takeaway when one actually purchases the token and participates in the governance of the DAO and either identifying medicines or voting on the allocation of capital, everything from the individual votes to where the capital is allocated is all recorded publicly on the blockchain and is viewable by anyone at any time. So, it gives a tremendous amount of transparency and trust in the system because the work that’s being done and the will of the community is then being executed and then also recorded live on the blockchain itself. It provides, I think, a tremendous amount of clarity for all participants, unlike some other approaches that are out there today.
Daniel Levine: We’ve seen patients and patient organizations grow far more sophisticated about the drug development process and really take a more direct and hands on approach to it. Why would a patient organization go the Vibe route, buy tokens, and make a case for their therapeutic program rather than seeking a more traditional approach?
Alok Tayi: Well, it’s not an either/or. We think they should do both. I think NF2 BioSolutions is a great example here where Nicole Henwood and team at NF2 BioSolutions have raised over seven figures in philanthropic dollars over the past few years, and have developed an impressive pipeline of almost a dozen different types of candidate medicines for treating neurofibromatosis type 2. But oftentimes what ends up happening is that many of these patient communities who are deeply involved and engaged in the drug development process often get stuck. They get stuck either because a biotech or pharma company can’t prioritize their program, or because of the quantity of capital required to actually initiate a clinical trial. And the types of expertise needed just tends to be out of their reach. So, when we start to pursue these different drug development programs Vibe Bio is fundamentally hoping to be a partner for these patient communities to be able to help take the baton and get them the next stage of drug development, whereby we can leverage our community of experts and best practices and know how to be able to advance these medicines from in vitro proof of concept to clinical proof concept, but also leverage innovative financing mechanisms through cryptocurrency to actually finance the work into a clinical trial as well, and so hopefully to a human POC and beyond.
Daniel Levine: Alok Tayi, co-founder and CEO of Vibe Bio. Alok, thanks so much for your time today.
Alok Tayi: Thanks so much, Danny. Really appreciate it.
Sign up for updates straight to your inbox.