Founding Bio #1: Andrew Rudd, CEO of Palm Therapeutics
An in depth interview with Andrew Rudd, PhD, CEO and Founder of Palm Therapeutics on how he started a pharmaceutical company from his academic research.
About Founding Bio:
It is becoming increasingly common for academic trainees in the life sciences, both graduate students and postdocs, to found and lead companies based on their academic research, a movement termed founder-led bio. The idea of starting a company when your whole career has been in academia can be overwhelming. There are increasingly more resources available for making this transition, such as the student-run accelerator Nucleate, the spinout playbook by 50 Years, and the Founder Playlist from Pillar VC. I want this Substack to be an additional resource that allows aspiring founders from academia to read about the experiences of people who have been in their shoes. I will be doing monthly interviews with people running early-stage startups they founded as academic trainees. These interviews will go into detail on topics like the tech transfer process when to spin out, and getting initial funding.
“Starting a company was not my goal going into graduate school … I just knew that I loved doing research and I really wanted to do that full-time and then see where I ended up.”
-Andrew Rudd PhD, Founder and CEO of Palm Therapeutics
This month’s interview is with Andrew Rudd, Ph.D., the founder and CEO of Palm Therapeutics. Palm Therapeutics is based in San Diego and has developed a drug discovery platform for identifying small molecules to modulate palmitoylation of therapeutic targets. Palmitoylation is a lipid-based post-translational protein modification that regulates the activity of a wide variety of proteins. Andrew spun out Palm Therapeutics from his work in the lab of Neal Deveraj at UC San Diego, where he completed his Ph.D. and was a postdoctoral fellow before leaving to start Palm. In this interview, Andrew details his experience starting a pharmaceutical company based on technology he developed as a trainee, his successes in applying for SBIRs, and his advice for growing your network “one connection at a time”.
1. Let’s start with your background and an overview of Palm Therapeutics.
I completed my bachelor's in chemistry at St. Olaf College, which is a small liberal arts school in Minnesota. I went into undergrad knowing that I had a strong passion for science, but not quite sure what kind of career I was interested in. I did know that I was interested in research so every year I applied for summer research opportunities, and my junior year I was fortunate enough to be selected for a research program at my college. I joined a lab that was focused on studying lipid-binding proteins, a particular class of proteins called perilipins. Our group was interested in understanding what triggers perilipins to bind to lipid droplets and prevent the breakdown of fat. So there's a human health angle there, but also this interesting lipid angle and that kind of seeded the trajectory of my whole career.
With a newfound love for scientific research, I applied for grad schools and that’s when I discovered Neal Deveraj’s group at UC San Diego that was focused on engineering lipid membranes and artificial lipid membranes to do really interesting things, developing model cells or understanding very fundamental and philosophical questions about how the first forms of life and membranes arose. As you can imagine, in order to really have life, you have to have some barrier that defines “self” from “not self”. These were the kind of fundamental questions we were chipping away at using some chemical tools that had never really been applied in that way.
Palm Therapeutics is focused on developing the first palmitoylation-targeted therapies, which is this really fascinating post-translational modification that plays a modulating role in a number of high-value drug targets. We see palmitoylation as this really unique opportunity that has a very strong biological premise and is important for the function of a number of really marquee drug targets. However, what's really been lacking are the tools to actually go after that from a drug development standpoint. Therefore, Palm started by developing the tools that enable this area of drug discovery. This was all born out of some work I did towards the end of my PhD at UC San Diego, where we were developing really some of the first small molecule probes to study palmitoylation and began to realize that having the ability, with a small molecule modality, to modulate palmitoylation could have tremendous therapeutic value.
2. How did the technology for studying palmitoylation come about? Did you go into grad school with the goal, “I'm going to join a lab where I can do something to start a company.”? Or did you have a project that evolved into something where you and your PI thought, “Oh, there might be something here that could be interesting.”?
The technology is something that I think in its earliest form, I started working on in 2018 and 2019 (Palm Therapeutics was launched in early 2021). And it really started out as more of an exploratory question where we had developed a unique understanding of certain chemistries and their ability to operate under biological conditions, pH 7.4, complex biological milieu, and then came across this functionality called palmitoylation and realized that the chemistry matched up in a way that we could potentially modulate that in biology. This really opened up a larger question of how can we think about potentially drugging palmitoylation and that kind of expanded into a more comprehensive drug discovery engine.
Starting a company was not my goal going into graduate school. I didn't really have a specific career in mind going into graduate school. I just knew that I loved doing research and I really wanted to do that full-time and then see where I ended up. I just joined a lab that was doing research I thought was interesting and that I was passionate about.
3. The Deveraj Lab does a lot of work on lipid biology and chemical biology. Had Dr. Devaraj started a company before Palm Therapeutics? What is his level of involvement in the company now?
This is the first company that Neal has ever been a part of, so we both went into this as newbies, trying to figure this out. The impetus for starting a company around this is that we thought this was really interesting and then we started having conversations with professors who had gone down that path and they introduced us to people who were excited about the potential of what we could do here. At that point, we incorporated and then set about figuring out the other aspects of tech transfer, funding, et cetera.
Now, Neal is head of the scientific advisory board and we still talk about once a week. He’s an incredible resource and sounding board and someone who's intimately familiar with our science. And he’s also able to tap into his relationships with other academics or pharma connections in his network as well. But again, neither of us having done this before, we did not start out with an extensive network and it’s something we have had to build over time.
4. You licensed a patent for your technology from UCSD. What was the tech transfer process like? And what would be your recommendations for other founders navigating tech transfer?
The timeline of the process depends on how much negotiation you're doing with them and how well the license suits your needs out of the gate. It can be really hard early on when you’re starting and don't have money, because the legal review can get very expensive. By the time we were licensing the IP, we had brought an advisor who had some experience in this area and he marked up the agreement a bit. hen we had our attorneys do a very light touch on it before we finalized.
At the end of the day, it [the patent] ended up being something we no longer needed so we terminated that license. Even though we don’t use that patent anymore, I do think it helped with applying for SBIRs. It's something that we explicitly mentioned in the applications, and I think it was well-received by reviewers.
Licensing terms can depend a lot on the area. The way that ours was set up, it basically boils down to three categories; milestone payments, royalties, and maintenance fees.
5. You're the only founder who is full-time with Palm Therapeutics. How did you make that decision? How do you think it would have been different had you spun out with another full-time co-founder?
Part of it was that's just how it played out. I wasn’t opposed to having a co-founder. I was the only one who worked on this project, and no one else in the lab was working on anything similar, and no one else was looking to start a company. I would have liked to have a co-founder. But there are pros and cons. The pro, obviously, with two people, is now you've got twice the amount of effort. The con is that now you have twice the amount of salary that you have to accommodate. I think if you're able to get money [venture funding] right out of the gate, two co-founders is a good situation. But if you're trying to bootstrap with SBIRs it's going to be harder. Basically, from a Phase I SBIR, you could probably fund both of you, but that's it.
6. On the topic of SBIRs, you’ve received two Phase I SBIRs. What has your experience been applying and what advice do you have?
Before applying, in terms of help, I talked to a few people that had written SBIRs before and got a couple of tips, but for the most part, I just taught myself how to do it. There are a lot of resources online and if you've done grant writing before, especially for the NIH, it's similar. There are some differences in the research portion and how you want to frame things, but the scientific writing is pretty similar, so I wasn't completely unfamiliar with that.
What was a lot more difficult to learn is when you write a grant at the university, you think all the work is writing the grant, but that's only about half the work, because the grant office is doing the other half of the work, which is all the logistics, all the other registrations, all the FAR compliant government accounting, all that other stuff. And so half the work is done for you when you're at the university. So now when you're own company, you're doing both sides of it. So that part is rough. And they [SBIRs] have low success rates, I think for the ones we got, the success rates each year is between 5% and 10%. You're always hoping and praying that you get some reviewers that like it. But I've been in situations where something goes in once, it gets a really good score, maybe borderline [for being funded]. You submit a revision and it doesn't get scored. Like most things, it's a numbers game.
[On SBIRs versus venture funding]
I decided on SBIRs because of the stage of the company for the most part. We had some venture talks early on, but we were too early for most funds and also just starting to learn how the VC world operates. We ended up being able to more easily access capital through SBIRs though we were certainly open to that [venture funding].
7. One of the most overwhelming aspects of starting a company for people that have spent most of their career in academia is the logistics. How did you find a lawyer, incorporate your company, find lab space, and hire your first employee?
The first step was really incorporation. We talked to a couple of other professors who had spun stuff out before and got some attorney recommendations. We found one law firm we really like that was much more affordable and they basically did everything. They basically just had a set fee for incorporating a company and setting everything up. They just charged us a flat fee, it was somewhere between $5,000 and $10,000.
[On finding lab space at JLABS in San Diego]
There are more options now in San Diego. When we started, there was really only two biotech incubator co-working spaces. There's JLABS and Biolabs. That's really it aside from finding, like, a sublease somewhere where you don't have any equipment. Especially working on SBIRs, you need to avoid that overhead. There's no other way you can do this otherwise, right? Both spaces had an application process. JLABS was more intensive. It goes through a whole internal review process. The application is pretty extensive, too, in terms of describing everything about your company. And then they basically decide whether or not you get admitted to the space. And that's also contingent on whether they have space or not. The other thing too, is that if you're applying for SBIRs, if you're not currently in your own space, you need a letter that guarantees you space, so it was important for us to get started on that early.
[On finding employees]
I’ve hired one research associate. I posted a job on LinkedIn and paid to sponsor the posting and then word of mouth. My advice with that would be just be patient. Even if you feel like you got to really go now and get someone in, it's not going to be the end of the world if you have to wait a couple of more months to find the right person.
8. How has your pitch deck changed over time? How did you start meeting potential investors?
The pitch deck is constantly evolving. It took a while to be able to put together a compelling message. And that message has changed over time too, based on what we've learned. But I think the biggest difference is getting comfortable with really high-level explanation of what you're doing. It's okay if you only have one slide that has data on it. It took time too to learn the language investors use to communicate. To understand how venture capital works, I did a bunch of different programs, both at UCSD and elsewhere. I did a program through the OIC (office of innovation and commercialization) at UCSD with several other UCSD founders where we spent most of the program working on our pitch decks. Just looking at other people's example pitch decks, understanding how they're selling their story was really helpful. I think it took time too, understanding potentially what is going through an investor's mind when they're looking at this, and making sure that the value proposition is front and center. Whether that's putting some really compelling comparables on a slide towards the end, or really highlighting the therapeutic markets for these different indications. At the end of the day, the most important parts are a combination of what's the opportunity and why are we the best ones to address that or solve that problem? And then additionally, what's our competitive advantage?
As far as meeting investors, when I started seriously pursuing VC and angel funding, I really focused on networking, particularly in San Diego. And the San Diego ecosystem is awesome. I mean, it's super supportive. I could just basically cold email CEOs of San Diego biotech companies and they'll just get back to you and go have a coffee and then they would give me warm intros to VCs. And so that's how I did a ton of it, it was through meeting people. I participated in the Connect program as well. They did this cool thing where they set up a founder roundtable where I said I wanted to participate and they said, “Great, here's some names of biotech execs we've worked with before. Why don't you also throw in some suggestions, we'll reach out to them.” I went and shared our story to a roundtable of four or five different biotech execs who were willing to help mentor me and make introductions. I was able to get a bunch of connections that way as well and I believe that's the best way to do it, but it also takes a lot of time and obviously you're not going to be able to hit every VC on your list that way. I've cold-emailed before and that's less successful, but I've gotten some meetings that way and then also presenting at and participating in investment events or partnership events.
9. Many CEOs of life sciences companies tend to be older, usually with extensive experience in pharma. Have you noticed any challenges for yourself having been part of this founder-led bio movement?
It's an interesting question. I've thought about it more and more recently. It makes a lot of sense why you [as a VC] would want a founding team who has 20 years of experience. But I think that founder-led bio can also be a great recipe for success. here are a lot of exciting outside-of-the-box ideas that are coming out of academia.
I think it's also important to try and bring relevant expertise on board, bringing on strong advisors who do have that experience, that you can point to for investors. I think [experience] can be an uphill battle though, for sure. And so you have to be ready to address concerns about lack of experience and the best way to do that is to point to advisors and the more hands-on they are, the better. And the more connected they are, the better. But it's difficult to find the advisors that are the most connected because they're very picky about what they're going to sign on for.
10. How did you find formal advisors and informal mentors when you started Palm Therapeutics?
Early on [finding advisors for Palm], it was tough. We got introduced to a few people early on. So I was able to bring on a couple of advisors that I got connected through a pitch prep program at UCSD, at the OIC. That and then just networking. I think spending time networking and finding people that are a really good technical fit but also a personal fit is good. Just talk to people. Talk to someone you can get a warm introduction to and then just share your story and why you're excited about what you're doing. And then say, “Hey, we're trying to identify advisors in these key areas”, and they can probably point you in the direction and you just kind of iterate off that.
[On what to look for in an advisor]
Yeah, I think one thing is skill set. So trying to initially understand what are the pieces of expertise you want to bring in. So for us that was we need a medicinal chemist with pharma experience, we need someone, preferably a current biotech executive, with investor relationships and then filling in the gaps. And maybe there are key opinion leaders in your area, that's great as well.
11. What skills from academia have been most useful and what area have you had to learn the most as a founder?
I think the most powerful non-scientific skills have been leadership and mentorship skills. I was fortunate enough to mentor a bunch of undergraduates, PhD students, and even postdocs in our lab. And then writing skills. 100% writing skills, writing and communication skills. I wrote a bunch in grad school, scientifically and otherwise. And so I was very comfortable when it came time to write SBIR grants and do other things like that or write just marketing or communication materials for the company and so I think that was a huge one. I mean, just being able to be confident presenting to a group of people was something that I was forced to do a lot in my academic career and so that paid off for sure.
For challenges, understanding the networking aspect of [starting a company] was something that I was not terribly comfortable with. I’m naturally a pretty shy person as well. And so understanding that I could do that in a way that wasn't forcing myself to go to some reception and talk to random people. It was actually just one connection at a time. And that was more valuable, and I was much more comfortable with that as well. The other thing was becoming comfortable in a situation where you don't really know much about anything. Because I think in academia, you’re in a situation where you know what you're doing inside and out. You're super comfortable with that. You feel like you are really exceeding. With starting a company, you feel at first like you have to do everything perfectly. You beat yourself up about it. But getting over that hurdle and just being like, “Yeah, I'm just going to suck at this for a while, probably a long time.” And just being okay with that was pretty freeing and better for my mental health. Instead of being incredibly anxious and feeling like you had to know everything about it inside and out. And instead of realizing it's okay to just be like, “Oh, I don’t understand this, maybe can you tell me more about that?” That was huge. Instead of being in an academic environment where you feel like that can be taken as an expression of being uninformed, where you're used to someone picking apart the finest details of everything you're doing. There's no way for you to operate like that as a founder, doing all these different roles, so you have to let that perfectionism go.