This episode is sponsored by Circle.
Can decentralized organizations help lower the costs of medications and accelerate medical research?
On today’s episode of “Money Reimagined,” host Michael Casey sits down with Genetic Networks founder and Chairman Gennaro D'Urso to talk about his efforts to change the inefficiencies of Big Pharma by using a revolutionary DAO-like model to help fund drug discoveries and possibly cure future diseases.
This episode was produced by Nicole Link, edited by Michele Musso and announced by Adam B. Levine. Our theme song is “Shepard.”
Michael Casey 00:00
Hello and welcome to Money Reimagined. I'm Michael Casey, I'm on my lonesome. Today Sheila is out for the week. We're talking about medicine today specifically the role that decentralized organizations or DAOs can play in helping to lower the astronomical cost of drug development and to accelerate it. I'm joined by Gennaro D'Urso, the founder, and chairman of Genetic Networks, whose idea for something he's calling Pharma DAO, is getting a lot of attention. It's a radical new way of getting around the inefficiencies and monopolistic behavior of Big Pharma to find treatments for diseases more rapidly and at a lower cost. In the midst of a global pandemic, that has put into stark relief, the need for rapid drug discovery and development. And in the wake of the opioid epidemic with its revelations of wrongdoing by big Pharma. The idea is as timely as they come. So let's bring in Gennaro to explain the concept. Hi, there, Gennaro.
Gennaro D'Urso 00:51
Hey, great to see Michael.
Michael Casey 00:53
So I met you I think about a month ago, maybe in Lisbon, and you are sort of certain float this idea. And then you've been on a kind of a whirlwind tour. You went off to the workweek Forum at Davos, and you were then at Consensus and a bunch of other places. And it sounds like you're getting a lot of traction here. So intrigued to hear a little bit about where it's headed. But before we do that, why don't you just write down the problem you're trying to solve? What is it that you see as the need here? And then we can talk about how a DAO can fix that and get into where things are headed from there. So what is the big solution? What is the big problem? You're trying to tackle here?
Gennaro DeRosa 01:28
Oh, that's a great question. I think the way I've been looking at this over the past six months or so since really looking at DAOs, blockchain technology, and where it can be applied to the problems of drug discovery and finding medications to heal people. It's really about I think, big purpose ideas. And so, for me, decentralization was a phenomenal experiment that obviously showed that people wanted it. And obviously, we saw bitcoin go to 20,000 or so from nothing. That's clearly a demonstration that people want a change. But I think in cases like medicine, where it is so expensive, to drive a drug to market, we're talking, you know, average of three to 5 billion nowadays, through the Big Pharma process, in my mind, not very sustainable as a model, the thing that drove me to realize that decentralization could help to drive not only prices down, but also the speed of delivery of drugs, is the fact that there's a lot of use for drugs that have already been developed. So there are safe drugs that have already passed most criteria for acceptance, which is FDA predominantly, but also approved approvals take place in other countries, there's about 7500 approved drugs out there. And the technology that people like Lee Hartwell has, was a partner with me, and other really remarkable scientists that work with me, we developed technologies over a few decades, really, in a sense, where we now have the ability to identify potential uses of those drugs, that, quite frankly, was never available before. And that is really what drove me towards decentralization because I felt by having that technology and bringing it to the people, we can literally bring uses for drugs that are already out there already safe, that are already inexpensive and off pattern and try to apply those and problems that we have. So that's the big picture. The big picture is I like to think of it as decentralizing purpose.
Michael Casey 03:38
So you've got this process that at your level, the application level there in a way to actually develop and accelerate the drug discovery process. But why is it not efficient to just take that to Big Pharma and fundraise through them? What is it that you need to do to get a decentralized funding approach to that accelerated discovery process that you have the technology to deploy?
Gennaro DeRosa 04:01
Yeah, I think that's another very good question. And the way that can be explained quite easily, I think, is it's just the nature of the business itself, the way things had been done in the past, or are still done is literally the only interest is making new drugs in industry, because the cost of the infrastructure that Big Pharma has to pay every year is enormous, quite frankly, they're very large companies. Everybody knows that their interest is largely in drugs that are going to get billions of revenue, and it limits the number of drugs they can go after. And it's always a really challenge to find a new drug to find new IP, and they spent most of their time and I'm not saying it's a bad thing. It's just that's the way the business operates. They look for new IP and new opportunities to make billions of revenue to support the large expense of making drugs. I think this is revolutionary in the point of view that the infrastructure costs will We do is very low, it's analytical, and also experimental sweat lab combined with analytics. But there really is no need. As we all learned in the last two years, there's not a much need for a lot of space. And a lot of this can be done offline. So the key thing here is that the expense is overwhelming for Big Pharma, they have to produce very expensive drugs, repurposing drugs has never been something that would make enough money, but it can still be profitable. And that's where decentralization comes in.
Michael Casey 05:27
And the some of the you said to me that I thought was just really took my imagination beggar, and that is that think of all of the communities out there have families of people who have an interest in finding the cure to a particular disease and how they can be kind of motivated now to participate in something like a DAO to fund this. So, you know, my sister sadly died of of melanoma about four or five years ago, we all contribute to the melanoma society in Australia, we do you know, but all of us, the thing that we would probably most like to see happen is a cure, or some sort of like accelerated treatment for melanoma, of which there's just one of obviously countless diseases and cancers and problems that are out there. So it seems to me there's like a ready made community of passionate people who would like to see these things accelerated. How are you thinking about incorporating them into, you know, a dowel like model?
Gennaro DeRosa 06:19
I think it's important to state my background is, I'm a scientist, I've been a scientists rover. So I've made my 40 year market, I've had four decades of research experience, and I worked on the cell cycle when I was young, younger, still young, I hope, basically, we discovered the genes that as a group, and Lee Hartwell was the primary person that led this charge for the cell cycle on cell division. And we discovered several genes over the years as a group against scientific community that lead to treatments for cancer. I think there's several drugs now FDA approved and working to save lives, and making billions of dollars, quite frankly, for Pharma. As scientists, we don't really get a reward for that, other than a job that's stable, etcetera, we don't get royalties for the genes we discover anymore. And Supreme Court decided against that. And so that was a big hit to me when I was younger, I was part of my drive was to, you know, I wanted economics as well. And I had a salary, but I could love to have some money if I discovered a gene. And that was taken away from us. And so at that point, I started thinking about a company. And I had a platform that I was developing, with my team and others that weren't. So that's, you know, so important to realize that I have an academic background, I know the research institutes, you're speaking of the foundations, I have a community of scientists that know me, know really hard, well, yes, we can get to all of those institutions, and get them supporting this for different reasons. And I've worked on things like spinal muscular atrophy, Parkinson's disease, et cetera. And when I find generic drugs that might have a value, I have never been able to get any pharmaceutical industry interested in that, even though they could be potentially life saving. It's just not economically feasible. And I'm not complaining about Pharma. And I would never do that. It's just that that model doesn't work. So de risking the risk of making drugs, across millions and possibly billions of people in a decentralized funding could be absolutely revolutionary for finding treatments, we need to remember 7500 drugs are approved. And we have no idea what they can be used for. And I believe they can be used for many things.
Michael Casey 08:34
So that derisking concept is really important, right? I mean, is it fair to say that the way that you're thinking about this from a doubt, yeah, you're basically diffusing the interest in this across a large group of people who have a different set of incentives for being involved. Some of them might be financial, but a lot of them as you know, to use my example, is really just a passionate one. And therefore my sort of tolerance as a as a collective group is different from that of a big pharmaceutical company that is looking for the blockbuster drug, and so therefore, you're spreading the risk more widely. Is that the right way to describe it?
Gennaro DeRosa 09:06
That's precisely the way to describe it. When people ask me, Why a DAO, that's the answer. It's a derisk move, because I'm not kidding anyone making a drug, even a repurpose drug is a challenge. It's not going to happen just because I have this wonderful technology to help us evaluate these things. It's going to happen every week. But I want to emphasize that one single drug being discovered could literally lead to enough revenue to sustain any type of nonprofit or otherwise institution forever. The amount of money that's involved in any drug discovery is astronomical. And all you have to do is look up Cystic Fibrosis Foundation to find that out. They had $5 billion in their treasury based on a single drug being manufactured by vertex pharmaceuticals, that they help support In fact, they spent all their money supporting it by vertex put no dollars into, it was really funded by Cystic Fibrosis Foundation, who got $3.5 billion for 10% royalty. So the reason it works and decentralization is because the market is so large, it's a $1.7 trillion market. If you just get a small fraction of that market, you will sustain a DAO for indefinitely. question would be how many drugs can you find if you have an indefinitely running machine that can fund small trials that cost less because they're safe drugs, you don't have to go through safety, you just have to go through a phase two a or phase two B, which might cost you know, 5 million in some cases. And that's nothing compared to what, you know, a typical drug would cost. So this is what I'm excited about. It's the de risking of a very risky process.
Michael Casey 10:51
So tell me a little bit about what the feedback you've had. And you've been talking to a lot of different people, potential investors, but presumably, you're talking to some of these foundations and their interests. You're talking to the people in the medical community, I don't know if you're talking to governments about this, but obviously, as we come out of the, you know, or still are in perhaps I, myself, full disclosure had COVID. Last week, in this pandemic, there's so much attention right now on the need to develop treatments for this or for future diseases going forward. How are you locating this proposal in that discussion? And are you getting you know, what sort of feedback and traction Are you getting?
Gennaro DeRosa 11:31
Yeah, so I think the best way to describe what's going on is to tell you a little bit of the history what happened, I was a typical company coming out of academia and running it myself and trying to sell the pharma the screening that we do, and it was working, I was profitable the last four years, it's been a great ride and really enjoying it, great group of people. And it's a very small group. But when the pandemic happened, which I'm glad you raised the pandemic, because this is a moment when we had some profit, and we put it back into the company to try to solve a big problem, which was find a treatment for people that were dying in the hospitals. And we didn't really concern ourselves very much with the virus, we knew that Pharma would go after the virus, that's what they do. And we knew that vaccines would be developed. So we actually took a different path. And based on the way our technology works, I won't go into right now. But you know, I'm happy to describe that some time, we went after drugs for mortality, we went after drugs that could save people from dying, because we really felt that was the most important thing. One thing to get a cold, it's another thing to die from a cold. So I searched for drugs that I thought could do that by looking at retrospective analysis. And regardless of what drugs I found, I found some that look promising. And so I had screened those in my library or in our library, a genetic networks meet. And we basically found a number of drugs that looked similar based on our functional profiling. And it turned out when we went to farm and tested those, about 70% of them worked to block the virus, and some of those random inflammatory, I think, actually all of them have anti inflammatory activity, which would explain why they were reducing mortality, because that's what people are dying from inflammation. So we're super excited about this course. And we ran to put our discovery on paper. And we did that. And then we went to pharma, where we obviously were met with these are not our drugs. This is not something we want to pursue, and that's understandable. But then we went to government. So you mentioned government, and I spent a lot of time and money, lobbying and just trying to get people to to understand what we had. And in the end, two years later, I'm happy to say that things are moving forward, and government is getting behind us. And we're trying to start the process of screening over 7,000 drugs we have not screened yet.
Michael Casey 13:40
Within two years, how many millions of lives later, right? Let's just be clear about it.
Gennaro DeRosa 13:45
Well, exactly. I mean, there's been over a million deaths in this country. And I think we could have saved half of them. The drugs we already have. But now it's a process that you have to go through. And it's just the way it is. And I you know, I teared up when I was realizing how long it will take before I got anywhere. And it took longer than I thought actually I thought it took about a year ended up taking two years. But we are there. And then now I'm going out and thanks to people, to be quite frank, like you, Michael and other people that have met me somewhere and realize what we were doing is really important. In six months. I've been all over the world, actually, from Venice, to Lisbon to Norway, to Austin to New York. And the response has been overwhelming, quite frankly, I've been I gave a talk at Consensus. And I had an hour long line of people asking me questions, and some of them are almost tearing up, because they felt that this was a use case for blockchain that was desperately needed to help blockchain work in this decentralization world. And it was really touching and gave me goosebumps. And I was like, okay, this is something that I have to really do and really push. And so it's been overwhelming the response and as really exciting to be in a position where the work of Lee Hartwell, he's 83 years old. He's a phenomenal scientist. He's very quiet, modest. Just to have him be by my side, going down this path is just absolutely thrilling. I really hope we can reach a point where we save lives and make a difference.
Michael Casey 15:11
You so have an interesting personal story in this as well. And that sense that you were blind at one point, right? I mean, just this idea about being at the right time and how important these treatments can be used. Tell us a little bit about that story.
Gennaro DeRosa 15:22
Yeah, it's an interesting one. I don't tell very often that when I was 15, I was a photographer, I was quite a dedicated photographer, I used to spend all my waking hours pretty much in a darkroom. We shot in New York, and I used to live in New York and New Jersey. And so ended up getting keratoconus, genetic disorder of the eye, which causes the cornea to misshapen. And I went blind, kinda sucked, I was you know a photographer and all of a sudden, I can't see, and I'm young, 17 years old. And I tried glasses for a while and it didn't work out for a while and contacts didn't work. And then finally, I was getting frustrated after taking trips to New York every weekend and get reset with contacts that never worked. I just said to doctor, What help can I do here, this is terrible, you know, and he said, Well, you can get a transplant. And there was a new technique at the time was invented by George Buxton, from Argentina. And he was in New York Eye and Ear Infirmary, which is like one of the top eye hospitals in the world. And he did the surgery on me. And I still have that cornea that he put on my eye, when I was 17. It's remarkable how long it's lasted. I hate when doctors tell me, it's amazing, it's less than this one that really makes me upset. But it has lasted this long, and I can see fine. And when I did, I realized that medical technology is ultimately a lifesaver. Saved my life in a sense. And I was working in factories, I didn't have any real, you know, dream of doing anything special. And then I realized I was reasonably smart and could study and went to college and ended up getting fired up on science because medical technology was kind of in my brain. Before you knew it. I was a geophysics major, and then a biology PhD, and I was all over the place studying all types of science. And I ended up in a lab that would go on to win a Nobel Prize. So you know, life changing things can happen from medical technology. And if I can do that, save a life somewhere online. You know, that's remarkable thing. And, you know, just to give you an idea of where we come from my partner, Cory Missoula, who is one of my scientists, partners, co founder, he gave away a kidney and honestly, like people like I hang out with are not dedicated to money as much as they're dedicated to saving lives. And so this is what we're about. And I think it's really important that story, because it just shows how things can change when somebody is generous enough to provide something you need.
Michael Casey 17:44
So let's get the money question here. Because I mean, I know that you're still figuring out what the structure of the DAO would look like, and how you go about, like launching it and so forth. But I mean, one of the issues that inevitably will come up is like, you know, how is the money dispersed and with their revenue? Who does that go to? And then what is the legal framework around this? Okay, these are questions to answer, perhaps going forward, like, you know, is the thinking here that the supporters of the DAO, even if there is going to be this funding mechanism coming back to them, if there's a successful drug, I really not in it for profit, right, that this is a this is a different way of thinking about? It's not really philanthropy, but it's also not necessarily a for profit operation. Right. So how do you thread that needle in the way you think about what what the structure of the DAO is going to be? Yeah, so that's a great question. I've been working on this for about six months, as I mentioned earlier, I have some real experts involved that are much more web three, savvy than I am, I've been down the path. And this is sort of recent discoveries. I've been down the path of tokenomics and looking at different token structures. But we're always running into the same problem in that tokens are going to be securities most likely. And what is the security you run into the problem of accredited versus non accredited investors, I'm happy to report actually measure how much I want to say about the details of this because I don't know them as well as others in my group. But at the high level, I'll give you an a high level idea that I'm very excited about. That came to me in early morning a few days ago in New York. And when I was struggling with the idea of security problems, I realized there's another path one can take that involves NF T's and NF T's are, by definition, not a security, but they also are a measure of success. And so, in my mind, that business model has been created by the production of NFTS has been proven. I think one of the NFT Collections has a market cap right now 4.7 billion, which is quite remarkable because it's not really tied to any use or any real purpose. But I think the point was that it created the understanding of new business models that can be created on blockchain with NFTs, and that hit me hard and I I woke up in my subconscious state with this concept. And I ran it by a few experts. And they basically said it was sound, that would work legally. And it would also give him opportunities, not so much on speculation of currencies. But speculation on whether or not I'll do any good in the world. And if I do, the value will go up of the things associated with that. But there's other mechanisms we're looking at, that will give for those that want it a potential reward. But those that just want to be altruistic will have that opportunity as well. So don't bother a non for profit foundation as well. But I think it's really exciting. I'm thrilled about it, actually. And I just can't wait to be able to tell you about the details of this when we have it all ironed out. But the people involved are brilliant, and young. That's the two things I've noticed in this world today. How absolutely brilliant some of these younger people are. They're over the top. Some of them are, you know, scammers and this and that. And overall, of course, that's always going to be there. But the real real deal ones are amazing. And they really have the right attitude, somebody like A Sam Bankman, and those people I've noticed, those are groups that really do want to make a difference, I think I think with their help, etc. You know, that's going to be the future.
Gennaro DeRosa 19:08
But what's interesting, just we're just reflecting on, this a little bit like is it's the ambiguity of the sense of what value is. And we have this very rigid way of talking about profit and nonprofit, right? What you're doing, there's a whole lot of different bundled returns, right? It's part of it is the financial part of it. But a big part of this is just the knowing that you did good, right. And that's all part of everything that we do. And so I think that, you know, there's something really interesting here about how as you go through the process of getting this thing properly, legally rolled out, that it's actually an opportunity for regulators and others to look differently about what a project like this because the end of the day is anything that's going to accelerate drug discovery is going to be positive for society and what government is not. Certainly at a time like this, not going to want to promote that. I think that's a really interesting point. So again, I think you've probably also trying to figure out what the governance of the DAO is. I've had a lot of conversations, one of the ones that we had at consensus for the money reimagined podcast we did there was with Kimball mask, and with Tracy Balan of her DAO. And we talked a lot there about like governance and who gets to decide how does every participate and so forth. You're still working this out? I mean, obviously, as you go through figuring it out, what do you see the roles within the DAO of how decisions are made as to what you're going to work on and whatnot? I have a very strong opinion about these things. I may be wrong. But I have my own opinion. The more I think about these things, the more I realize that it's going to be a hybrid, I believe everyone in this planet should work towards doing something that makes them happy, the job they like to do, and they make money and they pay their way through life. But I don't see DAOs as being necessarily the way you do that. currency trading is not for me, never was and never will be. But But I believe that big purpose events like shelter, water, food and medicine, for essentials of life could be supported by a doubt, couldn't be supported by the people for the purpose of making everybody equivalent and okay, then you would have opportunities to build companies, whatever. I'm not against capitalist societies, where if you want a Maserati, you go build a company and buy a Maserati, but a lot of people don't need a Maserati, like Sam Bankman. So the idea of saying, here are the essentials that you need. And because of, you know, Kimble, Musk food, which is what I think he should focus on, personally, making sure everybody has it. That's medicine for me. So in my mind, I'm looking at this as not a governance issue as much as a combination of decentralization purpose, with autonomous subgroups is what I like to think of it. And those are companies, those are centralized companies that do something incredibly important. In our case, it's we have a technology we developed to repurpose drugs. And yes, by all means, we should be running that because that's our invention. We know how to run it, we don't need a doubt to tell us how to run it. And if we screw up, you don't fund this anymore. And if we do great job, you fund us more. That's the way the world should work. And that's the way I see it working in a decentralized world. So basically, what you're saying, as you're taking funds from the people and going directly to the companies that can do good rather than going through a middleman, which is right now, of course, the government, which funds research $35 billion a year and doesn't really generate, as you said earlier drugs that can actually help you survive. It gives you research data in publications. It's helpful for the pharma companies to make new drugs only. But I want to turn it on its head and see if the science community can actually help us repurpose drugs. And then get something back for that potentially. So to give them an incentive, not just published papers, but actually get involved in the treatments that we all need. So it's a hybrid, if you will, decentralization with autonomous subgroups that are companies. That's the structure, I think that will work.
Michael Casey 25:19
Yeah, and it's fair to say that genetic networks would be one of their for a number of service providers essentially contracted by the DAO to do this work, right. So you've got a committee of some sort, in the DAO making decisions about where it's going to allocate the funds. And you'd be putting in RFPs, or whatever, to do that work or something like that. And you'd basically be contracted by the DAO, right. And you've got an interesting theory, living up to your promises, etc.
Gennaro DeRosa 25:45
Exactly. And you can also break it up. And you can have independent DAOs, I have people talking about DAOs for clinical trials. And that's a great idea. But it's hard for me to imagine a revenue stream that would support the clinical trial company, unless they come up with something clever. In the case of generic networks, we're fine, we're profitable, we have a company that works, we're not going to be dependent on a DAO, we operate independently of the DAO, but we can help the DAO reach their purpose, their goal, that's what the this combination is all about. And then of course, you have to perform, you have to do a great job. I don't think anybody would have complained if Google made it the DAO when they started searching, or Facebook made a DAO, or you know, Apple made it even a DAO, you know, it could have been financed not by VCs, but by a DAO, and then everybody would have gained instead of just a handful of people would have gained and so this is kind of a revolution right now to see where it will work the best. And I personally think it works the best on the things that everyone needs, but nobody really cares about too much out water, shelter, food medicine. Now those four things are essential.
Michael Casey 26:58
Yeah, it's exciting stuff. I'm you know, I was taken by it when I first met you. It's great to see the progress and the interest and really, really excited to see where it goes. You know, thank you so much for spending 30 minutes of your time to tell us about it. And thank you to all of you listeners. Thanks so much. So all we have time for for now. Bye bye