MIT Sloan Health Systems Initiative

Carl Berke, Partner at Mass General Brigham Ventures, Lessons Learned from Decades of Investing in Life Science Ventures

On April 4, 2024, HSI welcomed Carl Berke, Partner at Mass General Brigham Ventures, to present at the lunchtime seminar series. Berke, one of the founding partners of that fund, has deep experience in early-stage life science venture investment. For his presentation, Berke spoke of a number of failed ventures since, he said, “you learn much more from those than from successes”.

Each of Berke’s examples highlighted a different lesson learned, a different type of failure or shortsightedness or miscalculation.

For example, RapiDx created a device that enabled primary care doctors to perform screenings in-office that traditionally involved sending specimens out to testing labs. The first target indication was the PSA test for prostate testing.  Rather than wait for results, the patient and doctor could get results immediately. The primary care physician would perform the test and bill for it.

The design and manufacture of the device was successful. The company, however, failed. The founders never tested the value proposition with the true stakeholders. Primary care physicians neither wanted or needed this new device. They couldn’t make money because of the cap on billing for this test. Whether a clinician received the results immediately or a week after the test was done did make any difference in the treatment path and clinical decision making. Whether patients would trust the results was also an open question. In the end, the device was great in a vacuum but one doesn’t sell in vacuum but in a highly complex ecosystem with stakeholders with varying interests. This device did not have a market.

Nektar and Alkermes manufactured a device to administer inhalable insulin. The thought behind this new product was that patients would prefer inhalation over injection. The underlying assumption was that diabetes patients fear needles. The device worked, (with some dosage issues) and the company was acquired by Pfizer and the device was marketed as Exubera. The founders succeeded in selling their company, but the device was a spectacular failure in the market.

The lesson here, Berke said, was a failure of thorough market research. Diabetics in general are not naïve consumers but “professional patients.” The newest insulin injector pens have needles that are small and nearly painless. The designers of the new device were working to solve a problem that did not exist.

Calabadion was a third example that Berke gave. This was a drug reversal agent meant to be an antidote to the paralytic given during surgery. Berke called it a “beautiful molecule”; and it was the result of novel chemistry. The drug worked and there was a market for it. Nonetheless, it never made it to the operating room from the academic lab where it was developed.

Berke called this failure a case of “founderitis”. The PI was not satisfied with the valuation and the payout (including equity) that they would receive and blocked the usage of the molecule’s intellectual property. The company never got off the ground.

As Berke wrapped up his presentation, he summarized numerous lessons from failures in life science investment. In addition to the cases above, he also gave examples illustrating some other points:

  • Be ready to pivot based on what you learn
  • Device investment is disadvantaged to drug investment due to reimbursement policy
  • Don’t risk underfunding in order to maintain control

The overall message, Berke commented, is that the number of device investors is small and fundraising is challenging. “Founders are advised to choose a seasoned management team,” he concluded. “Wisdom comes from experience, and experience comes from mistakes.”