Paul Kohlhaas visited the Podcast of Andrew Steinwald, and spoke about his path into the pharmaceutical space and web3. He shares his experiences in biohacking, the pharma industry, the drug development process and how web3 could play a crucial role in making drug development more efficient, fair and transparent. This is achieved through BioDAOs an open source approach of pharmaceutical early stage research and leveraging the traits of NFTs through and a new standard, the IP-NFT.
Molecule is a company that is virtualizing and decentralizing how drug development works. They do this by attaching data and IP rights to non-fungible tokens (NFT's) and then bringing the core IP into web3. This makes the intellectual property liquid, which is very hard to achieve in biotech today, and also enables price discovery around IP. Molecule has created a curation market where people can trade and discover therapeutics for drugs.
Molecule has also started building biotech DAOs, which are research collectives that are comprised of patients, investors, and researchers in a specific therapeutic area. The mission is to democratize access to medicine by empowering researchers and patients to become co-owners of the IP and data associated with a new therapeutic.
Paul describes how the company's IP-NFTs work to store data associated with a new therapeutic and how they can be used to fractionalize ownership of the IP. He also walks through the company's roadmap and explains how they plan to decentralize ownership of the data and IP associated with a new therapeutic. Paul discusses the origins of VitaDAO and IP-NFT, the process of setting up a DAO, and the long-term vision for a DAO-based ecosystem for pharmaceutical research and development.The grand vision for the projects is to develop a drug that is enabled and discovered through the process and reaches patients in an eight to ten year timeframe. He also discusses the potential for IP-NFTs to be used to fractionalize the ownership of IP and allow patients to contribute funding to research."
Andrew Steinwold 0:00
Hey what's up everyone, I'm Andrew Steinwold, and this is ZIMA RED. On this show, we speak with the users, founders and creatives that are diving into the world of unique digital assets, also called non-fungible tokens.
Andrew Steinwold is the managing partner of Sfermion, an investment firm focused on the NFT ecosystem. All opinions expressed by Andrew and podcast guests present solely their own opinions and do not reflect the opinion of the Sfermion. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Sfermion or related entities may maintain positions and assets discussed in this podcast.
Andrew Steinwold 0:48
My guest today is Paul Kohlhaas, the founder of Molecule, as well as VitaDAO and PsyDAO. Molecule is a decentralized biotech protocol, that is democratizing pharma research and development. This one is going to blow your mind, we chat how drug development currently works the monopolistic nature of drug development, the open source pharma movement, longevity research, DAOs, psychedelic medicines, how the Molecule team is building the future of decentralized science and so much more. This episode offers a sneak peek in the future of medicine, please enjoy my conversation with Paul. Paul, thank you so much for joining me today. Super excited to chat with you. And to get started, I'd love to hear a little about your background.
Paul Kohlhaas 0:56
Hi, Andrew. Yeah, thank you so much for the invite on the show. And hi to everyone who's listening. My name is Paul Koolhaas, I am the founder of a new protocol and DAO called Molecule. And my background is pretty atypical to be working on something that straddles the biotech space, but I've been working in the crypto space for a really long time. So when I was a teenager around 16,17,18, I spent a lot of time in online biohacking forums. And these are some of the forums that splintered off harm reduction sites like Erowid. So Erowid, for example, was a large collection of trip reports on psychedelics run in the public domain, a lot was pioneered by Alexander Shulgin, who was the original inventor of MDMA, and then went on to work at a pharma company, as he was doing that, and the pharma company didn't think his work was valuable. I think organizations, such as MAPS are really proving that this thesis was completely wrong. But he went on to discover hundreds of different very strange novel psychedelic compounds, many of them are being actively researched in therapeutic use cases today. And so these communities I was a part of, we're exploring these compounds in a very open fashion. Back then, these were all like unscheduled substances, and research chemicals. And I found that really fascinating, this open source nature of drug discovery and drug development. And as I got deeper into those communities, I realized, hey, at the fringes here, there's diabetes communities, for example, that are developing their own open source insulin synthesis methods. And some of these communities then gave birth to the open insulin movement in the United States, which is now fighting to provide very cheap and affordable insulin made in clandestine labs across the US. Another cases were cancer patient communities, that said, “hey, guys, there's a drug here on the US market, I need to survive and treat my cancer, it costs 150k out of pocket. I make 30k a year, but I have an internet connection.”
And interestingly those communities source the base chemicals from the same Chinese manufacturers that the psychedelic research folks got their base chemicals from, so you have these big, Chinese and South Korean chemical manufacturers that back then didn't really care what you asked them to produce, as long as it wasn't patented. And as long as it was not a scheduled substance, I found that really fascinating. The same time, I was looking at the macroeconomics of the US pharmaceutical system. So these are like the early days of the US opioid crisis. And it started becoming apparent to me that there's something fundamentally wrong here that on the one side, there's people online that are being driven to engage in in some cases, dangerous behaviour, for example self testing compounds on themselves, and often out of sheer necessity. And on the other side, you have a large pharmaceutical system that's fundamentally failing to deliver what I would say is patient centric healthcare to providing medicine that is affordable by the public. I went on and studied , and I came looking at this whole thing because people in my family were prescribed early ADHD medication and antidepressant and I just felt like it wasn't really serving them. Yeah. And so I went on and studied economics at the University of St. Gallen in Switzerland, which is a fantastic, really rigorous Business School.
During my time there, I started trading biotech stocks. I had a couple of friends, we were exchanging stock tips and I found that fascinating. A biotech stock typically tends to trade just on the value of the asset. And it's the burn rate of the company as it's trying to develop this asset. And it's typically just a line downwards, pretty steady, that represents the burning of the company. And then you have positive data emerge, and it does a 5x or 10x in the day, where you have negative data emerge, and it does like minus 80, 90% in a day. And if you think about that, that's, a fundamental market inefficiency. As we're studying, I found that fascinating, looking at systemic inefficiencies and how capital markets behave. And then a friend of mine did an internship at a company called Bitcoin Suisse. Which at the time was the first Bitcoin brokerage in Europe. That was mid 2013. And then he started telling me about Bitcoin. I think, it happened many of us, we quickly fell down this rabbit hole. I taught myself how to code. Because I then got interested in open source software and the way that these various cryptocurrency Reddits, were sprawling, and you'd have someone fork the Bitcoin code and a new coin would appear. I still remember master coin and the white paper emerged. I'm also a big fan of Dogecoin, in the early days, just because I find it hilarious. And then I finished my studies in economics and moved to South Africa. Worked briefly in private equity there. And then during my time there, this is like, mid 2015, was already pretty neat, knee-deep in crypto.
Then I started my first company called Linium Labs at the age of 23. We started building out early applications on Ethereum. And providing training. And then did a couple of projects for larger companies that were at the time able to pay for development services, or that were trying to understand what's going on in this decentralized space, I became good friends with someone called Simon de la Rouviere, who I would say is like the grandfather of bonding curves.
So I've also done a lot of writing about bonding curves over the years because they're fascinating mechanisms for curating assets and discovering information. And then briefly worked at Consensys, did a project with UNICEF in digital identity in Cape Town, and then started working at Consensys, this is early 2017. And yeah, at the tail end of working at Consensys, I was doing a lot of work on data at the stations, and trying to figure out how we could attach data to stations to digital identities, and then also going into data marketplaces. So and then we were looking at NFT's among other things. And then I had this aha-moment where I thought, “hey, what if instead of attaching a picture of a cat to an NFT, we would attach a composition of matter patent”. So like the fundamental IP that describes a new drug or a new therapeutic. Yeah, and that gave the inputs to what I'm building today. That's like, going back almost, yeah, four years.
Andrew Steinwold 8:22
Wow. Okay. That is incredible. So we have biohacking psychedelics, open source, creation of medicine, you studied economics, you're trading biotech stocks, I can definitely see how all this is leading up to what you're working on today. It's really incredible. Going all the way back to when you're a teenager, how do you get interested in biohacking? And to clarify, is it like I am putting some sort of device in my arm or what exactly about biohacking were you so interested in?
Paul Kohlhaas 8:54
I was really interested in on the one side how nutraceuticals certain chemicals or psychedelics, for example, can just fundamentally alter your consciousness. So there's a huge supplement market on the one side, for example, it's very active in bodybuilding. So that's a form of biohacking. How do you hack your system to behave differently. Lots of bodybuilders use very various forms of biohacking to boost their metabolism. But then biohacking also obviously goes into using nutraceuticals that boosts brain function. Lots of people use Modafinil, which you could also consider biohacking. It's hacking your system to behave somewhat differently. There's also a lot of research around meditation, meditation could be considered a form of biohacking to gain more focus to gain more clarity. Another community that I found fascinating was HIV communities that were developing their own gene therapies to overcome the disease that they had. Gene therapies are another form of biohacking. So it's not the cyborg sense like implanting something in someone, but that could be that could be considered biohacking as well. It's how do you hack your own biology through the means of substances through the means of how you change your behaviour.
Andrew Steinwold 10:39
Incredible. You also mentioned that there's this movement of open source, medicine creation, I don't even know what you call that. But that's fascinating. Is that because the US healthcare system is just so fucked up?
Paul Kolhaas 10:59
I think in many cases there is a movement. This was really inspiring to me and to our team. In the early days when we built Molecule, called the open source pharma and the open source pharma foundation. And so there are many areas of medicine that are just not of interest to pharma companies. Often, these can be rare diseases, where the patient populations are just too small. And pharma companies are not interested in bringing a drug to market. And then, the FDA gives special special approval methods to those disease areas, you have the orphan drug designation, for example. But even despite that, it's an uphill battle to get a drug approved, you need enormous amounts of capital to bring a drug to market. And in other areas, for example, in tropical diseases like malaria, that affects millions, hundreds of millions of people across the world, even, I think COVID may have changed this. But before COVID, I think malaria was one of those diseases that killed most people around the planet. Yet, we still since the 80s, 90s, it was not possible to develop an effective vaccine, or really, effective long term treatments for malaria. So this open source pharma foundation, consists of researchers around the world that banded together around various universities, I think it's UCL, for example, brace Australian universities, where researchers committing new drug targets, to an open source repo which you can find on GitHub. They use GitHub to do this open source malaria. It's also open source mycetoma, another tropical disease. And what's fascinating there, this type of work has been funded by organizations like the Gates Foundation, or, other international organizations that feel its humanitarian work in a way. But those organizations often just lack the funding to then bring a drug to market in the end. And they often just get stuck in the best case. So as soon as , these researchers upload drug targets, new discoveries that they have of what could be a potential treatment to this GitHub repo. And then they discuss it in a open source way. And that's a completely different way of how biotech companies work or the pharmaceutical system works. Because as soon as they make one of these GitHub commits, that drug target, (which might could be used to treat to cure malaria) gets unpatentable. Because now you have prior art. As soon as you have prior art, you're not able to file a patent application. And, it is really powerful if you think about it, because now no one will be ever able to patent that. But because no one can claim a patent, you're unable to bring this Molecule in the long pharmaceutical development pipeline. Even organizations like the Gates Foundation will not fund your work any more. The only the potential for this drug is to become a generic, no one can patent it. The problem with having a drug immediately as a generic and this is the same for these psychedelic compounds. Many of the psychedelic compounds, that could be used for example to treat depression, become technically unpatentable for that indication, once they are uploaded to GitHub. The problem now is that nobody (maybe in the future this will change) now pays for the clinical trials to bring it to market, because there is no way to recoup the high costs. And the cost for a third stage clinical trial can be, depending on the indication, in the hundreds of millions. And if the drug can only be a generic, you're never going to find a partner like a pharmaceutical company, that will help you shoulder the costs, even if it's paid with public funding to bring it to market. This was a huge insight. These researchers, in open source malaria, are not able to get funding for any of the drugs that they develop. Another example, if you are a researcher at a university, and you publish a blog post about a new molecule that you believe could cure cancer, that you just discovered, will never make it to market, because you can't patent it any more. We could have amazing cures out there, that would work. But due to the way that innovation works, in terms of protecting patents, and then shouldering the high costs to get to an FDA approval, you'll never be able to recoup those costs.
Andrew Steinwold 16:21
Wow, okay, so you said that, that these people are uploading this research to GitHub, and I'm a complete noob here, but does this research look like code? Or is it like actual written papers that go into depth on more like theory? Or how does it look?
Paul Kohlhaas 16:37
It can be both. I mean, it could be in most cases, it would just be a data set that describes a new molecule.
Andrew Steinwold 16:49
Okay, why is pharma research so expensive?
Paul Kohlhaas 16:55
That's, that's a good question. So at Molecule we believe it could be way cheaper, if it was coordinated in a better way. The innovation processes, and the way that research is done in pharma, and specifically, the approval process, is extremely bureaucratic. And this has not really evolved in the past 30, 40, 50 years, the way that the FDA approves a drug today, and the hoops that companies need to jump through, haven't really evolved, despite so much new technology available. I think there's this cultural and bureaucratic problem. But because of that, I think many pharma companies have barely evolved. And I think can be compared to the banking industry. I think the banking industry is only started evolving in the past 10 years in the wake of FinTech, because Fintech is starting to really hurt their bottom line and take away customers and hurt their margins. I think we haven't seen any similar developments in the pharma space. If you think about it, it's beneficial for them, that it's really expensive to bring a drug to market, because it means that they're the only ones that can bring drugs to market. It's chronically hard, many biotech companies will never have an intention of bringing a drug to market themselves. Because they know, at the end of the day, they won't be able to shoulder those high-end stage costs. So what typically happens is that you, you have a biotech company, that spins out of a university, and then goes through several financing rounds, until the VCs that are financing that biotech company, their LPs or pharma companies themselves sell it to big pharma. The typical path is to become an acquisition target for a larger pharma company, that can gets the assets from that biotech company and brings them to market. Or what often also happens is that these companies IPO in order to be able to raise enough continuous capital, many of them that IPO typically don't make it to market , or they end up selling one of their lead assets. And, and many of them become zombie companies that keep existing despite not having a clear path of when one of their drugs could come to market.
Andrew Steinwold 19:16
Okay, so let's pretend that the regulatory agencies that are approving these medicines of the pharmaceuticals, let's pretend that that process is super simple and super cheap. Is that cost then brought down by like 90% or 95% , and what is the main cost of researching pharmaceutical stuff? Is that that just labour costs for people testing all that stuff out?
Paul Kohlhaas 19:44
Yeah, I mean, so you can differentiate between the preclinical stages and then clinical stage drug development. In the preclinical stages, costs have come down tremendously, because increasingly you can do a lot of outsourcing. And for example, if you have a certain compound today as you can choose from probably hundreds of providers today that can run standardized preclinical trials for you. These could be toxicology, reports, essays, fly studies, mouse studies, to determine whether it's even toxic and mammals in the first place, you tested in human cell cultures. And then you use all of that data to obtain an approval, like you do an IND application to obtain an approval to move into clinical trials. And in clinical trials, you're going to be testing the component in humans. And that gets much, much more expensive. But interestingly, if we compare this with these open source communities that I described earlier, you have an open source community that would try to obtain a certain compound. Now, typically, for example, these aren't cancer therapeutics. So it's a very different ballpark. But if you are testing a drug for chronically depression, and you hear about a new substance online, and you would obtain it, and it would help you, and that drug may have never gone through the typical preclinical costs and approval and application process. It is very expensive for a drug already to get into the first stages of clinical trials, where you test the drug then in the small patient population. But like, I think, for example, drug costs could be brought down exponentially if there was a more open source and anecdotal culture of how drugs are tested in certain indications. But okay, back to your question. So there's the preclinical cost, those have come down a lot, because we can increasingly do outsourcing. And outsourcing just means that and for example, we work with a company called Arcturus, they receive, robotics laboratory. So they have robots that run an automated lab that will test your compounds. So you can just tell them, hey, I want to test the following compounds, please run the following experiments, they will get it synthesized for you, they will then test it in their lab, and they will upload the data to the cloud, or in our case, they would upload the data to an IP-NFT. And because there's a lot of outsourcing happening, the costs around this have become increasingly competitive. So 10, 20 years ago, it didn't make sense to start a biotech company with, less five, that's less than five to $10 million in funding, just because you had to build your own lab, you had to get all of this stuff yourself. Increasingly, you can do a lot of outsourcing. It's still more difficult, though, in the clinical trials process, where you can't really cut costs that easily. I think what we can do, enable a lot more coordination. And the other thing is the enablement of decentralized clinical trials. So typically, when you do a clinical trial, it's very expensive to find patients to run the trial with, then coordinate the patients, monitor the effects and all of that, and just the regulation around that is very strange. But one solution to that could be, this is a huge hope and actively being worked on: having more decentralized clinical trials. And then a last component of the high cost is really each player in the current pharmaceutical system, you have to imagine these assets get passed on from company to company. And if a biotech company goes through an acquisition, and an asset could go through multiple acquisition cycles, leaves a seed stage startup and goes into a b series funded startup. And then that b series funded startup eventually sells it on to like a larger pharma company, each transaction in that value chain, the people that transact in it, and these typically tend to be like, just financial transactions add costs because everyone is trying to make money with it, right? If I bought it for this much, I want to sell it at least for like 5x to make a 3x return, we invested like 2x of the cost, and so on and so forth. And in the end, the pharma companies still need to make a lot of money with it. And maybe then the last thing to say: all of these financial transactions add a lot of costs. It's like the Wall Street for this entire value chain.
But the other component of why the costs are high is because so many drugs fail. For each drug that comes to market, Pharma has 20 drugs buried that didn't work. If you have to imagine if they buy 20 drugs for like $100 million each, often the costs are much, much higher. The system is quite inefficient and identifying targets that could work because it's very closed. And there's this principal agent problem in terms of how assets are transacted if I'm selling you a drug as a biotech company, I only have incentive to show you the good data. So we could run 50 studies on this new cancer drug, and like 48 of them show that it doesn't work. And two of them show that it works. One of them is inconclusive, we'll show you the two studies that work. And if you're desperate enough, you will buy it, and then it might work. But also based on if the data was more open source, it could have been identified much earlier that the drug doesn't work. So now let's see them this drug is bought by a large pharma company, they take it into stage one trials that may be working, but also inconclusive. Stage two is a massive failure. And at this point, they've spent an enormous amount of money to discover in stage two that the drug didn't work. This could have been discovered before, this drug was never supposed to go to market in the first place, because it doesn't work. So all the cost of those failed drugs are offset to patients and the end.
All of that taken together is what makes drug development so expensive today. So maybe it's a lost analogy, it's a little like if I used to make this analogy in the beginning, if IBM was developing a social media app, and it had a mandate to develop this app for the government, and no one else is allowed to develop a social media app, and it takes them eight years. And it's a really crappy app. And in the end, it cost you $1,000 per month as a subscription fee. And you have to pay 50 cents for every DM that you send on this app. Then they have a 15-year exclusivity on social media apps. And that's a little of how pharma works today. Nothing against IBM at all. By the way, I'm just more using them as an example of, like, software incumbents, and how and so open source software completely changed how we engage with apps. We can ask ourselves, why are apps free? Whereas 20 years ago, you still used to go to like a store and buy a physical CD that had a CD key on it. Pharma is still in that level of innovation, buying a CD at a store with a licence key.
Andrew Steinwold 27:12
Wow. Okay, so, um, from, you know, from everything, you're telling me just insane inefficiencies that are currently ingrained in the system? And you know, with your interests, which are open source, pharma, economics, Bitcoin, etc, open source, you've started this company called Molecule. So can you tell me what is Molecule, and why is it exciting?
Paul Kohlhaas 27:37
Yeah, of course. So at Molecule, we're really trying to virtualize and decentralize how drug development works. So at the core, like, if you look at this, like from a meta level, the core value drivers in drug development and in biotech and pharma are on the one side, its intellectual property through the form of patents or early stage IP. This is just data around a new molecule. And, on the other side, its data produced about these compounds. So we just talked about these expensive clinical trials and so on. But so, it's companies that claim innovation through a patent, for example, and then they waste funding to produce data. If we think about data, and the data has increasingly become a virtual asset, really since the 70s, and 80s. Before that, we still use that data and like these giant filing cabinets, but data has increasingly become virtual. On the other side, intellectual property has never really become virtual. It's a box of papers that you file from a lawyer, and then granted a patent by the US government. But so, if you think about intellectual property, it's the perfect asset class to virtualize. Because it doesn't exist, right? It exists in terms of being granted a unique right, but it's not like it's something physical. It's not like real estate. It's not like a car. It's intellectual property. What we do at Molecule, we attach both a data and these IP rights to non-fungible tokens (NFT's). And then we bring the core IP into web3. Then we've developed a new framework called an IP-NFT. At Molecule, we think pharma and biotech development as a marketplace. And as I described this pipeline earlier, pharma is one of the last big pipeline models, where IP is owned by a single company and then passes through the pipeline and then eventually brought to market by a single company, and most pipeline business models have been disrupted by marketplace models over the past 20 or 30 years. And we think that, it isn't necessarily about disrupting Pharma. It's about making pharma and biotech development much more efficient. And to bring down the costs both for incumbents, but especially for patients and for researchers. And so what we build is, and maybe to use some crypto terminology, in essence, a mixture between an Open Sea and ResearchGate that enables researchers, biotech companies, universities across the globe, to mint their research and their IP into an IP-NFT. As you can imagine, a drug discovery department at a university can create a portfolio of their research projects through our framework, and put their IP into web3. And what this now does is it makes the intellectual property liquid, which is very hard to achieve in biotech today, like biotech investments tend to be super illiquid, because it takes so long to bring drugs to market. And then you have tractability before but tractability on a patent basis is quite expensive. And NFT's make that really cheap, hyper liquid. And they also enable price discovery around IP, which is another thing that that's really valuable. So typically, you would only have price discovery for IP through, like public market listings. But that's also an inefficient price discovery mechanism, because then you have very stringent reporting around the data.
So what we had as an early vision for molecule was to create a curation market. So this is based on some of Simon de la Rouviere is already thinking of like, what if we had markets domains where people could just like, trade and discover and curate the most promising memes? And some of our early thinking was, in essence, hey, wait, “what if we had like a meme market, but for therapeutics for drugs, when our patients researchers could enable in price discovery for therapeutics together”. And now this therapeutics would live off data that people commit, or data that flows into the data repos attached to these drugs that have been researched, which would then garner more attention. And then positive data would increase the price of a therapeutic and negative data would decrease the public perception of price of a therapeutic. This is the baseline of thinking. And so we're working with universities across the globe that upload their IP. And then this could now be purchased by anyone. So we're trying to build the system in a very open way. But on the other side, we started realizing it's probably not going to it's not going to be industry and like industry incumbents that will be first to use new frameworks like this. But ideally, it would be folks that are already in web3 that are native to owning an NFT. But then, we thought it might not be efficient to have the typical, NFT speculator audience engage in this IP, and own it, because ideally, you want to make the IP productive. So the following data emerges, you would then need to define the next steps of the experiments to move this closer to market and move it closer to the patient. So what we started doing, at the same time to make this marketplace productive, is to build biotech DAOs, or we call them bio DAOs, which now function like new biotech research collectives that are comprised of patients, of investors of researchers in that specific therapeutic area. And develop those drugs. So I'm sure many of your listeners are familiar with a DAO called FlamingoDAO. FlamingoDAO is a huge inspiration to us. It's a DAO that curates and collect an amazing collection of NFT artworks. And so we launched, VitaDAO in June last year, June 2021. And VitaDAO builds, curates and collects IP-NFTs focused on longevity research. So this is one of the first fully functioning biotech DAOs that the world has seen. Only focused on longevity. And there's another one that we're building now in psychedelics research focused on psychedelics and mental health. This DAO will, in a similar vein, also be building a portfolio now of these IP assets and making them productive. And there's already a large amount of industry interest to collaborate with entities such as VitaDAO because the industry is really interested in the deal flow that has been created and the IP that has been researched and discovered.
Andrew Steinwold 34:59
Wow. Okay, so again, incredible, my mind is like just being blown non-stop. But okay, let's go back to Molecule. So I'm a little confused on , and it's my fault. But the efficiency gains you get from putting this data and IP rights onto the NFT. Why is that important? You said that it creates a more liquid market. But if that information is on this NFT, can anyone come claim and read it? And then it's open source? Why is there value attached to that NFT?
Paul Kolhaas 35:32
Yeah, of course. So the way that our IP-NFT works, the IP-NFT consists of two core components. So on one side, it's a one to one legal agreement. So Andrew, if you went onto our app, and you find an asset there from your favourite longevity researcher at MIT, and you said, and he's looking to raise some funding for a new set of molecules. This researcher says ”I am looking for $200,000 in funding to complete the experiments.” This will be one way to engage, and then you engage through something that's called a sponsored research agreement. So you, Andrew, it's typically not natural people that do this, but let's just use that as an example, you would then enter into a sublicencing agreement or something that's called a sponsored research agreement with MIT to sponsor the following work. And as a result, you would now own the IP and the data that results from it. And that IP agreement is encrypted.The owner of the IP-NFT, is able to see the licence agreement and everything around it. But the identity of the molecules or the resulting data is not of made available to the public, unless you do that. On the one side, it's a legal agreement for someone to license you a a certain amount of work, a certain amount of IP. And on the other side, it's a data storage layer that lives on top of Filecoin. Some metadata is on our wiki, some of it is on Areweave, it's an encrypted data access control system. To make that very simple, the NFT now is linked to decentralized Google Drive, where you as the NFT, holder, get to grant access rights to different parties. So the researcher now uploads his or her data into that data storage, and you get to see it, and you get to give other people access. So now you can say, “I want to give access to another research team that I also want to be working on this. And I'm going to pay them another 100k. And they are going to deliver the following data assets into this repo as well”. You could also show your friend at Harvard Medical School, he's been looking into this , and you tell him about this work, and use it very easily simply grant them access rights. And then a year later, like a biotech comes along, and they hear about the asset, and they're interested in looking at it. So you're like, cool, let me grant them access rights as well. They can DD some work through your granted access rights, and then they make you a bid on the chain to buy the IP-NFT from you. Yeah. So just to explain how the IP-NFT works. But the really cool thing about this now is this data is typically stored on company on servers, it's transacted like PDFs and emails, they're granting access control to the data stores that are described as follows the same NDA as patterns. So like, if you're the owner, you obviously don't want to invalidate your own IP, right? At the same time, if you wanted to, you could just open up access to that data repo. It's like having a private GitHub repo that you can add different collaborators to, or making it a public GitHub repo. And, at the point, if you decided now to patent this discovery, or these molecules, what the IP-NFT now grants you is everything that you need to go to the patent office with. It's saying, you're the legal owner, you out licensed this from MIT. And here's all the data that proves that this could work in the following indication, based on that you could be granted a patent. And this 9is what makes the whole research really valuable. The cool thing about this is now you can transact both the data and the IP, like the legal rights in the same way that I can send you a crypto kitty on my phone like a crypto fund, you could also now make the IP fractional. So VitaDAO is currently exploring fractionalizing, one of its first IP-NFTs. That doesn't mean again that the holders of those fractions get to access the IP, they get to access the data. But you can build all sorts of funky open source collaboration methods in there. For example, you could say, if someone contributes to the following dataset which I need to develop this from some university, for example, you say, hey, anyone who can do the mouse studies gets 2% of the asset. And then some university can say, hey, we're interested in this work. And we can do the mouse studies, we will take 2%. And we also want 20k from you, but it's not going to cost 150k that it normally costs. So you're starting to decentralize ownership of the asset, and make the whole development process much more modular.
Andrew Steinwold 40:22
Okay. Is it fair to say that Molecule if we had to give Molecule a one-liner, Molecule is a drug development research marketplace? Is that a simple one-liner?
Paul Kolhaas 40:36
Yeah, you could also I mean, we, you could say, for example, decentralized biotech protocol.
Andrew Steinwold 40:40
Okay. Okay, that sounds way better. And then would you say the mission of molecule is to broadly open up the market? So, you know, to more participants? So more research happens?
Paul Kohlhaas 40:53
Yes, absolutely. So it's a way to democratize access, in the same way that the internet democratize access to information. I think for us, this is really about democratizing access to medicine. And if we think about this whole development process, there are two user groups that are enormously user groups in the sense of like, this is a value creation process. There are two user groups that are fundamentally disenfranchised today. And those are researchers, the people that are doing the work, they don't typically see no upside, unless they go in like it really into the hardcore, like biotech, VC, biotech startup, like IPO route, which many of them don't want. They are really keen to provide value to patients. That's why they became researchers in the first place. But we want to empower researchers to become co-owners of the IP and of the upside. And on the other hand, patients are really the most disenfranchised people in this entire process. But they're the ones that stand to benefit the most, and that need access to new medicine. And you'd be surprised, for example, how much a cancer patient, how much a rare disease patient, are familiar with their disease, about the potential treatments about what might work for them and what couldn't. And the current system just completely removes them from that process. If you have a disease, you, you get what's on the market, you don't get to determine its price, you have no influence on that. I think this has enormous potential. And the same way that lets say NFT's empowered, in many cases, disenfranchised artists across the globe, to take power again, of, of their creations. I think this similar thing is happening in the music industry at the moment. We believe that NFT's in the medical space, and like these IP-NFTs can really fundamentally empower the creators and the benefactors of a therapeutic.
Andrew Steinwold 42:54
Okay, so I definitely see how everything that you've built so far is massively more efficient than the current system. And just better overall, but how did the regulatory agencies interact with that is, are they still a massive inefficiency and blocker?
Paul Kohlhaas 43:14
We are currently really focused on, early stage, preclinical development. Getting IP out of university and getting financing, for a researcher or a laboratory or a team that is looking for, 500k, at 200k 500k, maybe up to a million to complete the preclinical studies. To overcome something that's known as the valley of death. In this entire process, a lot of innovation never even makes it out of academia, and many, many precede and like seed stage, biotech companies just die, not because their innovation wasn't good, just because like there's a lack of funding, there is a lack of discoverability it's really difficult to discover this IP today and know what's in the market. Pfizer, for example, has for the entirety of North America has 12 drug scouts, business development managers, that are trying to source IP and work with universities to find IP. Coming back to your question, we tend to be quite focused at the moment on early stage development, where the regulatory overhead is quite small so that the regulatory overhead really increases. Once you move into the clinical stage once you file for an IND. I think as a crypto project that's really trying to bridge into the real world, it's super important to pick your niche. So we're really focused on the early stages of development at the moment. We're also the funding requirements alive and the regulatory overhead is quite low. So these IP-NFT's are fully forward compatible, they can be purchased by a biotech company or a pharma company that can then continue developing the drug. So for the time being, I think and also, while the web3 space is still quite small, we're really trying to accelerate innovation in their early stages to broaden the funnel. So enabling more great therapeutics to come into the clinical stage in the first place, but knowing very well that we won't have the capacity yet, I think even as a community, to skew it to a clinical trial. I think over time, though, like the DAOs that we're building could really start doing their own clinical trials, I think that would be an absolute dream, they can create their own spin off companies and then could orchestrate clinical trials. But I think for the time being there's just not enough liquidity and enough real world integrations for that to work efficiently.
Andrew Steinwold 45:55
So can you walk me through like the dream scenario from start to finish of research and drug development if people are utilizing Molecule and beat it down and all these other all this all these other products and things that you guys are building? Yeah, just walk me through from start to finish how that would work like on a mechanical level.
Paul Kohlhaas 46:16
Okay, that's a big question.
Andrew Steinwold 46:18
You can make it super simple like the person at MIT researching a drug then me as investor, I go buy the thing and so on so forth.
Paul Kohlhaas 46:28
Research at MIT developing a rare disease molecule that can be promising, gets financed by a rare disease DAO that also finds this approach really promising, kicks off initial studies, with the like, 300k in financing that she received. IP-NFT is now co owned by a researcher at 10%, University 20%. and rare disease DAO owns 70%. Rare Disease DAO initially now commission's an initial findings are promising, rare disease DAO commissions to CRO's, one in Singapore, one in India, to also begin working on this compound, all of those data flows and pays them both in in in shares in the IP-NFT. So like in sub tokens of the IP-NFT as well as in fiat, those additional data flows start flowing into the IP-NFT. Together with another rare disease patient foundation, IP-NFT is then spun into a small biotech company that is almost already at IND approval stage, all the data was procured in a fraction of the time as it normally would. Because of the rare disease, DAO is working with other researchers and a legal counsel that have helped shape and just expedite the value of the IP and what experiments to focus on very quickly. And then a biotech company is formed and is fully owned by patients and by this rare disease DAO which also mainly consists of patients, but also investors. And ultimately, a biotech company is able to get funding from that structure, you probably then need about 10 million, 20 million plus in funding to perform the first stages of clinical trials. First stages of clinical trials are quite promising, which prompts the interest now of a larger, pharmaceutical company. And now patient groups and pharma company agree that the DAO will continue financing the asset together with pharma company, but pharma company will start expediting all the clinical trials just because they have a much bigger machinery in the current system to do that. And the part of that agreement is that once the drug reaches the market, it will not be sold, that's an over maybe 4x, or like 3x, the cost of what it took what the entire development took, provided that both pharma company and like rare disease DAO, continue to share the cost of the development. Again, three years later, drug maybe gets FDA approval, that will be incredibly that would be incredibly fast. But think if you do more efficient coordination, around trials that could be possible. And an end result could be, you now have a drug that is still a majority patient owned. We're also a pharma company is making money off of it, but their input was much lower. So they're also happy to take a much lower cut on future revenue. And our pharma company uses their supply chain and their network of pharmacies very efficiently distribute this drug to doctors and to patients without needing to overcharge on it to make up for their losses in other areas.
Andrew Steinwold 50:03
No, amazing. Yeah, thank you for that overview, I think I'm beginning to understand the full process from start to finish here. So the DAOs are a super essential part of this whole structure here. And the first DAO that you help set up is called VitaDAO and you wanted to focus on longevity research. Was there a reason that you wanted to focus on longevity research first?
Paul Kohlhaas 50:29
Yeah, I personally think longevity research is a fascinating, interesting topic. It's like the holy grail of medicine. And longevity is fascinating also from an economic perspective, because, longevity is not about living for longevity research in my eyes is not about living forever. It's about living a much healthier, longer lifespan. So what if you could reach in like the age of 120, 130, 140? I think it gets critical after that. But without the typical onset of age related diseases such as Alzheimer's, such as cardiovascular diseases, cancer. So, the question is more, how could we live a longer, healthier end of life without the bad side effects that come with it, it's the reason people don't want to get old, because you have so many really shitty age related diseases that sit on, and those also cause massive costs to society. So, I think it's a really cool mission. And then I'm ageing research touches many areas of medicine, which for us, as a marketplace and as a protocol, is interesting because it allows us to quickly branch out into all sorts of disease areas. So that's the second reason. The third reason is, I think, ageing research should fundamentally be democratized. So the bulk of ageing, and longevity startups are currently funded by billionaires. And it's quite obvious if you've made a lot of money in your life, you want to live it out for as long as you can. But I think there's a risk there. Because if like the richest people in the world live longer and longer and get richer and richer, that will fundamentally, in the long run, create and an unjust society, because wealth isn't distributed as much any more. If I don't know if a bad leader of a country can now go on his fifth or sixth or seventh presidency term enabled by longevity therapeutics, that won't be good, but it's so at least let's ensure that access to longevity Therapeutics is democratic and not so centralized in the hands of the few. And then the last point is, as a community and as a marketplace, tend to be super conscious of product market fit with web3. And so for the time being, I think it would be quite difficult to launch, a DAO focused on breast cancer research. And it's not that breast cancer research isn't a like a really important topic. It's simply that the patient groups in that are affected by breast cancer wouldn't be as native to using discord and Twitter and Metamask as the people that are interested in longevity research. I think that comes over time. One thing that I'm, really excited about is , lots of patient communities are already quite digital. They tend to have like massive Facebook groups where they coordinate events online, but they're not like they're not in Discord yet. And so lots of web3 folks that I know got really interested in longevity research, lots of web3 people that are also interested in psychedelic research. So those are just areas and therapeutic areas that I think have a natural product market fit for us at the moment. As we are still in the early days of building out.
Andrew Steinwold 53:53
Awesome. Okay, so August of last year, VitaDAO, I think, you guys were able to transfer some sort of IP on chain as NFT. Can you describe what that was?
Paul Kohlhaas 54:04
Yeah, absolutely. So that was one of the first full end to end out licensing events with a university. This was with a professor and the leader of a laboratory called Dr. Morten Scheibye-Knudsen. He heads up the ageing, the Scheibye-Knudsen lab and the ageing Research Lab at the University of Copenhagen. So this is a study that's ongoing, that's analysing 10 molecules that could have life extenuating properties. And VitaDAO in this case now out licensed the full IP from the university, paid for the research. The research has joined VitaDAOitself and also now participates in the governance of VitaDAO through the Vita token. So they receive tokens in the organization, which is fascinating because now these researchers also actively bringing in other researchers , and they bring in other interesting work that they're doing you to receive funding. Yeah, so this, this research was attached fully to an IP-NFT. And then VitaDAO did purchase the IP-NFT. And the funds went to the University to kick off the work. And now, we've seen other research groups within VidaDAO that are building on this research, and they also want to collaborate with this first study that they're doing. Which is really exciting. So you see these other researchers that come in that hear about the work , and they're like, “Hey, I have a thesis here as well. And we should also investigate the following thing, and I can then make it a part of, of the work that you guys are already doing”. The work itself is about repurposing 10 molecules that have life extending properties statistically, from a huge data set of the Danish population's medical records that they analysed, so that the lab received access to from the Danish government and that they analysed. And based on this, now they're running through a series of studies. And these molecules can then be repurposed, most likely through an analogue strategy, to potentially bring entirely new longevity therapeutics to market.
Andrew Steinwold 56:15
Okay, so if I am a regular person, that's not as, some sort of research scientists or drug development scientists, what part can I play in VitaDAO?
Paul Kohlhaas 56:28
So, yeah, so if you do that, it's quite interesting. If you go into the Discord, you have a mix between lots of people that are just really interested in longevity research. But like you said, they're not researchers. They're not scientists, but they want to contribute to the field, they want to learn more about it, they want to connect with researchers. And then I'd say the core of the DAO is really what is called the longevity working group, which at this point, is over again, probably over 100 scientists from across the world, I'd say about 60 of them working very actively. In some cases, we have MD PhDs from Harvard, we have professors that were leading laboratories that have left their academic past almost full time to work on this. And they are now constantly bringing in research to be funded by VitaDAO. And as VitaDAO token holder, you can on the one side influence the direction of what work you would like to see funded. For example, you might have heard about a new, exciting supplement or a new exciting research policy, so you could actively begin engaging those researchers asked him about it, and also suggest specific things to receive funding. But ultimately, this longevity working group will then make proposals to the DAO and token holders to vote on what research should get funded. And also, then if like positive results are found over time, you as a token holder also then get to decide as a next step, what to do with the research, which I also find really exciting. So, like, VitaDAO could. And this goes back to something I said in the very beginning, about potentially open sourcing IP. So like, that's just a hypothetical scenario, if VitaDAO discovered a groundbreaking new molecule that could make, every human on Earth, at least 200 years old, and then read it, I thought this is far too big to ever be owned by a single company. It's too influential, terribly commercialized. Let's open source it. So VitaDAO token holders could decide to just open source IP that they develop. However, they could also decide to sell it to a biotech company. And then, any proceeds that come into VitaDAO through this process would be re reinvested into further research. So we hope that VitaDAO becomes this just growing and growing decentralized collective, that now democratically manages its IP, and engages in a much more open process and philosophical design thinking around how IP should be managed by humanity. Yeah, so this is how you could engage.
Andrew Steinwold 59:11
That's so freaking cool. It's insane. Alright, so your long term vision is that there are different DAOs that are focused on different pharmaceutical markets or focuses, like, for example, you said the next DAO that you're you want to launch will focus on psychedelics and mental health. And there'll be another one called rare disease DAO and so on so forth. So in your mind, there's going to be many DAOs, each focus on different sectors of this market?
Paul Kohlhaas 59:41
So we hope I mean, we, so what we're increasingly doing is we're building the DAO frameworks to enable that, because as a community, and as a network, we don't want to be in a position to launch all of these. They require an enormous amount of domain specific knowledge and specialization. And they're also best in the hands of researchers and patients or people that are really affected by these diseases. So where we're like, we're actively building some of them out. But over time, we hope that there will be a sprawling ecosystem that emerges that builds on our frameworks are built on other frameworks, and help brings biotech dollars to life. And then I think initially, these organizations will, as I, as I explained earlier, we feel this like preclinical funding gap, and we need just accelerate, help accelerate early stage research and innovation. Because that's where there's a huge need. But then over time, if they grow large enough, they can increasingly really move into the clinical trial stages.
Andrew Steinwold 1:00:49
Awesome, awesome. All right. So let's fast-forward now, 5 / 10 years from now, what is your grand vision for everything that you're currently working on?
Paul Kohlhaas 1:01:00
I think the really grand vision is that a first drug that that was enabled and discovered in this process reaches patients. I think that could really happen in a five to 10 year timeframe, I would be, I'd be really happy. And more so if that drug was developed at a fraction of the cost. Because I think this is what's really possible. And that's what's really possible we found so incredible about the emergence of VitaDAO was that VitaDAO turned into like a mid-sized biotech company within just comparatively in terms of staff and in terms of knowledge, in terms of expertise. But in the course of three to six months, and with much, much less funding, and often driven by people that are just really passionate about doing this, like drug development doesn't have to be like it sadly, today, it's really often about profits just about like revenue, because you have a giant VC funded ecosystem that is optimizing for that. But I think we should optimize, for patient centric, healthcare. And if you then have people that are working, that not on a voluntary basis, but you can coordinate people to produce the same outcomes at much lower costs. So this many ways, obviously, that this ecosystem can go, we're trying to build it in a very open source way. So also, if you want to create a DAO that is highly focused on like, just maximizing profits from IP entities, you can obviously do that as well. So we're not I think we're not trying to build, we're trying to build this system out as a very open and free marketplace. But I think what would be really cool to see in the next five to 10 years is one of these IP-NFT based drugs reaching patients, and doing so at a much lower cost than is possible in the current system.
Andrew Steinwold 1:03:03
Amazing. Awesome. All right. All right. Paul, are you ready for the closing questions? Yes, yeah. Awesome. All right. What is your single favourite NFT that you own?
Paul Kohlhaas 1:03:27
Do you know sad girls?
No, I don't.
Paul Kohlhaas 1:03:27
It's called sad girl's bar. It's like a project by a really cool female artist called Glam Beckett. And the principal is just it's like these sad girls. They like to have pizza slices in their hand. And it's like black and white and a golf look. I find it funny. I think it's great. And I somehow got into the position of owning sad girls number one, so if there's any sad girls fans out there, reach out to me.
Andrew Steinwold 1:03:54
I love it. I love it. Yeah, normally I hear like, punk sport, apes, etc. But I've never heard sad girls. So very, very cool. All right, what is your most controversial thought relating to the drug development industry?
Paul Kohlhaas 1:04:08
Probably that if our legal system changed, that we could treat drug development like software. Ultimately, like developing drugs, it's impossible to do open source drug development today because of our legal system. But ultimately, drugs once you get into producing them, they cost nothing, in example the cost of a pill is virtually zero, especially, once you get into chemical production, but these drugs are sold for hundreds of thousands of dollars. And it's really, really reminiscent in some sense of the software development industry in the late 90s and early 2000s. So I think, most controversial thought, I do believe drug development could be like software development.
Andrew Steinwold 1:04:57
That's awesome. Okay, so could we do it safely without the government?
Paul Kohlhaas 1:05:04
Definitely. Yeah. What we're seeing more and more emerge in the web3 space is very sound, self-regulating processes and principles. I think if you, if you have completely open systems, people will self regulate, and the government often regulates, I think, in very bad ways. And over time, that regulation often becomes self-serving through lobbyism. If you just we really have to ask ourselves, like, what job has half the FDA done, in some cases, in terms of like protecting US citizens from the opioid crisis? I think it's so painfully obvious that some of these regulatory processes have hurt patients and consumers more than they protected them. And I'm sure, I'm not based in the US, but I'm sure there's a long story that people can tell about the justice, the financial regulation in the web3 space, and the role of government there.
Andrew Steinwold 1:06:04
All right, you can snap your fingers and instantly solve one issue in the drug development research industry. What would it be?
Okay, so I explained that.
Paul Kohlhaas 1:06:16
I mean, yeah, I think it's based on what we had before. If we had IP protection, that was more like open source licensing frameworks, as opposed to patents. We could develop, engage in much more open drug development. So if I could snap my fingers, I would hope that licensing frameworks in the pharma industry could effectively replace patents as drivers and protectors of innovation.
Andrew Steinwold 1:06:49
Amazing, alright, who is someone that you look up to? And why?
Paul Kohlhaas 1:06:55
I hate myself was No, I don't hate myself for saying this. But like, I do look up to Elon Musk on the one side, I think he's such a funny troll. Sometimes, have the audacity to just go out and say that stuff. But on the other side, I think he's someone who's inspired a whole generation of builders, and likes to push for the limits of what is possible. “if you want to, like, you can't just decide to go to Mars” and “if you stick with it for long enough, then like you have a fighting chance of doing that”. And I think with that type of behaviour, anything is possible. It's something our younger generations used to get that from political leaders, and presidents. Unfortunately, that isn't the case any more. Today, I don't know anyone, or very few people, who look up to our political leaders. But I think Elon is someone who really inspires us to build and to push new boundaries. And to push for a better world. Oh, and Vitalik Buterin as well.
Andrew Steinwold 1:08:08
All right. Last question. Where do you see IP-NFTs in three years?
Paul Kohlhaas 1:08:15
In three years, I think we could see a similar highly liquid market around IP assets through IP-NFTs. I don't think fractionalization makes as much sense for normal NFTs, for example having fractions of a punk, I even think having fractions of the Mona Lisa. Okay, it's fun , but you can't actively engage with it. But for the IP-NFT, I think we could have a much, much more fractional market over time. So if you have this drug, and it has a specific patient population, or you have a bunch of researchers working on it, it would make a lot of sense for it to become factional. So now, you as a patient could say, “Hey, there's this new, rare disease”. And then there's a new drug and development that you hear about, and it has the form of an IP-NFT or several IP-NFTs. And now you can contribute funding that. You can take $2,000 of your money, and say, “I'm going to contribute funding to this research”. And now you don't just know, you get to govern the future of that asset. And you get to have a voice in terms of what the actual drug should be priced when it comes to market. I think that's really powerful. So yeah, I really hope that we can enable that market to exist. And for IP to become a public domain.
Andrew Steinwold 1:09:47
Amazing, awesome. Paul, this was just mind-boggling. I feel like I just did a college level no beyond college, course, and everything about drug development, drug discovery, etc. And it's really cool to see NFTs being used and in a way that truly matter, not that all the other use cases don't matter. But we're talking about like our health, which is obviously the most important thing. And so it's just super inspiring to hear everything that you're doing and building. If people want to find out more about yourself, find out more about molecule or VitaDAO, where should they go? What should they do?
Paul Kohlhaas 1:10:18
Absolutely, yeah. So you can find me on Twitter. My DMs are open, please feel free to connect. If you're excited about this use case. It's @paulkhls. On Twitter, we're @molecule_dao. Also, you'll easily find VitaDAO. Yeah, we're constantly looking for people that are just as excited about this use cases we are, so please feel free to reach out. And our website is molecule.to.
Andrew Steinwold 1:10:46
Amazing, Paul, thank you so much for coming on. I really, really appreciate it.
Paul Kohlhaas 1:10:49
Thank you so much for your time. And yeah, I had a lot of fun speaking to you, and yeah, hope to speak. Speak soon.
Andrew Steinwold 1:10:57
Awesome, man. Thank you. Hey, everyone. Stay tuned for more episodes of The ZIMA RED podcast, and subscribe to the ZIMA RED newsletter for more info on all things. NFTs thanks so much for listening.