The Trough Of Disillusionment: 2026 RNA Reality Checks

Anna Rose Welch: Hello everyone and welcome to Advancing RNA's mRNA Hot Takes, the show where we talk about serious, oh, so serious RNA things, but with a spicy twist. I'm your host, Anna Rose Welch, the editorial and community director of Advancing RNA, and I'm thrilled once again to be joined by two fearless RNA executives on the screen before us all. Sophia Lugo, CEO of Radar Therapeutics and Michelle Lynn Hall, general partner of the VC firm, Entree Bio. Thank you both, again, for entertaining my hairbrained ideas and being willing to go on this journey with me.

Ladies and gentlemen, watching this, please note, we are doing this for you, so our pain is your gain. Just saying. And really, we've experienced some pain. Yes, Michelle's nodding. The concept of mRNA hot takes is simple. We will be talking about the scientific and business-related aspects of RNA. But because this is Advancing RNA and we love to have a good time learning, we are going to try to carry on these conversations with each other while also seeing how well we can handle the heat of a hot pepper.

So last week we tackled the trusty Serrano. This week, we're going to be facing off with Thai Chilies, which clock in anywhere between 50,000 and 100,000 Scoville units. And I have to admit, I'm a little bit nervous because ... Sophia, can you tell us a little bit about what happened after the last time you ate some hot peppers on this program?

Sophia Lugo: So, viewers that tuned in perhaps have realized that I've been getting a little cocky on the show. So, I decided last time to skip a stage and get the bird's eye chili, as well as the Serrano pepper. And my mouth felt fine, but about an hour later when I ran out to get some food, I almost did not make it to the restaurant, mouthwatering, looking for trash bins to potentially puke into.

Michelle Lynn Hall: But you made it.

Lugo: But I did make it, and I'm back.

Welch: You made it. And she's here to defend her title as The Spice Queen, which she has unfortunately held. She did puke.

Hall: She didn’t puke. She still has it.

Welch: She continues to hold it week after week. So, we're going to see how we can handle some Thai chilies this week. So ladies, are you ready? Are you ready to bring on the heat?

Hall: No, but I don't think you care. I think we're doing it anyway.

Welch: So, I have four of these beautiful Thai chilies, ladies. And I've read that the yellow is when they're ripe, but that also means they tend to be sweeter. So, I'm thinking, should I go with the green? What do you think? Should I go with green if they're spicier? 

Hall: I thought that the red was ripe. And I thought yellow was in route to red.

Welch: It might be in route to red.

Lugo: Take a bite of each.

Welch: Chances are, ladies and gentlemen, that's what's going to happen. But I guess I will start. I'm going to kick us off by starting with the green one, and we'll see what happens. Alright. Cheers, ladies. Here goes nothing.

Hall: Wait, you forgot to tell us where you got your chilies from.

Welch: Oh, it’s a little late for that. It's blossoming. Oh boy, it's blossoming.

I got these at Wegmans, the best supermarket on the planet. If anyone has ever been to a Wegmans, they're the place to be.

Hall: It's game changing. I had always heard people talk about Wegmans, and then when I finally went inside of Wegmans, I was like, "Oh, I get it. I will join the cult of Weggies."

Welch: It kind of keeps me from wanting to move elsewhere. Okay. This is blossoming.

We're going to kick off the question asking. I'm going to start with you, Michelle, but this is sort of a two-part question. So, we're going to start with a broad question, and then I'm going to drill down a little bit. So, we're taking reflection of the entire RNA space, the journey that we've been on over the past year or so. What topic or topics of conversation in the mRNA or RNA worlds would you argue are too hot or perhaps over-hyped today? Where would you kick us off? And you have to show us your chilies and you have to eat.

Hall: Right. So, let me intro this. I did not make it to the farmer's market this week. So, instead, I had to run around to no fewer than three different grocery stores just now to see what I could find, and I found dried red chilies imported from Thailand from a woman-owned business, so I already like that. But eating a dry chili I think would suck. So, I reconstituted it. I'm a chemist. So, I boiled this in water for a little bit, and I have no idea how this is going to go, but let's do it.

Welch: I'm deeply impressed.

Hall: Oh, thank you. Thank you. Alright. How much did you bite off?

Welch: I just ate the entire thing.

Hall: Well, you're more woman than me.

Oh my God.

I am holding back curse words.

Welch: We welcome the swearing here on Advancing RNA.

Hall: I'm woman enough for this. What do I think is overhyped? I think we all hoped that a lot of the next generation mRNAs — excluding what Radar does, obviously, Sophia — would open up a whole new realm for mRNA therapeutics, specifically in protein replacement therapies.

I think we were hoping [panting] that circular mRNAs, for example, would give durability out to multiple months. We were hoping that self-amplifying RNAs [panting] would do something similar. And by and large, the data does not bear that. So, I think while I am pro-next generation mRNAs for enhanced durability, I don't think they're going to get there in the way we want, in the timeframe we want.

Welch: In the timeframe particularly, yeah.

Hall: Therefore, I think the claims that a lot of these things are going to be the panacea that is going to unlock more permanent and durable mRNA gene therapies — I don't see it happening anytime soon.

Welch: Well, I think you bring up a good point that science unfortunately does not follow our whims, our wishes, or our goals, especially in the timeframe that we would really like. And so, I think we all were very excited about some of the work that we've been doing with the progression into self-amplifying & circular RNA. But as you said, 2025 was a year. It was a year, and we got hit with some less than happy news throughout 2025, and some of that had to do with the next gen complexes.

Hall: Don't get me wrong. I think that they are an improvement over linear mRNA for durability. I think we just hoped it would be a step change, and I don't think we've seen that.

Welch: Not yet. At least not yet.

Lugo: We did see a step change in mRNA; there was a $10 billion cross-government infusion into the technology, so I think maybe as the RNA world picks up, there will be an opportunity for technologies to really be funded to the level that they can create a step change.

Hall: Yeah, and exactly. And far be it for me to be like, "Well, you haven't done it in one year, so, what the hell is your problem?" That's not what I'm saying,

Lugo: No, I think you're taking action. You're now an investor.

Hall: Now, how many emails am I going to get with circular RNA pitches now that you've said that?

Welch: I mean, if they have data, that's great.

Hall: Absolutely. Yeah, early data would be great. It takes time for these ideas to come to fruition, and I think we kind of shoot ourselves in the foot. Speaking of the investors, we demand that you over-hype it. “Circular RNA is going to totally transform the field. It's going to open up protein replacement therapy.” And if you don't tell us that, we won't put money in it. And then when you don't do it, we say, "Well, you didn't do what you were going to say." So frankly, we're all kind of responsible for this, but I do think it has resulted in the situation that we're in now and will continue to be and until we start to refine the way we do pitches and demand pitches.

Welch: The hype cycle, right? We always get stuck in a similar hype cycle. No matter what the technology or industry is.

Hall: I'm proud of myself for doing complete sentences given the amount of saliva.

Welch: See, this is the fun of this show. Technically now, Sophia, it's your turn.

I'm going to try one of these yellow ones.

Hall: Alright, please report back.

Welch: Let’s see if there's a heat differential here. That's interesting. Definitely not as hot.

Hall: You seem less debilitated.

Welch: I may have spoken too soon. It's definitely sweeter. Okay. But Sophia, main question. I'm going to ask you the same thing as Michelle: What do you think in terms of topics or topics of conversation today in the RNA, mRNA world, are too hot or over-hyped?

Lugo: Okay. Here we go.

We do not know if this is a Thai chili, but we hope.

Hall: I don't think so. That was from Instacart?

Lugo: Instacart, Safeway, Thai Chili. Forgot my shopper's name. But yeah, it would be a very large Thai chili.

Welch: It's an enormous Thai chili. I'm not sure what that is.

Lugo: I’ll let you know if it's spicy.

Welch: Watch, it'll be super mild.

Hall: Yeah… it's going to be mild.

Lugo: I think I have a freebie day today.

Welch: Okay. To be fair, after the last time you were eating — we don't even know what you were eating — the best that London had to provide in terms of chilies, you paid the price.

Lugo: There's something in there, but it's not as much of a kick.

Welch: Yeah, this one's ... It's getting worse.

Lugo: So, back to the question: Hyped topics to me. This is kind of industry crosscutting and perhaps it's more salient to me as I sit on the West Coast. But there's a movement particularly out here that is called the founder-led biotech movement, and I'd summarize the tension of this movement as a debate on whether PhD scientists — inventors — particularly coming out of academia, should be entrusted with capital to run their own businesses. The debate sounds very strange to tech people out here because you have to explain to them that biotech VCs often incubate their own companies, and they often own companies’ equity at inception. They pay out a small amount to professors, and then they stack a company with very experienced execs of their own choosing, and they primarily compensate them with cash. And so, there are VCs on the East Coast that on the other hand, understandably, in many cases, will not fund first-time executives or first-time founders. So, if you are that, and you talk to them, and they like your science, they may want you off the cap table, and they have many levers to do that. To me, this tension or debate is really not centered on the right things. So, I think the principle at all times for companies that are doing incredibly intense and, for early stage — maybe not as much, but eventually heavily regulated things — the principle at all times should be a company should have the best team possible for the job.

And yes, I think this especially means the executives, but it's every single person on the team. So, to me, founder, not founder, that does not matter. So typically, I don't like to write founder or co-founder of Radar Therapeutics in my title because that's a historical artifact. To me, it's tangential to my current duties, and I think every CEO or CSO — founding or not — has to be evaluated for performance in that role because we are not in a time where we can use money on anything but performance. Can you raise and responsibly allocate money? Can you hire the right team? Can you come up with a commercially and scientifically viable strategy, and can you execute on that strategy? So, I think what both groups get wrong is that I don't think we should take a cookie cutter approach to frontier innovation and choosing teams. If you are developing a de-risked technology — so let's say RNAi is more de-risked now — and if it's ready to head into or be in the clinic and navigate a very highly regulated maze, I think you do need very experienced people who've seen that maze before and knows that maze like the back of their hand.

If you're doing a built-to-buy strategy, you better have someone who knows pharma like the back of their hand. If you are working with novel biology — so an approach where you actually have to hack through new protocols and new assays — you need a very smart and deeply technical bench, and you need to pair them with someone who thinks about dollars because typically those two levels of expertise don’t go together.

At Radar, our CSO is deeply technical, and he knows more about Radar than anyone on the planet. So, I think he's right and critical to leading this endeavor. And as we scale-up and standardize our platform and screens, we've brought in the battle-tested talents of Andrew Fraley, who's been at Korro, who's been at Judo, who's been at Moderna in the early days, Triplet. He has seen hacking through protocols and knows how to start standardizing it, and he also knows how to bring in the operational rigor to building. So, I think it doesn't matter which one of us is the founder. It’s: Are we doing right by the company's vision?; and where we have gaps, we better fill them. So, on the business side, right now it's harder than ever to get a company financed and to fully align your budget to critical needs and keep it tight and navigate the entrance of China.

And so, if you have gaps in your team, I think founder, not founder, it doesn't matter. You have to get out of your own way and hire it, or find a way to bring that talent in. I think what we do is too important. And I think the conversation becomes amplified in RNA because I do think it's the next major therapeutic class that is happening now. I mean, RNAi is finally becoming derisked. I think we finally have some blockbusters in Leqvio —

Welch: And commercial models.

Lugo: We have commercial models now, and I think mRNA is actually in the harder, still needs to be hacked side. And yeah, cookie cutter pattern matching is just not, I don't think it's appropriate.

Welch: Right now, we're basing a lot of our conversations around the commercialization of the vaccines, which are drastically different than what we're looking at for therapeutics, first of all. We were just talking about, right, Michelle, with the next gen modalities, scientifically, analytically, those are different. Those can be slightly different nuts to crack and understand preclinically and clinically. And we're in that weird intermediate where we're getting the preclinical data and we have some clinical programs that are moving forward, but a lot of people are still in that very deeply scientific phase moving forward.

Hall: And maybe building on what both of y'all are saying: I think where I get nervous is not whether it's a founder CEO or a non-founder CEO or founding team or non-founding team. The number one thing that really sets me off is when I see that somebody is egotistical. You can be the founder CEO, and this can be your thesis. You could have been 30 under 30. You could be best friends with Bill Gates and Warren Buffett. And I don't care if you have an ego because every CEO is going to have blind spots, especially with what we're doing, which is at the intersection — I argue, should be — at the intersection of biology and computer science and data science. Nobody knows all of those areas very well and happens to be in with all the biotech VCs and happens to be on good terms with all the tech VCs. It just doesn't happen. And, so, I think I agree with what Sophia said that it's not about founder or not, it's about who you have on the team. And that is one of the things I think is super interesting about the tech VCs out in the Bay and elsewhere; there is this myopic focus on founders and founder CEOs, and I think that can be really good or really bad depending on who and when and what the objective is.

Welch: I started to cry halfway through Sophia's answer, just FYI.

Hall: I didn't know I had that impact on you.

Welch: I know, you have that impact. So, I want to focus in a little bit, too, on a couple of different pieces that I know you're both pretty passionate about. So, Michelle, one of the conversations in our space that you are very front and center of is the AI world. And when we're talking about hyped conversations, over-hyped conversations, AI is obviously a big buzzword that comes up, and you've spoken quite eloquently on this topic. So, I do have a follow-on question. As we're thinking about hyped topics of conversation today in the space, my loaded question is: Is AI actually going to be game-changing for genetic medicines? How would you answer that question?

Hall: The answer is we don't know, to be completely honest. We know that genetic medicines are an extremely complex multidimensional area. I fundamentally reject the idea that people can have intuition around what is or isn't going to make a good genetic medicine. There are a few heuristics, but they only begin to scratch the surface. I believe that this is really where machine learning, dare I say AI, start to shine, is navigating these very complex multidimensional landscapes, generating data sets and insights that frankly are better than what I could discern just looking at Excel spreadsheet, for example. But how much juice are we going to get from that squeeze? I have no idea, and anybody who tells you they know is lying to you. What I do know is that we won't know until we run the exercise, and I believe strongly that of all the places you can think about launching one of these types of optimizations and efforts and campaigns, this is probably one of the best in our area. So, optimization and discovery of very, very complex modalities, eg., mRNAs, as well as clinical trial optimization. Now, again, we don't know how much juice is going to come from that squeeze. But I'd argue if you don't find out, you are doing science a disservice.

But what I do know for damn sure is that, if we all keep saying AI, not only will the amount of homicidal tendencies I have continue to go up, but we will all fall on the hype curve, because what I've noticed is fascinating. Let me back up a lot. So, years and years and years ago, this was back when we all had wired ethernet, I had this little house in Austin, Texas, and my friend and I crawled under the crawl space, like spelunked under like little cavers and drilled holes up through the floor — the landlords were stoked — and we realized we needed more Cat 5 cable. We were running short for all the wiring we wanted to do. So, me and my friend — he's male — went to the store and asked for Cat 5. So, I walk up and I say, "I need another 100 feet of Cat 5, please." And my friend walks up behind me, and they go, "She just said she needs more Cat 5. She surely doesn't mean that. What does she really mean, man?" And he was like, "No, she needs Cat 5, and don't bother crimping it. She can crimp it herself." So, I think there's a lot of hype and expectation about what we do and don't know. And I think the level of understanding that most people have of this topic, what you assume their understanding is, and what their understanding is, is very, very different. And so, I think there's a lot of people going around saying AI and they have no idea what they're saying.

Frankly, I think most people have no idea and I think a very small number of people have some idea. And sadly, those are not the people we're hearing from. Maybe present company included, now that I say it. So, I think what's probably going to happen is we're all going to fall flat on our butts because all of these people who've been super, super vocal about AI are going to vacuum up all of the money. It's going to produce no results because they're super focused on algorithms and not data infrastructure and then the few people who actually can do it, the people who are willing to crawl through a crawlspace and run Cat 5 cable and get dirty and make an impact, I think they're going to find themselves without funding. And I think it's going to be a real, real embarrassment and tragedy, which is why I'm very focused — Plug — send me your pitch decks for data infrastructure, because there is no data science without data. And so, I think that is where we are going to fall flat on our butts, and I think we need to invest now if we aren't going to get totally swept away in the tsunami of disillusionment.

Mic drop, done. Thank you very much.

Welch: Very befitting of a Thai chili. Especially the homicidal rage part.

Lugo: I've heard Michelle say this: “There's no data science without data,” and repeated it as if it were my own. I will start quoting you, Michelle. But I do think data infrastructure, I totally agree. I mean, I also first heard it from Michelle, but once I heard it, totally agreed that data infrastructure is, that's where every company needs to be looking. We can all do it or should be doing it.

Welch: Yeah. It's unsexy work, I believe, is the phrase that I've heard Michelle use in the past. And I like to go back to it because it's not sexy work, but it is absolutely what needs to be done.

Hall: Well, and then once you do it and you use it to build algorithms, everybody's going to be like, "Oh, I always knew that was important. Oh, I always..." Yeah, yeah, I'm sure you did.

Welch: So, this ties nicely into my follow-up here for Sophia. I should not have touched my eye. That was a very dangerous idea.

Sophia, we've talked, again, in terms of Michelle's question, she talked a little bit too about funding. She's often talking a lot about machine learning, AI, the work that we need to do. For you, I would say funding is a big, important topic. It's something that you focus on quite a bit. So, I'm curious, we can't obviously have a single topic in this industry without hearing about how hard it is to get funding today. In what ways do you see funding models being ill-equipped for helping the RNA space along today? And what's at the root of that?

Lugo: Yeah. Maybe I'll start with just the markets in general and then remind me to move back into RNA because I think MRNA is a risky ... So I would say it's a risky, highly dimensional space to play. And so, it is a place where translation is a huge problem. So going back to the ... Okay, now I'm going to start with RNA and then go to the industry. Translation is a huge problem. For anybody doing novel biology, it's a huge problem. RNA is a space where the biochemical assays don't translate to the cell-based assays, then that doesn't translate to your preclinical in vivo data. We still see strong preclinical in vivo data not translating to human. And so, I think that's a problem for RNA that is a problem for funding because I think for speculative areas, it is hard for non-specialized investors to come in. RNA is speculative. At this point, it's speculative. And I do think experts, groups of experts that are investing in the space have arbitrage here, because those who have seen more will be better at discerning which patterns may hold true or not.

But I do think there's arbitrage, and I do think that it's coming online and there are a lot of positive things happening in the RNA space. So, markets in general: I was reading an analyst note this morning, and it was about how year-to-date net outflows of biotech ETFs and mutual funds stand at eight billion. So that means eight billion has left this year, mutual funds and ETFs. And so, I think that is not a positive development. I think for funding in biotech in general, M&A has seen an uptick, and I do think private markets are starting to do better, but on the public side, I am worried about an overcorrection from the huge influx of generalized capital in 2020, 2021, and now we are seeing too much continued outflow. So, I think too much capital in 2021 made it so that companies went public when they weren't ready to go public, and that capital was not efficiently allocated to programs, some suboptimal programs that moved forward, and then just capital being allocated… being a public company is more expensive, and that is not an efficient use of funds.

And now I think we've over-corrected. So that generally is worrying to me. And what's structural in the industry is, very honestly, I don't know if biotech has figured out how public market structures can suit our needs. So, we are unique in that there is fundamental volatility to what we do. There's our binary clinical and regulatory events, and the event that comes before is not a good predictor of what comes next, and this is, like I said, particularly for RNA and mRNA, which is barely diversifying from vaccines. And then you really need specialized expertise to evaluate scientific and clinical data. And obviously that is limited.

We know that biotech hasn't figured out public markets, because what we have seen this year is so many new financing structures in our sector. And so, I saw that US biotechs raised about 5.5 billion from pipes in 2024. We also saw 90% of follow-ons in the second quarter of this year were confidential offerings on the public side. There were many crossover rounds; the crossovers were having to build the strategic IPO syndicates. And if you were at JPM last year, you saw some companies starting IPO roadshows that actually ended up going with M&A. We've seen reverse mergers, debt financings, more royalty financings, and even you start to see more funds that are building structured capital teams, and you're seeing a lot of companies trading below cash value. And when that happens, it means there was a valuation dysfunction, and I don't think we've corrected for that. In fact, I think we're still in overcorrection mode.

So, to me, this means that biotech doesn't have a mature IPO model; tech and other sectors do, but we don't. We don't have historical agreement on like, “When should a company go public?” In 2020, 2021, it was like preclinical Phase one and now it's Phase two. Of course, that differs by modality and therapeutic area, but there isn't alignment. Our post IPO success rates are really bad. They're much lower than tech, especially this year. I don't like to use the word “really bad,” but yeah, they've been bad. They've been lower than tech.

Hall: Disappointing.

Lugo: It's disappointing.

Welch: Cause for concern.

Lugo: Yes — For an essential industry. We've talked in other episodes about the insane macro right now, but I think part of it is also structural, and we don't have these profitability metrics or standard multiples for pre-revenue companies. It is a hard place to demand more generalist capital. There were no IPOs in quarter 2; So, honestly, I have started becoming favorable towards an idea of starting a movement for a dedicated biotech exchange if the NASDAQ or whatever is not working out, with specialized disclosures and trading rules. Why do pre-revenue companies still do earnings statements every quarter when our development cycles are much longer than some quarterly disputes.

Hall: Exactly. But it's not just in the public; it’s also on the investor side. We really screw that up. We were like, "Well, yeah, but how are you doing this quarter?" It's like, "I don't know. It's science. I ran some experiments. I went and I got some lunch. Now I'm waiting. It's not because I'm trying to be a jerk."

But also, I'm curious — here's a hot take. I wonder whether some of those IPOs transitioned into M&As because the expectation that they would be able to get anything near their overhyped valuation on the public market was dashed, and they realized they could only get it with an M&A. Agree or disagree?

Lugo: Honestly, agree. And, there are executive teams that I think know that their technology might have a chance to survive on the private side and are not willing to make moves to make that happen. So, there is a world where tech is good. It is not at a place where you can be on the public side, because the public side is driven by clinical events, and if you don't have clinical events, you might have a good tech; you might be in the wrong place, and you might have to be willing to recap or go private and find a creative way to do that or find one of these creative financing vehicles or do M&A. I mean, I think that there are teams that could find ways to right-size their own valuation, and that might require more creative moves.

Hall: And discipline, frankly. It's really sexy to chase after these hyper-inflated valuations. Gosh, what was the question I was going to ask you? Oh yeah. So, the correction; so I totally agree with you. It's super interesting. I'll talk to people who are not in biotech and they'll say, "Yeah, but look at this valuation." And I'm like, "Wait, wait, was it pre- 2021?" And they're like, "Yeah." And I'm like, "Yeah, no, different ballgame."

Are you seeing that, Sophia, where people's expectations need to be adjusted based on where they are in time? Because we are going through these sort of over-hype and inflated valuations and now into a correction.

Lugo: Yeah. Yeah, I do see that. In 2020, 2021, there were not enough companies going public for the amount of generalist capital that went in. And it is very clear what happens then; that is a historical artifact that bumped up valuations. Then all that generalist capital fled when the capital was not recycled. It's been five years now, and much of that has not been recycled, or that value has been destroyed. Everyone needs to come to terms with that now, including companies. As a public company, it's hard to come to terms with that. On the private side, valuations are more flexible. But yeah, right now, I'm actually pro these more structured capital, alternative financing mechanisms that are popping up, or pharma coming in and being the smart buyer that says, "Hey, I'm going to right size what you're worth and find you a home."

Welch: We had a big year in mRNA with big pharma this year. Do we feel like that right-sized value or added to the problem?

Hall: We're going to pay the price for that, would be my guess.

Lugo: There were some very large deals that I think there's a lot of debate around the value that was added to the deal. But I'll say the increase in M&A, in particular, for RNA has been really strong. And I think that what's happening now is that big pharma is actually finding a home for RNA platforms, and I think that is good. I think pharma can be a great place to have a home for a platform, especially in an industry where, for RNA, there are so many components that we need to optimize like delivery and payload in a very difficult regulatory environment, and many, many other things.

Hall: Where it's rapidly evolving. By the Tweet.

Lugo: Yes, exactly. And so, I think pharma actually makes a great home for this. Honestly, Avidity was super interesting because Avidity only had one buyer and was priced at 12 billion. And I think the single offer is a very interesting place versus the multiple offer, because you see that the offer being priced by one party means it was probably more driven by a model than by supply and demand. And so, that one was very interesting. And what I really, really hope for this year is not just uptick in M&A, but now that we have Leqvio and Amvuttra developed by Alnylam, at least originally, I want to see larger RNA by birth companies that are becoming buyers, because the other problem … We talked about the public markets, but on the buy side, there are not that many buyers in our industry. These typically tend to be profitable large pharma, and we need more native RNA players that can become buyers. Moderna squandered the opportunity. They did not do that when they could. But I hope that we will have more RNA companies entering the ranks of abundance now that we have at least two blockbusters there, and some are moving towards profitability. That will be really exciting, because I think these are actually really, really good buyers.

Hall: They're thinking about it. They're definitely thinking about it. Talking to smaller companies where they think that their tech is complimentary; we just haven't seen it yet. And I hope that does come to fruition because I think maybe pulling on a thread Sophia said earlier, I think it's really helpful when you have specialists in there. I've spent a lot of time, having started my career in small molecules and then moving over to mRNA, trying to educate people on one side of the fence about how the other side of the fence works. And I think the more that you can have somebody who is a specialist in that field directing one of these early stage biotechs, welcoming them into the larger community, I think it'll probably go better. So, I agree with Sophia. I think that would be great.

Lugo: Yeah. Bubbles hurt everybody. Burst bubbles hurt everybody. And the 2021 surge led to worse capital allocation. It led to companies burning cash where they shouldn't have. And then it led to a set of investors who may never come back to biotech because they were led to believe that it was valued in a different way than it actually is. So, burst bubbles hurt everyone. And some of those technologies are good and will die because they're in the wrong place. They're on the public side when they should be on the private side, or they should be in pharma or they should be somewhere else.

My view is also that there's a world where we should have more of the public universe actually just be revenue generating and keep companies private longer. Of course, that will require there to be investors on the private side, but there is a world where revenue generating is actually the best type of biotech company to be in the public markets. And then we can have our specialist biotech exchange for the other companies. I'm all for putting a lot of capital into science. I really am, but we can't do it in the way we did it in 2021.

Hall: Yeah, I agree. 100%.

Lugo: And milestone-based financing. Not quarterly; it's like milestone-based financing and milestone-based rewards for companies.

Hall: Yes. I'm a big fan of that. One of the things that I like to do is intentionally lay out the timeline: this is target identification, hit ID, hit to lead, all the way up to “congratulations, you put it in a human” and, “oh, wow, look, you've reached this market size,” and incentivize little milestones along the way because I don't know about you, but who didn't like getting their homework back in school with a “good job!” exclamation point. Just give me a little hit of positive renforcement. And so, I don't think we've done a good job of thinking in terms of those incentives.

Welch: Well, I want to phase us into a very quick cool down question here before we hit the top of the hour. So, I feel like some of our conversation has been dancing around as well some of the topics of conversation that aren't as hyped as they need to be on the AI side, on the funding side, on the founder-led versus specialist-led companies. But I would like to ask each of you to give your quick take on what topic or topics are a “slow burn.” We got to keep the heat jokes coming, a slow burn. They're not getting the Scoville rating that they deserve today. So, maybe we start with Michelle and then Sophia, you can give us this. And I will also say that my milk is about three weeks past its expiration date. So, another one of us may be getting sick after this call, just throwing that out there.

Hall: Please don't do that. That would be terrible. All right. You’re going to be 0% surprised. So, I'll give you the answer that you expect me to give, and then maybe I'll conjure up something more interesting. Big shocker: Data infrastructure. Not sexy; is the foundation of everything else. I'm curious, are we ever going to realize that? I don't know.

Welch: I mean, if you keep shouting it from the rooftop.

Hall: Yeah, people are just going to ignore me. It's going to be like every time Cate Blanchett goes off about leaf blowers. We all know. We just hit mute.

Welch: Yeah, but she's right though. Leaf blowers are absolutely terrible.

Hall: 100%.

So that for damn sure. But then, maybe tying it back to what I said earlier about how I was hopeful, and I think a lot of us were really hopeful, that these enhanced durability mRNAs self-amplifying and kin would really move the needle in terms of pushing mRNA outside of acute high expression and then, oh crap, you got to do it again sort of thing. I'm really hopeful — notice I didn't say optimistic, notice I said hopeful — for non-viral delivery of DNA, because I think that will get us there.

What I have just said is not novel. There have been a lot of super smart people who have been working on this for a long damn time and have failed over and over and over again. But that is one of the things that I'm really hopeful we'll eventually be able to figure out. And two, why is it a slow burn? I don't know about you — There's a lot of things that annoy me, okay, but let me tell you one of the many things that annoy me — leaf blowers, people saying AI — other than that, my favorite thing that people will say is, "We tried that. It didn't work." And you're like, "Cool, what did you try? What did you learn? How could we do it differently?" And I think right now in the non-viral delivery of DNA realm, we're in a lot of, “We tried that, and it didn't work,” and nothing works until something does. And so, the question is, “Why is it not working? How can we learn from that and how can we move forward? So, I'm very hopeful for that for the future.

Welch: Beautiful. Sophia, close us out here.

Lugo: Let's see. Slow burn... I feel like we should have done my pessimistic note and then my optimistic one, but mine's a bit pessimistic. For me, it's the talent development pipeline. We just talked about how, even on the investor side, this is an area that requires more expertise, more experience, more specialization. Broadly, I am worried about the talent development pipeline in the US. I think that we are in a moment where, in San Francisco and Boston, it is hard to live and be a person dedicated to science and biotech. Jobs are evaporating, salaries are being reset when inflation has not been reset, and honestly, it's devastating to see how many people are on the market on my LinkedIn.

I think in the US, there has to be a “coming to Jesus moment.” We cannot become the biotech Rust Belt. This is such an important time, particularly with the entrance of China, to keep talent here and keep talent occupied. What ends up happening is a lot of VCs are only looking to experience talent. Even though some of the biggest deals of this year were done by women CEOs, you saw a decline in women CEOs because VCs went back to the most experienced talent, which means you're pulling from times when the ranks were more male, and we're also pulling in that ultra-experienced, highly expensive corporate talent to early stage startups. They might end up putting that startup in a place where it's mired in proceduralism and corporatization when it's supposed to be an innovative org geared towards agility. That's also a great place for first timers to thrive. Bob Swanson was a first-time, young founder of Genentech; Jeff Moraza was a first time; and that infused creativity and it also developed a pipeline.

So, I think we need to continue to develop our pipeline of executives and our pipeline of the bench and everywhere. Then, at the asset level, more pharma and biotechs are just purchasing in assets at Phase one/two, from China. So, on the operating model, investors are pushing you more to be lean, to operate through consultants, to operate through CROs, and, once again, we are foregoing the opportunity to train up communities of talent like Moderna did. There was a time when everyone who was good at mRNA was trained at Moderna. Someone has to train them. And those people at Moderna then went off to create companies that operate on the next level that tried to solve Michelle's qualms about mRNA. Those are the people who were trained. So, I think it is an important societal investment for the United States to make to maintain these communities of people and talent and process knowledge of building drugs because China did do that. They invested a lot into doing that. And, once we lose this community of talent, it will be lost forever. We have already seen that happen in different industries. And again, the talent drips back to people who are able to invest in this space. So, I think the trajectory there is not good. There has to be a societal investment made in keeping the talent, the community of people who understand and have process knowledge, here.

Welch: Yeah, absolutely. I do think that that will hopefully be a topic of discussion more in 2026, because I know just, even based off of the conversations that I've had with executives for the outlook articles for 2026, looking at what that impact of shifting talent, what that impact of increased business in China or overseas, what that's going to do specifically to the RNA space as a whole. But as you say, this is an entire ecosystem for biotech. So, it's not just RNA; this is every modality.

Lugo: As a company, one cannot endeavor to take on that societal issue themselves. For me as a company, I have to really right-size the team and keep it lean. Of course, we look at outsourcing what's not our magic sauce. Of course, we look at collaborating with other players.
Welch: Well, we are at the top of the hour, ladies. As always, thank you for playing with me.

I ate all four of my Thai chilies. So, I'll report back on what happens in the next hour or so.

Hall: I will think positive thoughts for your tummy. Maybe take some Tums now.

Welch: I might take some Tums. I may need to go and eat something else. That just seems like a smart idea. And I'm definitely not drinking more of this milk. We're just going to throw that out there.

Hall: Oh, does it smell?

Welch: No, it just has an unusual taste. It's past its prime, put it that way.

Hall: Three weeks is bold of you.

Welch: Thank you. Yes. Well, we do like to make bold choices here, this show being one of them.

Well, thank you, ladies. It was lovely to see you. We'll be back next time for yet another adventure. Until then, see you then.