Pharma bro David Shaw

Returning Alphavillain Alexandra Scaggs pointed out to us a fascinating tidbit of news that came out on Monday, when everyone’s attention was on the unfolding market mayhem.

NEW YORK, June 13, 2022 /PRNewswire/ — D. E. Shaw Research (DESRES) today announced that it has entered into an exclusive global license agreement with Eli Lilly and Company (Lilly) for the clinical development and commercialization of DESRES’s program of Kv1.3-targeted therapeutics for the treatment of various immunological and inflammatory diseases.

DE Shaw Research is the full-time hobby of David Elliot Shaw, the founder of the $60bn quant hedge fund that also bears his name. In the early 2000s the former Columbia University computer science professor tiptoed away from DE Shaw to set up DE Shaw Research and pour his fortune into computational biology.

He remains lightly involved, but the hedge fund is currently run by a six-member executive committee (a pretty rare example in the money management industry of a successful leadership transition).

Shaw’s efforts now appear to be bearing fruit. The lead compound of the licensed therapeutic — which Shaw has modestly named DES-7114 — was conjured up by some decidedly quant-like techniques.

The design of DES-7114 by DESRES was enabled by the use of proprietary special-purpose supercomputers that DESRES developed and constructed to perform ultra-high-speed, atomically detailed simulations of the three-dimensional motion of biologically and pharmaceutically significant molecules. A series of such simulations, in combination with experimental studies, resulted in DESRES’s unique understanding of Kv1.3’s structural, dynamic, and functional properties, leading to the design of compounds that bind strongly to the target protein while likely avoiding undesirable interactions with other ion channels.

Quants have turned their skills to medical challenges with some success before. In 2016, two quants formerly with Crabel Capital Management in LA and Two Sigma in New York teamed up to create an algorithm that diagnosed heart disease from MRI images.

But that was just for a Kaggle data science competition. Eli Lilly will pay DE Shaw Research an initial $60mn for the license, which can rise to $475mn through various development and milestone payments, plus royalties on any worldwide sales.

For Shaw, this is chump change. He is still the biggest owner of DE Shaw (Google’s former CEO Eric Schmidt owns 20 per cent, which he acquired from the Lehman Brothers estate), which is the fourth-highest grossing hedge fund in history, having made investors $43.7bn since its inception in 1988.

That has handed Shaw a personal fortune of $7.5bn, according to Forbes estimates. ProPublica and New York Magazine reported in 2019 that Shaw donated $37.3mn to Harvard, Yale, Princeton, Stanford, Columbia, Brown and MIT between 2011 and 2017 merely to ensure that their children would have the pick of elite universities.

But for Shaw the thrill of seeing DE Research finally develop something concrete and valuable — the orally-administered compound has in initial trials proven effective against several chronic inflammatory and autoimmune diseases like Crohn’s — probably matters more than any financial rewards.

Here’s what DE Research’s “chief scientist” said in the statement:

“We’re enthusiastic about DES-7114’s potential, and are hopeful that it will ultimately have a meaningful impact on the lives of patients throughout the world,” said David E. Shaw, Ph.D., chief scientist at DESRES. “We’re also enthusiastic about teaming up with Lilly, which is one of the global leaders in therapeutics for immunological diseases, and is exceptionally well positioned to carry the compound forward through clinical development and commercialization.”

Further reading:

DE Shaw: inside Manhattan’s ‘Silicon Valley’ hedge fund — FT
DE Shaw: The first great quant hedge fund — New York Magazine