Episode notes
Drug discovery is becoming more expensive and producing less results than ever before. Why? Partly due to middlemen called contract research organizations, or CROs. When a pharma or biotech company needs a clinical trial doing, they often call up a CRO to do it for them.
But as Charlie Munger says, show me the incentive and I'll show you the outcome. CROs are incentivized to make these clinical trials as bloated and inefficient as possible, because they're effectively paid by the hour. Imagine you were paid to wash cars by the hour. Would you try and wash lots of cars? Or would you take your sweet old time on one? Check Twitter. Maybe have a cigarette break.
Well, that's the situation Lindus Health are trying to fix. They're the hot new challenger on the block. They've run almost 100 trials through their platform and just raised their $18 million Series A round, with investors including legendary tech billionaire Peter Thiel. Thank you to Mithi Thaya, also an investor, for introducing me to Lindus CEO, Meri Beckwith.
In this conversation
- The middleman problem, quantified: a single pivotal trial runs $20–30M, but with 30–40 trials behind every approved drug, all-in costs hit $2–3bn — and CROs get paid by the hour to keep it inefficient.
- How an unknown startup beats IQVIA: not on footprint or budget, but on the two things that actually matter to sponsors — timelines and data quality — backed by access to millions of real patient records.
- The "anti-CRO" positioning as strategy: why defining yourself by what you're against built a tribe of disillusioned ex-CRO staff who now email saying "I'll do anything to work for you."
- A VC-turned-founder's most useful fundraising rule: never have half-baked early chats with investors — you'll be judged against every polished pitch they've seen, and you'll poison the well.
- Beyond Lindus: why Meri thinks fertility is the next civilisational pressure point, and the mental model (John Boyd's OODA loop) he uses to kill decision paralysis.
Transcript
For as long as I can remember, I've been obsessed with the problem of productivity in life sciences — basically, how we develop new medicines, new treatments. Essentially, the productivity around life sciences has been getting exponentially worse. There's this thing called Eroom's Law, which describes the exponential increase in cost to develop a new drug, a new medicine, since 1950 — over the last 70 years. That's pretty terrifying when you think about it. One of our most important industries is getting exponentially less efficient.
So I've always been obsessed with why this was happening and whether there was anything we could do to solve it. As I was working in venture capital, investing in early-stage health tech and life sciences companies, the answer started to dawn on me. Essentially, most of the cost to develop new medicines is the cost of clinical trials to show those treatments are safe and effective. And what I was seeing on the ground with early-stage biotechs and digital health companies was that when it came to running these clinical trials, the outcomes were really bad and frustrating. They were always over budget, late — there were just always problems.
Then I had a separate experience when I volunteered to take part in a few clinical trials as a participant, including one of the big COVID vaccine phase three trials. That was totally shocking, because it was just unbelievably chaotic. And in particular, I could tell they were capturing very poor quality data — as well as ridiculous stuff, like the company running the clinical trial couldn't build a website properly, so I had to download Internet Explorer to even sign up. Et cetera, et cetera. That's the high-level background.
And I think the trigger to founding Lindus was realizing that most pharma or biotech companies will hire a commercial company called the Contract Research Organization — CRO for short — to actually run their clinical trial. It's this huge industry that not many people are aware of, but it's 60, 70 billion dollars, give or take. And essentially these CROs sit in the middle. They have total budget control over how the clinical trial runs, but they just do a terrible job. This is what came up again and again in conversations with everyone from pharma execs down to biotech founders. From working in venture capital and being on the clinical trials myself, I realized that the CRO model was just really broken and needed to change. And that sets the stage for what we're doing at Lindus Health.
Meri, some people hate injustice, some people hate traffic — and you hate contract research organizations. Can you talk about why they exist? Why do pharma and biotech use these CROs? If they are so terrible, why are they using them?
“The CRO business model means you make more money the worse a clinical trial goes, because you're getting paid by the hour.”
Meri
Well, there are two reasons. Firstly, in the 90s — this industry, despite being big and very clunky, has actually only been around for 20 or 30 years, really 20 years. In the 90s, everyone used to run their own clinical trials, overwhelmingly pharma. But then pharma realized they had so much pricing power in the market that they could just outsource it as a way to save cost, and then do what they're doing today, where pharma is almost like an investment bank — they just move money between different programs and then maybe do distribution when things get approved. So this created the CRO industry, these companies you could outsource running the clinical trial to.
This also worked for biotechs. As the biotech industry has grown, virtually no biotechs have the resources to build their own internal clinical operations capability to run clinical trials on top of everything else they do around target discovery and so on. So this created the clinical trial industry. And then there's a regulatory component — the regulations don't mandate this, but they're written with a view to certain aspects of clinical trial monitoring and patient management being easier if you have a neutral third party do them, rather than a deeply interested pharma company. That creates a problem of incentives.
So those are the twin reasons the CRO industry exists. And something like this should exist — I'm definitely not arguing with that. So you say I hate CROs. I think I've come to hate them. I don't think any of us really hated them initially. We just saw it as a problem of misaligned incentives. But I've spoken to enough ex-CRO people — pretty senior — and they've just confirmed all of the worst things. We hear terrible, terrible stories again and again. I'm talking about instances where the CRO business model means you make more money the worse a clinical trial goes, because you're getting paid by the hour. There are all these instances where CROs have deliberately sabotaged clinical trials they're responsible for in order to make a quick buck — charging five grand for the weekly PowerPoint catch-up meeting, absurd stuff like that.
And this really affects patients. Think of oncology — I heard about this in the context of a phase two study for non-responders for breast cancer. These people are going to die unless they get this treatment on a clinical trial. So if you're finding a way to delay that trial by a couple of months so you can make an extra 50, 100 grand, that is deeply unethical. And that's the sort of stuff that goes on. That's why we hate CROs.
The fundamental issue with the CRO — I think it was Warren Buffett or Charlie Munger who said, show me the incentives and I'll show you the results. So the fundamental issue is it's a fee-based service model where they're incentivized: if things go longer, if they spend more time on things, they get paid more. And your innovation here is that you're results-based, or value-based? What's the change?
There are a couple of things. On the business model side, it's value-based. We only ever do a fixed price, a fixed quote for an entire clinical trial. So our customers have certainty over how much it'll cost them. And they only actually pay us as we hit certain milestones — the milestones that matter to them. So it's entirely value-based. We are contractually obligated to deliver outcomes the customer cares about, as opposed to a CRO, where — it always blows my mind — they are contractually obligated to deliver a number of hours that are not at all linked to the outcomes a customer cares about.
It's so crazy to me that this has gone on for as long as it has. I think pharma bears some responsibility for just letting the state of affairs continue, the way their procurement systems work. But the result is that to get a clinical trial to go right — and we hear this again and again from all our customers, big and small — they need to micromanage a CRO, because the CRO's only lever is throwing hours in different places. That doesn't necessarily mean they'll get any kind of result from it. So yeah, it is fundamentally a problem of incentives.
I've been thinking a lot about how people hate — in quotes — middlemen. They're across society, right? If you really boil down a lot of businesses or services, they essentially operate as middlemen. As a simple example, if you think of Uber — they're not the driver and they're not the person being driven around, they're connecting the two people and taking a slice off the top. Similarly, in pharmaceuticals, more on the clinical side, you have pharmacy benefit managers, PBMs, and people hate on them too and say they bloat the cost of healthcare in the US. And then in your world you've got these CROs. Do you think there's — they must be adding value to exist, right? When you have someone in the middle like this, there's something there, otherwise it just logically doesn't make sense that it would exist. Or do you think it's some perverse incentive structure that's caused them to stick around for so long?
I think in the early days of the industry they were probably adding value — giving pharma and research sponsors the flexibility to shift capital between programs. And if you think about resource allocation: if you're a biotech, you could build a team internally, but your need for a clinical operations function might be lumpy, whereas if you work with an outsourced company you're effectively pooling resources. But I think it's just gotten to the point where, because the barriers to entry in this industry are so high, and because pharma is frankly such a terrible customer for any innovative business model or new entrant, the CROs have this entrenched position.
And again, I vacillate between thinking the model is kind of evil, and thinking there are direct evil actors within CROs — I think it's a bit of both. The market forces have just meant they're in this privileged position, and they've done what any interested party would do to take advantage of it.
You said pharma are bad customers for any innovative business. What does that mean?
Oh, boy. Any of your listeners who have a startup, or who've sold to pharma and seen what a pharma procurement process looks like — they just have incredibly heavy-duty processes to buy anything. Entire divisions devoted to, quote, procurement. And what that boils down to is: if you're trying to sell anything to pharma, you need to go through months and months of wrangling of questionnaires, and all of the questions are designed to bias them towards the biggest, most established companies possible. It's like, "send me your audited financials for the last five years" — why would a startup ever pay to have their financials audited?
So if you're trying to create a product where pharma is the natural customer, it's just much, much harder as a startup if pharma is the only customer you can sell to. It's going to take a lot of effort and time, and those are exactly the things you're resource-constrained by as a startup. Whereas the big guys can just employ entire teams to deal with these pharma procurement processes.
Can you explain the impact or the scale of the clinical trials problem — the bloat, the inefficiency — and how that feeds into the bigger picture of why it's becoming more expensive to bring new drugs to market? There was this JAMA paper I linked you that, from the headline at least, says getting a drug to market costs between one to three billion dollars, and the clinical trials — or at least the pivotal trials — only make up about 1% of that cost, around 20 million dollars. So from that it seems like a relatively small issue in the bigger picture. But what's your take on the disconnect there?
So you're right that the median cost for a phase three pivotal study is about 20 million. The 2-billion-per-drug-approved figure factors in all the drugs along the way that you still had to run clinical trials on that didn't make it. And this is the key thing — you only know if a drug works when you test it in humans. You read the newspapers every day: "scientists have discovered a cure for cancer" that only works in rats or cell models. You only know whether something works when you test it in humans.
That's the key problem with today's clinical trial ecosystem. The operations part — the part we're disrupting — is a big part of it. I'm not saying it's all of it, but it is the biggest bottleneck to enabling much faster, safer, more rapid iteration, such that you don't need to run 50 very long, drawn-out, expensive, $20 million clinical trials per drug you actually approve. At the moment, you need to run 30, 40 pivotal studies for each drug that gets approved. You total up the cost — that's a billion dollars — but the individual study itself will be worth 20, 30 million.
Can you talk about how you got your first clinical trial, your first taste of success? It looks like from your site that you initially focused on more digital health, digital drug, or decentralized-type trials. Is that correct? Is that a good way in?
Yeah, that was our entry point. When we started the company, our North Star was always: to make a difference in this space, you need to be in charge of the entire clinical trial. That's really hard, particularly for a startup. So we thought, okay, what's the simplest clinical trial we can do end to end and prove out the model? And exactly as you said, we focused initially on digital health, digital therapeutics, and not quite food supplements, but functional food products — technically food supplement products that were making registered health claims. So our early cohort of clinical trials were all in those areas.
Shout out to maybe Habitual, the UK company — our first ever end-to-end clinical trial customer, whose study we finished and it went super well. Very grateful that there were a handful of companies willing to trust us with something super important and take a chance on a new provider.
Fundamentally, how do you compete with companies like IQVIA, who probably have coffee budgets — or printer budgets — bigger than all your budget combined? What are you going to do there?
“No one gets fired for hiring IBM. In this space, no one gets fired for hiring IQVIA. It's just that effect, and it's just something you've got to grind through.”
Meri
Printer budget is apt, because so much of clinical trial centers still runs on paper, which is crazy. The glib answer is that we don't — well, we've started competing with them. We didn't until about six or eight months ago. But now that we're running phase one to four drug studies for major pharma and biotech sponsors, we are directly competing with the IQVIAs, the Parexels of the world — and we're starting to beat them, which is awesome.
As an aside, we're in the final selection for quite a big phase two study. And let's just say we know some folks — we're competing against one of the biggest CROs for it, and I just got a text message from some of the folks at this big CRO saying, "yeah, everyone's shit scared, because they know who you are now and they know there's just no way they can compete." So it's really gratifying, whereas six to eight months ago I doubt they even knew we existed.
So to directly answer your question — how we compete is, we're never going to match their footprint or their printer budget, not at the moment anyway. But we present an overwhelmingly stronger case on the things that really matter to the customer. That's timelines — how quickly we can start up the study, recruit patients, close the study out — and quality of data. The way we do timelines is, we have access to real patient data. All the assumptions we make, everything we present, is sense-checked against millions of real health records that we have access to — and not just access to, but we can reach out to those patients and recruit them onto our clinical trials. And on quality of data, it's our software platform: how it captures data, stores it in a compliant way, and a lot of other features that spin off that.
It is hard, and the objection we always deal with is: no one gets fired for hiring IBM. In this space, no one gets fired for hiring IQVIA. It's just that effect, and it's just something you've got to grind through.
Can we talk about the big vision with Lindus? You keep going the way you're going now — you're like a CRO slash anti-CRO, providing this service for people, and it's a huge market. But in terms of a big, big, rocket-ship vision — is it that you eventually vertically integrate and have your own pipelines? What's the next step?
The vision is we just become the default provider for any company looking to validate a health or biotech product, because we can do it so much faster and we can evidence that running a clinical trial on our platform leads to materially higher quality data. At the moment, our vision isn't to almost become a pharma company, where we're buying our own drug products and then running them on our platform. That's definitely an avenue we could go down. A company I think is interesting in the space is TrialSpark — they did go down that path about four or five years ago, and I think it's an interesting path.
But when I look at how much there is to do just in the arena of clinical trials, that's more than enough for one company to chew on. And at the moment, our DNA isn't the scientific inspiration behind a certain target or drug. So we're squarely focused on just executing better, faster, more effective clinical trials.
What did you take from your time as a VC, and what have you brought to Lindus? Are there things you think you'd be a bit smarter with, compared to other founders who didn't have the VC background you had — from being on the other side of the table?
All of the memes roasting VCs who try and be operators are just running through my head. They're all unfair. There's a lot of tactical stuff around fundraising, and it bothers me that there are still loads of unwritten rules when it comes to fundraising. If you've been a VC, you kind of know how to avoid some of the potholes, or run a tight fundraising process. So that definitely helps.
I think also, having had — as VCs can only have — a very ringside seat to some pretty cool companies helps give you that lesson for, okay, here's what a high-performing culture looks like, here's what hypergrowth looks like, here's how things can go wrong. So that definitely helps. But the memes have a point where it's deficient in a lot of ways, because a VC firm is ultimately quite a weird organization — it's very zero-sum, it tends to be very small, quite political. It's not really like you're building a growth business. So the job of VC itself isn't a perfect setup for being an entrepreneur.
What are the potholes that you avoided?
Oof. Okay. So there were actually potholes that we knew were potholes, but still fell into anyway. The classic things — like hiring too senior too early. This is a mistake almost everyone makes. I could even see companies I'd worked with as a VC making it, and we still made the mistake. You start the company and you're like, shit, there's this whole area — I'm not from this business function, here be dragons — what do I do? Let me just hire someone who really knows this area and they'll figure it out for me. No, wrong. That fails every time. And we made that mistake a couple of times.
On the fundraising front, there's the very tactical one that some people make: you and your time as one of the founders is either 80% on fundraising, or you're not — there's no middle ground. That's the way to play it. But the mistake is you kind of half fundraise — and we made this as well. You have early conversations with VCs before you really know what the pitch is, and that puts them off, and you sort of poison the well a bit. So those were some of the mistakes we've made — even though we should have known better, and I kind of knew they were mistakes from my time in VC. At least we won't be making them again. Or at least I hope.
Wait, sorry — the downside there is having conversations with half-baked ideas when you're not ready to pull the trigger, and that's a bad thing? Because that isn't obvious to me. It seems like having those warm, friendly conversations in the build-up, doing it as you go along, would be beneficial. No?
For us, at least, it's almost always been a bad idea. It's particularly bad in the early stages, when essentially the VC is backing you just based on your pitch. For them, the better your pitch, the more likely you are to raise a Series A, which boosts their portfolio value. But it was definitely a huge mistake for us — literally every VC we'd had early discussions with, when the pitch wasn't ready, they were always the first to turn us down, very quickly. And I don't blame them for it, because our pitch just wasn't coherent. Even though you can go to a VC and say, "look, we don't have a pitch ready, this is just a casual conversation," they'll always judge you by the standard of all the other pitches they're seeing. So I think it's almost always a bad move.
It can maybe work slightly later, like Series B stage. We are deliberately having just a small handful of conversations with VCs, generally more senior VCs, so that when we're raising our Series B round, they already know us and have seen a level of progress. But even so, I do it very sparingly. If you're having an early, non-fundraising general chat with a VC, heavily caveat it up front — just be like, "look, we don't have a pitch. I can tell you about the market. I'm not going to tell you very much about our company, certainly not going to tell you any metrics." I think that's the way to do it.
The positioning and PR side is quite fascinating. You've pitched yourself as an anti-CRO, even though, again, you are basically a CRO. And I find that interesting because I think it hits on this chord of tribes. Seth Godin has really good writing on this in his book Tribes, in terms of how you can, as a business, position yourself not only as "we make money and we pay you," but as a tribe — like people follow a cult, or in a very positive sense people really get behind the vision.
One of his key points is that you need to be very clear about what you are not, rather than what you are. A lot of people say — you see this all the time with corporate BS — "our values are integrity." I think Enron's key values were integrity, honesty, openness or whatever. And then you see how that ends. And another part of it is that you're actually a lot clearer when you say what you are not. For example, if you were talking to an alien and trying to describe the difference between a dog and a cat, you can say a dog is a four-legged creature with fur, they're very friendly, they hang around your house — and the alien will feel like they understand what a dog is. But the moment they see a dog and a cat together, they won't be able to differentiate.
So I think that's an interesting position. But perhaps the downside is that when you pitch yourself as a disruptor — that you are not this thing, you are the movement against CROs — well, they're going to be your colleagues, your business partners, et cetera. So there's a bit of a loss you take there. Has that been a very intentional decision for you, and do you agree with my analysis?
I totally agree with your analysis. It has been intentional. The problem is, when we use any other words to describe ourselves besides CRO, people are confused about what we do — because I'm serious, there are so many different offerings that make up a clinical trial. So CRO is a useful shorthand. But at the same time, CROs are not well thought of in the industry. I don't think I've met anyone, in hundreds of conversations, who's had overall positive things to say about them. So that explains it.
I agree with you that you can definitely over-rotate on defining yourself by what you're not.
Have you seen any of the companies who get the balance right, do you think?
The ones that immediately come to mind are in the DeSci space — there are a couple of good ones there that aren't coming to mind.
Like Molecule?
Yeah, Molecule. And the other ones are maybe the more metabolic, healthy-lifestyle, N-equals-one personalized medicine ones that are a bit more "we are against the medical establishment" — we are against this population-based treatment of you treating you just like a number. One that immediately comes to mind is Zoe, where they're very clear: this is personalized to you, we are going to measure your metrics and you're going to get this diet that's personal for you. It's not just this food pyramid that's been handed down. Whether or not there's enough evidence behind that, I think it's a nice story they make.
So maybe something about the enemy being vague is helpful as well — when you see conspiratorial people talk about the big man or the establishment, it's quite vague, so it's easier to rail on those.
That's definitely fair. And one thing that's quite funny with our positioning — we're pretty open about being anti-CRO — is that the most negative people about CROs are other CRO people. The number of times we've had people reach out, or I've been talking to someone who used to work for a CRO or works there currently, saying "I love your positioning, here's all this shitty behavior that I saw, here's all these horrible ways in which the CRO model is broken." We've literally had people say, "I'll do anything to work for you guys, I think my company is evil, I want to help redress the balance." So we're aware we do lean into heavily defining ourselves in opposition to the industry incumbents, but it's the nature of the industry — it kind of works in this case. That was my co-founder Michael, but I think it has worked well for us. I do agree that you run a risk, and over time we'll develop a slightly more nuanced tagline that's less outright negative. But for the moment it seems to really jive with what we're trying to do.
So, Meri, do you have any billion-dollar ideas in bio or health that you might be approaching if you weren't working on Lindus — big open goals where you see huge opportunity?
Yeah, a few. They're not going to be very coherent, because we're fully consumed with Lindus Health at the moment. I'd say more that there are big problem areas that I'm interested in or worried about. One is definitely fertility. I read a book a couple of years ago that really reconfigured my matrix on the subject, called The Decadent Society. It very persuasively made the case that a lot of the fundamental stagnation we all intuitively see — around general quality of lifestyle, the cultural arena, technology — ties back to demographics and an imbalanced population pyramid. We're essentially five to ten years behind Korea and Japan in terms of birth rates, where populations are shrinking and you have fewer and fewer working-age people able to support older people.
So if you think about what we're doing at Lindus Health — finding this key bottleneck or pressure point in a whole industry — I think fertility is another really fundamental pressure point. More concretely, there's a bunch of things around fundamental technology breakthroughs in IVF and maybe surrogacy. We've had IVF for a while, it doesn't work perfectly, there's some stuff to do there. There are interesting models like Gaia, one company in the UK doing interesting things — not really innovating in the fundamental tech layer, but more the experience layer, wrapping it around insurance, which I also think can be impactful.
And there are models around how we do IVF, and maybe even how we not just look at it as a problem of fertility and helping couples conceive — that's very important — but also, how can I put this, how we use all the tools we have to ensure that pregnancies are successful and people's families are set up to be as healthy and happy as possible. So there's a ton of stuff there. I haven't had much time to think about it, but it's an area I'd love to work on one day.
Awesome. And I suspect you're not going to give me a good answer to this due to humility — but what are any habits, or ways you approach problems, that you think have helped you get to where you are today? If we were looking back in 20 years and saying, "oh, Meri's this great guy, let's trace back some of the key frameworks he has in his head" — what would come to mind? Michael Young, your co-founder, said you're never accepting of the status quo, you're always pushing for improvement, and you've got clear vision and push towards that. Mithi had loads of really nice things to say about you too — he said one of your other incredible traits is attracting high-caliber people: employees, advisors, customers. It feels like a humble brag. And he said that whilst other people are busy posturing and doing PR, you're just hard at work running hundreds of trials and getting on with it. But what do you think are the things that have helped you?
“A mental model I find very useful when dealing with problems is thinking about things from the highest level of abstraction possible. Decision paralysis is probably the thing that kills people and companies.”
Meri
Okay. If I look at the company as a whole, I feel like we've moved pretty quickly. We're two and a half years old, and we've been consistently ahead of the targets we've presented to investors. I'm not sure I embody high speed necessarily, but as co-founders we've all really pushed that as a value, and made sure that everyone we hire really embodies that bias to action. And it's not just speed — it's also agency. People who are just not comfortable with the status quo, and if they see a problem they can't help but want to go and solve it.
More specifically about me: a mental model I find very useful when dealing with problems is thinking about things from the highest level of abstraction possible. You're never going to have all of the data. Decision paralysis is probably the thing that kills people and companies, frankly — or leads to a lot of lost productivity. So being able to step back and go, okay, what are the two or three biggest factors here, let's just make a decision on that basis.
There's a framework I don't think many people are aware of, called OODA — Observe, Orient, Decide, Act. Probably America's greatest military theorist is this crazy guy called John Boyd) in the 50s and 60s, who came up with all these frameworks. You can see how they've been applied in the business world as agile, but I actually think the original frameworks he came up with were most impactful. One of the ones we use is the OODA loop. It's super important that you observe — get the data you need to make a decision — make the decision, and act on it. That's super key. Nothing kills productivity, teams, or cultures more than when you make a decision but don't act on it, because that leaves room to go back and second-guess yourself. So that's been a really useful framework for how I and the company work.
That sounds pretty obvious — is the key thing there that you not only observe and decide, but you actually do the action as well? Is that the key part, that you complete it? You come to a decision, and then you don't act on it immediately, and then an hour later you're like, "wait, is that the right decision?" and you spend tons of time second-guessing yourself?
Yeah. I think that kind of decision paralysis can be fatal for any company, but certainly a startup, where you need to move fast.
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