Varda Space secures first-ever commercial pharmaceutical manufacturing deal in orbit with United Therapeutics

Speaker 1: I guess. It is a great movie and you can tell the budget was really flying with that one because they they crashed a Lamborghini Countach, is maybe $500,000 car. And they just I think they just destroyed it. And they destroyed maybe the actual I don't know. That might be not real. But very fun movie. Anyway, we have Delian Asparouhov from Varda and Founders Fund in the TBPN UltraDome. Hey, guys. There we go. The self hug. There

Speaker 4: we go.

Speaker 1: Have a seat. Oh, he's doing a victory lap. He's doing a victory lap. We still have a victory lap running around the table. For anyone who's been living under a data center, introduce yourself.

Speaker 3: Hi. My name is Delian, cofounder and president of VARTA. I have a couple other side gigs, but Okay. That's the main gig.

Speaker 1: Let's focus on VARTA today. Oh, yeah. We're talking space data centers. Right? Space has gotta be that.

Speaker 3: We do have some chips up there, so in theory,

Speaker 2: you could do.

Speaker 3: But we do more valuable things than just some inference. We make some drugs up there.

Speaker 1: And there's a big announcement today.

Speaker 3: Yeah. Spirit. So for the first time in human history, there is a large publicly traded company, United Therapeutics, $25,000,000,000 in market cap, traded on the Nasdaq. Yeah. They're using their own balance sheet to go produce a product, physical product, in low Earth orbit. Wow. With us. Pharmaceuticals, they focus on pulmonary disease, so think lung, blood, etcetera. We're working on those products together, crystallizing them into a better formulation, bringing them back down. That's the only company that makes physical products in space. Everybody else, it's all radio waves. It's Internet. Yeah. It's in France. It's, you know, you know, photos of the earth, This is literally the first time in human history where there is physical products being moved in space as a way to generate revenue

Speaker 1: up For real business.

Speaker 2: And is that that that's happening or is about to be happening?

Speaker 3: Yeah. So we signed this deal, you know, call it like, you

Speaker 2: know Stop you right there because there's an opportunity for someone else to put it's a race. And a balloon. We should we should race.

Speaker 1: We should

Speaker 9: race a

Speaker 1: bit No. No. Balloons can't go to space. Balloons can't

Speaker 3: go to space. You gotta go. You gotta go on

Speaker 2: the a balloon and then once you're up there, jet pack type thing to

Speaker 3: Yeah. People have talked about the like, you know, could you go float a rocket up there? But it turns out the like size of balloon complexity that you're just better off building a rocket to get the rocket up there. Yeah.

Speaker 2: Talked about

Speaker 1: space ride. They would they would take the balloon up and Yeah. And this was actually used back in, like, the thirties, I think.

Speaker 3: I think they did some, like, very early tests when rockets Yeah. Were Yeah. Now the rockets are big and, like, satellites are big, a little a little harder to get up there. But, we signed the deal a little while ago. We've working on the products with them for a period of time. In order to get ready to go to space, we do do some work on the ground to understand, hey, what is the thing that we're going go do in space? And let's make sure we figure out all the other process parameters. When you're, like, crystallizing a drug, there's a particular temperature, a mixing rate, a solvent. We just bring one extra knob, the gravity knob. Yeah. Now, here on Earth, we can't decrease gravity, but we can increase it. So alongside the customer, we look at basically adjusting that gravity knob down here on Earth. Yeah. Figure out kind of how to tune all the other things, so we're tuning the right knob. Once we get that all set, load that up into a spacecraft, send it up to space. Obviously, there, gravity knob goes to zero, get a different result, land it in Australia, and then send it off to the clinic. Yeah. We're still working with United on the ground so far, getting those drugs ready for flight, but we'd expect basically next year to fly the first United drugs.

Speaker 2: And how are they making this drug on Earth today?

Speaker 3: Today, you're using traditional techniques. So there's a whole set

Speaker 2: of Much less efficient.

Speaker 3: You're just getting a different result. So as an example, the use case or paper that the company was in some ways predicated on, obviously, there's been forty to fifty years of work on protein crystallization up on the International Space Station, Skylab, Space Shuttle. But in 2019, Merck basically showed their blockbuster cancer drug, Keytruda. They crystallized it up in space. They showed they could shift the administration from what was previously an IV drip to now a subcutaneous syringe, so you don't have to go to an IV clinic. A rural patient that can't access IV clinics can now access this drug. And so that's what we're doing up there with United Therapeutics, is we're looking for changes in performance of the drug because of those different results that allows United them to shift Therapeutics is famous for a variety of different things. So the company was originally started by Martine Rothblatt to solve a rare pulmonary disorder for her daughter, built that up into a huge platform. They've really leaned into the frontier over the course of the last year, so twenty, thirty years, including they make gene modifications for pigs to create human organs inside of pigs. But one of the things that they're known for is for one of their pulmonary compounds, shifted the administration from a nice pig sound. Well done. Well done. Like it. You know, a lot better than waiting on, you know, whatever 24 year old kid to die on a motorcycle

Speaker 1: and get

Speaker 3: your kidney. Instead, just

Speaker 8: get it

Speaker 3: from a pig farm. Yeah. But one of the other things that they're known for is they actually shifted one of their, you know, sort of primary drugs from an oral pill to instead an inhalable and made it much more efficacious, easier for the patient because you take the drug less often. It's things like that that we're looking to, you know, sort of do with them.

Speaker 1: Dumb question. You you you have the gravity knob. You're able to turn that off. But aren't you adding a knob for like vibrations and basically dialing it to 10? Like does that ever affect because you imagine you're sort of centrifuging it like it's gyrating as it's reentering. So is that a problem? Do you have to is that like for the selection criteria? Do you have mitigation strategies?

Speaker 3: What you can think of is like in a pharmaceutical process where you're crystallizing something

Speaker 2: Yeah.

Speaker 3: You're basically going through like a phase change. You're going through liquid to a solid.

Speaker 1: Okay.

Speaker 3: Where things matter is when that phase change is happening. Okay. In that particular moment is where you don't want the sedimentation, convection, etcetera. So what we do in some ways is we load up all the liquids ahead of time. Yep. Those liquids, for sure, on the rocket light it up, get shaking, etcetera, but it doesn't matter because the liquid's still saying a liquid. Yeah. Then up in space, what we do is we go through that phase change. We go from basically like a liquid to a solid. Okay. That needs to happen in a very pure environment. Sure. We shut down all the reaction wheels. We make sure that, like, everything on the spacecraft that would vibrate Yeah. Is totally silent

Speaker 2: Got it.

Speaker 3: So that it is as pure of microgravity, basically, possible.

Speaker 7: Got it.

Speaker 3: It then becomes a solid. And at the end of it, it kinda looks like a salt, basically. Like, think of it like table salt. Now on the way back, that table salt for sure is shaking a bunch. But the table salt, if you think about, like, you know, some, you know, table salt that we put and we go put it in, a centrifuge for a hundred years at, you know, a thousand g's, it's still gonna be table salt. Sure. Where those, like, vibrations matter? Heat

Speaker 2: more. You do

Speaker 3: need to manage heat. If you melt the salt, you're fucked because of facto liquid. Yeah. But, you know, this is what, you convinced United that we would be capable as a partner is we actually had datasets from our very first mission where the surface of the heat shield was hotter than the temperature of the surface of the sun. So, like, extremely hot. Onboard, I think it was, like, something like 14 degrees centigrade plus or minus point one degrees.

Speaker 1: Wow.

Speaker 3: And so we had extremely precise temperature control on board. And so a lot of what has brought people to the table for this first commercial deal is while there's been this historical work on the ISS, nobody had showed how do you go do this on a purely private platform, fully autonomous, low cost, high cadence. A part of what convinced them was, yes, both the regular flights we've been doing, right, we are now on W six, seven, eight, and nine will be launching later this year. But it was also, hey, not only are they launching and landing these things, but on board, they've got the right process control so I can see, hey, they can go work on my drug. And by next year, when we fly seven times in a year, that's going to be higher cadence than everything that the ISS, space shuttle, etcetera, have done in all of human history, let alone in 2028, 2029, as we continue to go higher and higher cadence.

Speaker 2: So how many things need to go right in a row to have a successful mission? I imagine that, you know, there's like all these different

Speaker 3: Like, just the space mission or like get the drug into the clinic?

Speaker 2: Because the

Speaker 3: Well, drug in the clinic is more just the

Speaker 2: space mission.

Speaker 3: The space mission, at this point, we've kind of shown we can do pretty safely, but I'll walk you through First on the ground, we got to go build. Basically, effectively think of it as like a two part spacecraft. One is sort of looks like a traditional satellite system. It's a little bit lower power and under, you know, spec relative to most satellites because we don't need super high power to communicate with, you know, Internet terminals, radio waves of photos, etcetera.

Speaker 1: Oh, that makes sense.

Speaker 3: Yeah. The only power we need is just to run the bioreactor, and the bioreactor doesn't consume that much power. So think of it as like a

Speaker 1: it is, like basic telemetry.

Speaker 3: Yeah. Basic telemetry, but we don't super high pointing accuracy while just floating up there because, again, we're not pointing at a particular place on the ground to basically try and take a photo of it. And so think of it as like we build an under spec sort of satellite. Now, the one thing that it is big on is it's got a lot of thrust and propulsion on board because we need to come back unlike every other satellite, But otherwise, spec satellites. So we do those on the ground. We've now built a handful of those. Then we have to build the second part of the spacecraft, which is the reentry pod. All of this does have a relatively complex supply chain. Think like those solar panels, the GPS chip, the flight computer, that type of stuff we buy out of house. Some things you have to do in house. You can't buy a capsule, like, off the shelf, so we have to build the heat shield, the structure, etcetera, around that. Those have to get integrated. We have to do a bunch of ground tests to make sure that works. Then you ship it off to SpaceX's facility a couple months before launch, make sure that everything's still working over there, install it onto the rocket. Once we're on the rocket, we kinda look like any other satellite that goes up there, whether it's like, you know, asteroid mining satellites or comm satellites or spy satellites. SpaceX takes us up to orbit. They then drop us off, again, like any other satellite. We spend between, call it, like, four to twelve weeks up there. It kinda depends on the drug manufacturing process. Some go pretty quick. Some take quite a bit of time. While we're up there, we have, basically, pharmaceutical scientists on the ground in Mission Control. So you remember those, like, Apollo films in Mission Control? We literally have, like Been in there. Think, like, Amgen scientists, but like they're in Mission Control I talking to the buyer out

Speaker 2: can imagine you you love hanging out in there.

Speaker 3: Brewie always makes fun of me. He's like, you know, I don't quite know the American idiom or don't get it, but hopefully you guys will, but he's like he calls me like the gentleman's mission control, where like there's like the gentleman's farmer. It's like the guy that stands around the farm, but it's like I'm really doing anything. I'm like the gentleman's mission control where like, yeah, I like hanging out there. Obviously, I like I'm completely useless and mostly a distraction. So I try mostly just listening to the livestream Yeah.

Speaker 2: Every team needs a class clown.

Speaker 1: Yeah. Exactly. Can you unpack a little bit more about the orbit? There's a piece in the journal today, space data centers face a lot of challenges. They all got to go to sun synchronous orbit. I imagine you don't, but I wanna know about the knock on effects of, like, what can you tell me about sun synchronous orbit? What orbit do you use and why? And then how might this change what happens in the future?

Speaker 3: Yeah. Part of what's beneficial about sun synchronous orbit is you're basically, like, always, like, facing towards the sun and have sunshine. Yeah. We are not as dependent on that. As I mentioned earlier, we're not super power constrained. And so we can just charge up, you know, basically our batteries on board. While we're on the dark side of the earth, we can basically just drain those batteries, recharge them basically on, like, the next orbit. We're up there just for the microgravity, and so we can be in almost any orbit. That gives us a ton of benefits. One, when you're in space, you don't have to worry as much about traffic. We just go where other people aren't. But two, it actually helps a ton with launch. As an example, later this year, for the first time, we'll be launching historically, we've only launched to sun synchronous orbit because that's where all the transporter missions, which are the SpaceX rideshare missions have come That's

Speaker 1: what I was gonna ask.

Speaker 3: They now have what are called bandwagon missions, which go up to they're also rideshare, but they go to polar orbit. Yeah. We'll actually be flying our first bandwagon mission later this year. Okay. So now we have launch flexibility. I was gonna say bunch of companies that can't go on bandwagon or basically, they're we're actually probably one of the only companies that can go on both.

Speaker 1: Either. That's what was gonna ask. Because what happens if everything winds up being sun synchronous orbit? Because I think there's 10,000 or so Starlink satellites Elon's asking for a million for space data centers. That means, like, 90% of the launches are gonna be sun synchronous, but that's okay for you.

Speaker 3: Yeah. We're okay going to sun synchronous. We can quickly get out of the orbit if we like need

Speaker 1: to or

Speaker 3: try and go, you know, sort of slightly off of it. Yeah. Or we can just go to polar and be totally, you know, sort of happy there. Yeah. And that gives us some benefits on the like launch economic side of things. Yeah. For now, we're basically able to go on any rocket. Yeah.

Speaker 2: So I was gonna ask, it seems like every hyperscaler, some startups are, you know, and some of the labs are thinking about space. Are you expecting like launch to could, you know, theoretically Increase because it's man. Bottleneck, launch pricing It's

Speaker 1: been falling for so long, but, yeah, what do

Speaker 2: you expect? Yeah. How are you planning? Because you have to buy capacity launch capacity years out.

Speaker 3: Yeah. Yeah. To date, launch prices have only gone up, so they have not gone down since we started the company. Launch costs for SpaceX, I'm sure have. Yeah. But there has not yet been pricing competition, so why would they necessarily pass on those savings to us? You know, and they haven't, I think, seen that much price elasticity in the market when they've, like, lowered prices. It's not like they've seen, like, 10x greater demand. And so for them, it's, capture as many margin dollars, basically, as possible.

Speaker 1: Yeah.

Speaker 3: I do think what we're going to start to see is more competition in the launch market over the course of the next five years rather than the prior five. Right? Mhmm. Blue Origin, I think it was today or yesterday, announced that they're, you know, going to be doing their first external, you know, sort of fundraising, which speaks to, you know, I think them taking themselves much more seriously as a company that is going to regularly show shareholder value and launch very regularly. You've got Rocket Lab now. It's like a, I think, $65,000,000,000 company.

Speaker 1: Yeah.

Speaker 3: Wow. Definitely have enough resources to go tackle Neutron, and they've got shareholder expectations for them to get that medium lift, you know, sort of rocket You've got Stokes space. And so there's a few others basically playing in it. We are booking out, you know, sort of rocket launches now all the way through 2029. So we do have the capacity that we need for the next, you know, sort of many years. And I think by the time we're getting into booking late twenty twenty nine flights, yeah, there's a world where there start to be, you know, basically more providers online. Mhmm. SpaceX at least, basically, to date has been like, you know, for us at least, as many times as we've as we've wanted to launch, that capacity has been available. Like, are not capacity constrained. They are still more demand constrained. I do think they're Yeah.

Speaker 2: Because no one's making anything in space. Totally. Nobody's making And

Speaker 1: that's why they were able to be so successful with Starlink was because they had the residual capability. Right?

Speaker 2: It's so it's it's it's like a tealism. Right? It's like we we created we created the space economy and then it's just more Internet. Yeah. More apps. And now it's just gonna be more more AI. How are you thinking about other drug categories? I can imagine space Retta would be a pretty hot drug if people would smoke space Retta.

Speaker 3: Yeah. One thing that I didn't realize is Ozempic today, one kilo of Ozempic retails for a million dollars. Woah. People don't realize, when people ask me, like, oh, space drugs, economics, etcetera, does this stuff work? Have to, like, tell them, like, yeah, for you, like, you know, it might be like a thousand bucks, you know, basically per shot. But, like, it's because there's very, very little Ozempic based on board.

Speaker 1: A lot of them are like powders that then get diluted and then injected. And so, like, yeah, the actual core ingredient is so tiny.

Speaker 3: Exactly. And what we do up there is we just make the powder.

Speaker 1: Yeah, exactly.

Speaker 3: United Therapeutics, our partner that we're announcing today, they have a ton of expertise in all things like rare pulmonary disorders. For sure going to be the person that we work with on that indication area. But microgravity has a wide set of pharmaceutical applications, neurological, immunology, oncology, etcetera. And so for sure, we'll start to I think in the success case of Savarda, it's not going be like we have 50 different partners. It's probably to be like five to seven that we go really deep with when we kind of choose one partner per indication area, then we go as deep as possible. Ophthalmology is another area that we're looking deeply at, partially because the eye, smallest organ, again, smallest amount of powder that you need, also an area where some of the other changes of administration technologies don't really work as well. And so, yeah, we're starting to explore who are the partners for the other indication areas.

Speaker 1: What about Beyond Bio? I remember ZB land being something that people were talking about potentially being able to manufacture microgravity, wildly different economic trade off there. But are there other when you imagine like the industrial city in LEO, like, there other categories that extend maybe ten years out, twenty years out where it might be logical?

Speaker 3: I think like if we look at the next decade, you know, call it, like, if there's 200 products that are manufactured in Orbit, I think a 195 of those are gonna be pharmaceuticals. Really? So vast majority is gonna be, you know, sort of there, and that's where our core focus area is. Yeah. If I had to, you know, sort of peer into the crystal ball and look at what comes next, I do actually think probably fiber before semis is probably, you know, sort of my rough guess. Yeah. When we were looking at that, like, high end, you know, of ZBLAN, you know, sort of fiber market back in 2021 when we started the company, there was clearly some level of, like, you know, sort of interesting capabilities there, but just, like, relative to what we were seeing on hypersonics and pharma, not as large. Interestingly, that market has matured a lot. There's sort of two, call it three areas where it has applications. One is it is the lowest, basically, think of it as interference inside the optical fiber for infrared. Near infrared is now used in a lot of the high energy weapon systems. Oh.

Speaker 8: So if

Speaker 3: think about having to pump that laser through a fiber, you basically want as little, basically, resistance as possible. There's just like a lot more being spent on those types of near infrared weapon systems, especially with some of the anti drone stuff that's coming down the pipe. So that's sort of expanded. It's also used now a lot more in metal cutting and organ eye surgery relative to where it was five years ago. So that's expanded. The other area is quantum communications. So quantum entangled photons are much more sensitive to those types of impurities in fiber. Quantum comm has also grown a lot over the last five years. And then the other area is oddly data centers. Know, there's

Speaker 1: I was gonna say, as soon as there's a data center story Yeah. There's gonna be 25 companies that's gonna invent funding IPOs and stuff.

Speaker 3: So ground data centers, not space ones, they are Yeah. Actually

Speaker 1: No. No. No. You make the ZBLAN there, you bring it back, and then you

Speaker 3: Dude, ZBLAN is now being used in terrestrial data centers. That was not a use case at all five years ago. Yep. I know it's all these

Speaker 1: things photonics and optical interconnect.

Speaker 3: Yeah. They're still, like, early, I would say. But and, like, you know, what's happening though is also, the Vard economics keep improving on a flight by basis. The Z Blade market keeps growing.

Speaker 1: Yep.

Speaker 3: We're, for the first time, I would say we're, like, dedicating resources or anything. But, like, around the office for the first time in five years, somebody was, the Z Blade stuff is, like, almost starting to fence line again. It's probably, like, four years till we, you know, sort of do anything, but, like, you're starting to see those lines start to get closer together. That's what I love about a platform like ours is, like, if you had told me, like, predict where your revenues would be five years ago, really hard, even this year, like, things that are landing are probably not what I would have underwritten a year ago. Like, I think pharma has, like, way exceeded expectations. Like, it's pulled in probably, like, three and a half years relative to, you know, our series c that we announced last year. Our financial projections on that on pharma were just, totally, you know, sort of wrong. And so I'm excited by the idea that, like, yeah, there might be other areas that are wrong. Semis, I think, is just gonna be, like, you know, the furthest out, Partially, just like the process equipment and the sensitivities. Like, if think about a bioreactor, it's, like, hard, but it's kinda like mixing, like, liquids together. The hard thing is, like, which liquids? That's what's hard. The mixing of it, not so hard.

Speaker 2: Yeah. But you're making those decisions.

Speaker 3: Down here on the ground. Fiber, Yeah. Same thing. It's like once you make that precursor rod, then drawing it is not like a crazy complex process. It's making that rod that's hard, but again, you're doing that on the ground. With semis, it's like, oh my God, that process is so sensitive. If you look at the stuff that they use for EUV, basically, like, know, lithography, the mirrors for

Speaker 7: that.

Speaker 3: If you were to lay out a lithography mirror over the course of the size of Germany, the amount of variation you see in terms of mountains would still be less than 0.1 millimeters. So this stuff just has to be so, so, so, so, so precise that it's just like

Speaker 2: The cost is so high. Even during the experimentation process, you could

Speaker 1: Yeah. The famous quote from TSMC is that if there's an earthquake, they don't have, like, a pager duty. Like, they don't slack everyone, hey. You gotta come in. There's an earthquake. Everyone knows if there's an earthquake, just go to the factory.

Speaker 3: Exactly.

Speaker 1: Exactly. And the just know because it's just so so important.

Speaker 3: And so just that, like, microgravity process equipment is just so much more complex than semi. So it'll get there one day, but, like, bioreactors, the fiber draw things are, like, orders and orders of magnitude simpler to make, like, microgravity bioreactors, microgravity fiber draw towers.

Speaker 2: Yeah. Yeah. Yeah. Will it ever make sense to have a permanent, like, ISS style structure that you are transporting supplies to and then sending, you know, your finished product down? Because, like, you Warehouse. You would like to have a proper, like, dedicated space factory, but does it actually make sense?

Speaker 3: It's always been the somewhat secret, somewhat not secret, like, ambition of Varda is to go build that, but go do it step by step. Right? So when you look at, like, generation one of basically what we're building, it's this two part spacecraft. Right? Yeah. Satellite, pod. Satellite has all the process equipment, etcetera. Pod just has the finished good. When we're done, pod survives. All that process equipment, everything on board, we basically just burned it

Speaker 11: up. Mhmm.

Speaker 3: Generation two, that'll be flying in, like, call 2029. Think of it as just like we make it so that that heat shield material just envelops everything. And so now the satellite plus the pod, they both survive. And that'll probably look like a little mini space plane is kind of how you can think about it. So a space plane has the solar panels, the propulsion. It's got the process equipment. It's also got the finished good. That goes up and down. And so now that full system is reusable, improves the economics. We'll have more payload on board too. Now at some point, like, it doesn't make economic sense to keep moving that process equipment up, down, up, down every time. Call it by the end of the decade, the goal will be we'll start to invest into those, like, fixed pieces of infrastructure in orbit. Early on, they'll probably just look like a satellite just with a little docking port, basically. The, like, space plane will come with the raw ingredients, basically, liquids, etcetera. It'll dock with that, like, satellite up in orbit, exchange for the fabricated goods. But then we'll have, like, 10 of those satellites. We'll start to stitch them together. Basically, it looks like a station. One day, there'll be so many of those pieces of equipment on board that we'll be able to economically justify, hey, probably need a dude with a wrench every once in a while to go, like, fix some stuff up there. But, like, once we can economically justify, like, one person with a wrench, 10, a 100, a thousand. And so like, yeah, we for sure, we want to build the first industrial city in low Earth orbit, but we're taking it like one step at a time, building out the business, getting great unit economics, proving out one use case at a time.

Speaker 2: What about the other parts of the stack that you actually need for that? So like, I'm thinking like docking. Is there a startup that's just just working on docking?

Speaker 3: Yeah. I mean, you know, sort of credit to them. There's a company in Seattle called Starfish, you know, sort of space that is hyper focused just on like the, like, docking, maneuvering the software for that. Yeah.

Speaker 2: Because that that feels like something that, like, if that's not your core competency, like, seems like you could have a series of nightmares around just trying to figure out docking, and that is a probably, you know, super widely applicable process for the rest of the space economy.

Speaker 3: Totally. It's like back in the day, would have had to make our own solar panels, our own thrusters, propulsion tanks, etcetera, for the stuff that we build on the ground. That stuff, over the course of last decade, has become a much more mature supply chain. As we start to get to this, like, space station world, I think there will be some of these things where, like, Starfish Starfish, I believe, basically makes this, camera that you can basically attach to your satellite. They take over the controls for your, like, propulsion, and they'll dock you to wherever you're needing to go. Yeah. Five, ten years ago, there's no way that we would have, like, been able to buy that. We would have absolutely had to build it. And so, yeah, I think on a, you know, ongoing basis, we'll always be doing that, you know, sort of build by trade. And ideally, obviously, if there's an off the shelf solution integrating that, and that only accelerates basically our progress. And so, yeah, it's cool to see that, like, as obviously VAR is developing, the general space economy and all these use cases are developing. And heck, when you said, like, you know, sort of warehouse in space, there are companies like, you know, Gravitics that are trying to do, like, dedicated warehouse vehicles. Maybe there's some world where, like, we buy the warehouse and we just install some docking ports, fill it up with process equipment, we don't have to build the warehouse. I'm not opposed to that. What we really want to focus on is we're going have the best lab down here on Earth to assess how to make these formulations. We definitely have to make the bioreactors ourselves. Nobody else is going to make microgravity bioreactors. We gotta make those space planes basically ourselves because, like, nobody else is gonna be bringing those up and down all the time. But the rest of it, pretty open to, like, you know, buying where we can.

Speaker 1: How are you thinking about the public markets? SpaceX is going out at, like, in the trillions. A lot of bio companies, I'm sure United Therapeutics went out in the billions probably. And a lot of biotech companies, they go out earlier. Pharmaceutical companies go out earlier. The public markets, sometimes they like really stable projections. Do we understand the quarterly forecast? Sometimes they like a big vision, and you get out there with a Tesla or something, and does really well. What is your take on how you might fit into the public markets in the future? Yeah.

Speaker 3: I mean, there's not a lot of private, like, 10 plus billion dollar in market cap, like, pharmaceutical companies. They basically all go, you know, public before that. Think it's like

Speaker 1: I mean, there's so many deals. Like, every day, a big biotech company is buying something for 1,000,000,000, 2,000,000,000 all day long.

Speaker 3: Totally. That's basically like the default. Yeah. Now I think like GLPs have shown that like in the therapeutics world, you can build a like, you know, be a business that can effectively be like a trillion dollar outcome You like just like one therapeutics business. You know, we're definitely thinking about that from the, you know, founders fund hat side of things, how we back things that aren't just that 1 to $5,000,000,000 therapeutics outcome. Yeah. At Varda, I think we'll look at it like on a round by round basis where, like, I think about it as like cost of capital. Yeah. The public markets are offering me a lower cost of capital because they have more expertise because there's a bunch of hedge funds that have, like, MD, PhDs Yeah. And tons of them on staff to deeply understand pulmonary diseases, ophthalmology, etcetera. Yeah. We'll go to the public markets if that's the case. If we're still seeing tons of support in the private market and we think it's like relatively similar, you know, we'll study private for a period of time. If I did, again, peer into the crystal ball, my guess is like, yes, relative to a SpaceX or an Andoril or things like that, I think we will have much lower cost of capital early on, you know, sort of being public rather than not because the public markets have so much appreciation for the types of clinical data sets that we'll be putting out.

Speaker 1: What about on the other side? I've heard there's a like a really way to really great way to make a lot of money really quickly is like an unlicensed broker dealer of like SBVs. Like, you recommend that? What's your take? You know? Get into that game? Like, go to some employee

Speaker 2: There's no securities laws

Speaker 1: in space. Random person. Oh, there we go.

Speaker 3: He can't find me there, period.

Speaker 1: But, like, how are you even processing the SPV boom, all of these questions around brokering and what's going on there?

Speaker 3: Yeah. Mean, think I do think that one lady's anthropic tweet basically led to anthropics Part like policy on of why that sort of is happening is there's this SEC regulation on the number of entities you can have on your cap table while staying a private company. I forget the exact number. Think it used to be a thousand. Yeah. Now it's 6,000. These private companies, as they stay private so long and have this number of SPVs, and especially as these SPVs get warehoused out, it increases your entity count. Mhmm. And so I do think there's a significant user lock down on it because

Speaker 1: And employees typically own options, and they don't show up on the cap table until they exercise.

Speaker 3: Got it. Okay. So, yeah, I mean, we're we're obviously tracking that at VARTA in terms of how many entities we have. We're not seeing some, like, exponential growth where we're, like, we're too worried about it. I don't know that we've been as stringent to date, but as I look at our future rounds, you need to start to think about, okay, how many more rounds am I going to stay private? And at some point, I need to keep the entity count managed. So I totally get the Anthropics of the world. They've just raised so many good bajillion of dollars in the private markets that they have to

Speaker 2: be I did get some more backstory on that one deal. Allegedly, it was a much more complicated structure that wasn't as bad sounding as the original post said. There was an SPV involved and some other stuff. But anyways, why every single person that you know that has invested in the company has probably come to you saying like, what are you doing with data centers? And all the biggest companies in the world are now like dedicating resources to it. You guys are seemingly staying, like, extremely focused. You've had conviction around timelines around space data centers being longer. But now that the sort of regulatory environment on Earth is changing things, that could change potentially the need or the economics? Like, when would you change your mind and capitulate?

Speaker 3: I mean, I'm definitely, you know, sort of open to changing my mind as, like, a shareholder of companies that may take advantage of these technologies. As somebody that's going and building a space company, I really want to focus on, like, where I think we have the right to win and can, you know, sort of build up something that has, like, you know, sort of durable margins.

Speaker 2: Yeah. Not not a great situation. Like, you being in a situation where you're like this, like, deeply entrenched partner with five, you know, massive pharmaceutical companies that are dependent on you for a specific part of supply chain. That is much better business to me than like competing with SpaceX on like, you know, putting GPUs in space when they just are naturally gonna have a lot of advantages. And so it feels like, yeah, you could pull forward like around, but do you shoot yourself in the foot in the process of that?

Speaker 3: Yeah. I just think there are a lot of companies in the space industry that will raise off of contracts, renders, etcetera, but ultimately, these things aren't durable unless you are regularly flying spacecraft, building up a production line. Right? The Elon quote that I love is like, the factory is the, you know, sort of product. I think the thing that we've done well at VARTA is we've stayed hyper focused on just, like, our particular W series vehicle, getting that up to, you know, production rate, flying it regularly, and making sure that it's exceeding and serving, you know, customers across a wide variety of verticals versus distracting ourselves with, like, there have been a lot of opportunities that we've said no to. I'm sure some of those things in the short term would have inflated our valuation and top line, etcetera.

Speaker 2: But wearing your investor hat, you're like, I don't care about what my valuation is today. I care about

Speaker 3: what it is in ten, twenty years. And so, like, I don't need to, like, listen to the noise of the market. And so I think that is the benefit of, like, having somebody like me on the, you know, sort of cap table or as a, you know, sort of cofounder versus, like, there are plenty of companies that had x y z vision two years ago and are now fully pivoting to space data centers because, like, that's where investors are deploying capital. And at some point, it's like, if you're changing your company vision and product off of the basis of where investors are cycling capital into versus what customers are demanding, and this where it's like, look, are there areas where it's like, yeah, ZBland might get affected in there? I think we have much more of, like, a right to win, and that affects terrestrial data centers and things like that. Yeah. Like, there might be areas that we either sort of play, but, like, go launch a bunch of NVIDIA Jetsons up into orbit and do that at economics that aren't competitive relative to SpaceX. And even then, I think the SpaceX economics, while promising, still have a long ways to go. That's not a game that I wanna play in. You know, competition is for losers.

Speaker 2: There you go.

Speaker 1: Yeah. Yeah. I mean, you also like, you're so far from realizing, like, the TAM of what you're building. Like, it makes sense for Google to, like, jump into AI. Like, search is saturated, and they need the next thing.

Speaker 2: Yeah. It's possible we'll look back on this moment and be like, okay, every viable competitor for to actually go and compete in pharma Yeah. Like went and did this other thing and maybe some did well, but then that still left an opportunity to just kind of like verticalize own the category.

Speaker 3: And I think what like tech people misunderstand is just like the like size of the TAM in pharma.

Speaker 1: Oh,

Speaker 3: yeah. So, you know, Anthropic is what? I think like a $60,000,000,000 run rate or something like that. I forget like the, you know, sort of latest numbers. Keytruda, that drug that I mentioned that Merck did in 2019, that one drug's top line last year for Merck, dollars 25,000,000,000 in revenue. One drug. Yeah. That obviously have many other drugs. There are many other cancer drugs. There are many other immunology drugs. And so it is a massive TAM. If you're able to actually significantly improve the performance out of these things, capture some upside, start to go more full stack yourself in pharma, I'm not concerned. And especially by the way, once there's AGI, what do think everybody's going be focused on afterwards when there's no more white collar labor that is needed? Everybody's just going want to live for forever. Where do you think all that capital's going rotate into? It's going to rotate into longevity, therapeutics, manufacturing, and so I'm, you know, sort of happy to stay on the sidelines and, know, sort of accept that capital once, you know, sort of all the AGI people rotate out.

Speaker 1: I love it. I love it. Well, thank you so much for coming on the show.

Speaker 3: Oh, yeah. Had finally come in person.

Speaker 4: Good to see you, boys.