October 1, 2007 (Vol. 27, No. 17)
Small Biotech Firms Should Seek Out and Work with Universities and Foundations
The lag in getting the necessary drugs to treat many devastating illnesses is not only a lost opportunity to improve global health but also an enormous missed business venture.
For the past several decades the traditional drug development business model used by the pharmaceutical industry has worked when applied to creating new treatments for diseases and conditions that serve populations with access to healthcare. For infectious diseases affecting people in the developing world, however, we need a new paradigm.
It is universally agreed that the pharmaceutical industry is in need of a new business model. It has been greatly successful when measured by return on investments. The sector, however, is challenged with IP and price erosion in the form of patent expirations and generic competitors. Additionally, R&D productivity has been reduced dramatically.
Untapped Infectious Disease Market
It takes about $800 million and anywhere from 10 to 20 years to bring a new drug to market. The challenge for the infectious disease treatment market, for example, is to create business methods with which to deliver truly new drugs with sustainable results. Clearly, we need to improve the cost-benefit ratio to encourage new drug development.
Globally, the infectious disease market represents well over $40 billion annually. In addition, infectious disease outbreaks around the world have increased in the past 20 years, and infectious disease cases will only rise with continuing globalization and global warming. Yet despite the changing dynamics in worldwide health needs, few new drugs have been developed to treat or to prevent infectious diseases.
Small Firms Are Better Suited
Of course it is very difficult for large pharmaceutical companies with entrenched structures to target niche markets. It is more likely that small, entrepreneurial firms, unburdened by legacy costs, can work relatively more effectively in specifically targeting neglected diseases.
Drug development begins with the most time and capital intensive work of drug discovery. This can often take years of work. The idea of having governments support drug discovery is not new. What is new is the focus and commitment put forth by an increasing number of foundations.
By tapping these alternative sources, even smaller pharmaceutical companies can pursue disease targets that would otherwise not be open to them. Neglected diseases, which are not necessarily always in developed countries, then become economically viable.
Academic Partnerships Reduce Costs, Integrate Scientific Know-How
One of the most effective ways for a small firm to create a new drug is to collaborate with university-based researchers. The NIH gives out over $28 billion in grants each year for medical research, while universities and research institutes, collectively, spend billions more to support scientific research.
Small pharmaceutical companies focused on commercializing drugs should tap this enormous resource of brains and capital. Of course, strong management, a sound business strategy, and effective execution will increase the odds of success.
By collaborating with a scientific consortium, we are able to activate the scientific research and know-how made possible by decades of funding from the government and universities.
Licensing science from universities is not unique—it has been done for decades. By focusing on a group of compounds or a specific disease, companies can create an open-system of knowledge-sharing. Such a system that invites contribution and participation from many scientists offers one way of accelerating drug discovery and selection. While researchers focus on drug discovery work, a commercial partner can propel the compound toward commercialization.
For smaller firms, the business development model should be best kept simple. Immtech Pharmaceuticals (www.immtechpharma.com) chose infectious diseases because while the potential market is enormous and the needs are great for new drugs, the trials are relatively short in duration and the endpoints generally easily measurable. A trial that targets a measurable event such as the absence of infection can usually be completed in days or weeks instead of months or years.
Targeting a treatment for an underserved market can also position the development effort for FDA fast-track status or orphan drug status. Fast-track status reduces the development timetable, while orphan drug status can position a company to take advantage of certain tax credits, bypass NDA filing fees, and have market exclusivity for seven years following approval.
Infectious Disease Prevention
While a focus on treatment is essential, the infectious disease prevention market is highly attractive commercially. For example, malaria affects over 40% of the global population and kills at least one million people a year. The potential market to treat malaria is measured in billions, when resources are made available to those in need. Additionally, because the reality of a malaria vaccine is still many years away, there is a great need for more user-friendly prevention options. Each year, 125 million visitors from developed countries to regions where malaria is prevalent. As a result, a new safe and effective malaria prevention drug would be a blockbuster.
Even for foundations with funds measured in tens of billions, it is not practical to spend $800 million to create a new drug for a targeted disease. By working with pharmaceutical companies funded by private investors, foundations interested in making positive changes can deliver sustainable results. Private-public development initiatives can significantly streamline development costs, enabling new therapies to be delivered, making it a win-win situation for all.
Smaller companies should work closely with other firms to hasten commercialization of new drugs. Larger, more established companies with strong distribution and commercialization channels are ideal partners for smaller specialty pharmaceutical companies because these two groups are logically matched to deliver results. There is over-capacity in the industry. The scarcity is in the new drug candidates. Focus on finding the better drug, and the rest will fall into place.
Things Are Changing for the Better
The industry, foundations, and governments are focused on restructuring the existing model, recognizing that development risks must be shared, knowledge integrated, cumulative learning capitalized on, IP protected, and sustainable results must be demanded. The reality is when capital is wasted or inefficiently used, all of us are harmed.
I believe we are embarking on a new golden age of drug development, one in which not one but various innovative business development models will be used. The focus, however, will remain on delivering results to patients as well as to stakeholders.
Cecilia Chan is executive
director and board director of