Supply Chains Are Orderly. Biotech Innovation Is Messy
I was intrigued by the concept of an “innovation supply chain” for biotech raised in last week’s Xconomy discussion with Noubar Afeyan of Flagship Ventures. The basic idea is that if there’s agreement about certain experiments, results, and value with a pharma company, then a biotech company can focus on delivering those results, the pharma company would have greater assurance of a “supply” of new drug development candidates, and investors would be more assured that they would be rewarded for their investment.
I found myself arguing with my computer screen as I read it.
To be fair, there’s a broad spectrum of what constitutes a biotech company. Some companies are working on valuable but incremental improvements while others are attempting to develop broad new biologies or modalities. Noubar himself helps develop companies across that spectrum (e.g., Moderna Therapeutics and Syros Pharmaceuticals are two recent examples of Flagship portfolio companies pursuing very innovative science). (Disclosure: I’ve known Noubar a long time, and he was a founder, investor, and director of Adnexus Therapeutics, where I was head of business development. I think he is deeply creative and sees further down the road than most).
These days there are lots of initiatives around single-asset entities, and you could argue that each of these fits into the supply chain concept that Noubar put forward:
—CMEA’s Velocity Pharmaceutical Development (whose tagline is “we build drugs, not companies”)
—NEA’s & Pfizer’s Cydan, which calls itself an “accelerator” and focuses on drugs for rare diseases.
—The recent Avalon Ventures / GSK initiative, which hews pretty closely to a supply chain concept.
But if these initiatives are to deliver truly important new medicines, they need to bring more to the table than just an ability to execute on drug development plans outside of pharma companies’ profit-and-loss statements.
Aligning Interests? Or teaching to the test?
One of the concepts in the supply chain model described by Xconomy is that “innovators should be working closely with the acquirers from the early days, getting regular feedback…[this can] force the startup to run the key experiments needed to prove the value of their idea, rather than simply guessing what the pharma companies want to see.”
Yes and no. Take it too far, and it’s like standardized testing in education and the concern that teachers “teach to the test.”
This isn’t unique to an acquisition scenario; every business development meeting is an opportunity to get input. I think this is actually an advantage that small companies have—because we typically need to cultivate potential future partners and investors, we constantly put our data and plans up for external scrutiny. That’s a lot of opportunities to get feedback and new ideas.
But you have to sort through that feedback carefully. Some ideas are great, but others just don’t contribute to making a better decision. Some come from habit or dogma (“we always run this assay, why haven’t you run this assay?”). Or someone wants to see just one more variation on the dosing schedule in an animal model. Or a slightly different control arm. Or maybe the partner told you something last year, but management turnover or M&A has upended the priorities this year.
More critically, the more innovative the science, the more likely it is that the real challenge is to cultivate a new vision. I was recently in a discussion with a pharma company about an Alzheimer’s program. I asked about possibly stratifying patients in a mid-stage clinical trial to try to target the drug to a certain group of patients where it might be more relevant. They said they wouldn’t want to do that because it would limit the ultimate market size. They didn’t comment on whether the idea made scientific sense or not.
I didn’t know how to respond to that, except to realize that if I wanted to work with that organization, a new vision of Alzheimer’s had to be cultivated. To me that’s the signal of a huge opportunity.
Pharma companies have seen, collectively, a hell of a lot more drugs than any biotech, and those lessons stick in both good ways and bad. Pharma has a lot of great people and much more experience thinking downstream, asking important questions about a drug’s clinical and commercial future. How will regulators think about this? What are physicians’ perspectives and habits? What will best fit into a patient’s life? What will this compete with? What are the keys to reimbursement? How are these different in different care settings? Different countries?
Biotechs can be naïve and vastly underestimate those complexities. But we can also more easily shake off dogma and pursue an unconventional path. I worry that that’s unlikely to happen if you prewire the plan with a future acquirer.
The best interactions are two-way and iterative. But you can’t give up your vision or let yourself get whipsawed by the input. It’s necessary to sort through it.
Ultimately, the biotech company needs to decide what data are really needed to advance their drug and to do it efficiently. Capital and time are costly. You need to be confident that the data package you create will be inherently meaningful, beyond the point of view of any one company or thought leader.
The supply chain discussion proposed the car or airplane industries as templates for our industry, a system to create new drugs more efficiently. I’m not sure I see that. What was the last really innovative thing that happened in the automobile industry? The vehicle equivalent of, say, RNAi or vemurafenib (Zelboraf) or ivacaftor (Kalydeco)? I wouldn’t compare those to better brake pads.