How to Find Balance in Biotech, Between Owning It All or Finding a Partner
For startup biotech companies, there are many benefits to licensing drug candidates to major drug developers. Partners can be an excellent source of non-dilutive financing, provide the company with validation, and ensure that the drug candidate will have the support it needs to reach the marketplace. However, it is important for biotech entrepreneurs to avoid getting so focused on partnerships that they fail to fully develop a drug that’s wholly-owned.
Importance of Wholly-Owned Programs
If a management team is truly interested in building a company for the long term, then at the end of the day it needs to sell a product, generate revenue and turn a profit. Companies that sell most of the rights to their assets to partners in return for milestones and royalties have a very tough time getting interest from public market investor. Public investors are looking for companies that not only generate their own revenue stream, but have the ability to effectively invest profits into the innovation process.
Market performance over the past 20 years in this industry demonstrates that the most successful companies are those that took drug candidates into the market themselves. Companies that out licensed everything, on the other hand, have not been nearly as successful. In biotech it can be challenging to know when to keep a program versus finding a partner. It is important to understand some of the drivers in this decision.
Primary Care vs. Specialty Care
A generally useful delineation in choosing a program to partner and one that would remain fully owned is whether or not the eventual drug would be prescribed by a primary care physician or a specialist. If the drug in question is of the class that would be prescribed by a primary care physician, it is rather simple math to see why a startup would not pursue bringing that drug to market without the support of a partner. For example, in the U.S. alone, it likely would require thousands of sales reps to fully commercialize a drug with primary care physicians. It is virtually impossible for a startup company to garner the resources to make that investment. Major drug developers, though, have these sales forces in place and the capital needed to expand as required. It is also important to consider the size and cost of the clinical studies involved in the development of a primary care drug. It is almost guaranteed that the amount of investment required moving a primary care drug forward in the clinic would be more than a small company could afford. For these reasons, it is best to consider partnering the program to a company with the financial and infrastructure resources needed to move the product forward.
Amira’s first program, which inhibits a molecular target called FLAP, was clearly in the primary care space for potential treatment of asthma and chronic obstructive pulmonary disease. For this reason, we quickly achieved proof-of-concept in clinical studies which enabled us to secure a lucrative partnership that continues to finance our operations in a non-dilutive manner. We are also in the process of pursuing a similar arrangement with our second program, a DP2 antagonist. We expect the combined financial impact of these partnerships to finance the development and commercialization of our third program, which is a specialty care opportunity.
All of the business decisions about partnering should still allow the scientific team to pursue opportunities in their sweet spot. Once a discovery is made, it is then important to evaluate the needs from a business perspective of how to best develop the product and get it into the hands of patients and physicians. At this point, the question then becomes whether a partner is needed, or if the company can do it on its own.
At Amira, this means allowing our scientists, who have a strong background in bioactive lipids, to follow their intuition for discovering safe and highly-effective drug candidates in this space. We have to be able to do that without the business interests pushing them to move into other, less certain areas of science. Consequently, we do not try to actively direct the science too early, but once we have a target of interest and good drug candidates, we then assess if it is a primary or specialty care drug candidate.
For startup organizations, it is often beneficial to find a partner for the lead program for multiple reasons. As previously stated, this partnership can provide an excellent source of non-dilutive financing for future projects. Without a partner, it is likely the early-stage company will need to obtain capital through means that will dilute the value of existing shares. In a normal marketplace, that means the entrepreneurs who formed the company lessen their share substantially. In our current economic climate, it can be very difficult to obtain these additional finances at all. Trying to raise capital in this environment can result in undesirable terms and requires that the management team be out of the office instead of being in a position to drive programs forward. These distractions are not desirable in the early stages of a company.
The other benefit of partnering early is that it gives the company credibility. Once a startup successfully completes its first deal, other potential partners may more readily seek a relationship in the future that would not have been as easy without the validation of the first partnership. The instant validation of your discovery and development efforts provides a “stamp of approval” and added credibility that is useful in raising additional money and moving other programs forward.
Keep Some, Partner Some
When you keep a very small number of programs, even as few as one or two, you allow yourself to focus entirely on that program to move it through the clinic in the best way possible. This allows you to explore every possibility and move the program forward to commercialization. Finding a partner for the larger programs is an excellent way to keep the company fueled with non-dilutive financing.