Measuring Success in the Biotech World

4/28/09

What defines success in biotechnology? I’ve noticed that many companies are described as being successful, but there’s no widely agreed upon definition for success within the industry. Lack of agreement on a definition of biotechnology success can serve as a source of friction within a company’s senior management group—some of whom may be trained in business, some in science—but whose job it is to define this unified vision. Let’s look at the various players both within and outside of the industry to gain some perspective. How do we measure success?

Job creation? Politicos have a need to be able to tell their constituents about all of the wonderful jobs they’ve created in their districts. And what jobs register better with voters than high-tech, high-paying biotech jobs (even if they’re not exactly well understood by the public)? A new or expanding biotechnology company is going to create jobs, and not just for scientists. Business people, lawyers, HR specialists, accountants, administrative assistants, even the cleaning crew that comes in at night all need to be hired. Biotech jobs help build up the scientific community and enhance the reputation of the area in attracting other high-tech workers.

Scientific discovery? Every industry scientist dreams about coming up with the 21st century version of Paul Ehrlich‘s Magic Bullet, the wonder drug that will alleviate any one of mankind’s incurable illnesses. In truth, the discovery of new medical innovations (i.e. new and novel drugs) is rare, and in most medical scientists careers, it will never happen. Along the way, however, one can publish some significant papers that contribute to the overall advance of scientific progress. It is important to understand that science is an incremental process, with only occasional breakthroughs. As Isaac Newton put it, “If I have seen further it is only by standing on the shoulders of giants.” Actual breakthroughs are much less common than suggested by hyped-up media reports on the nightly news.

Financial return? Venture capital organizations won’t invest in companies that they don’t think will return a profit. While “wildly successful” might be an idealized outcome, a “reasonable” financial return is what they’re are after. This can come through an initial public offering, sale to another company, or out-licensing of a drug. Note that not every company that VCs invest in is expected to provide a positive financial return. It’s more about hitting a reasonable number of shots on goal. Depending on the level of return, one success can more than outweigh a handful of financial duds.

Drug approval? This prospect gets the clinicians and the regulatory folks’ blood flowing. Getting a drug approved is a difficult thing to do. The FDA eventually approves for sale only about 3 to 5 percent of drugs that enter clinical trials. The rest are abandoned because the drugs had serious side effects, were ineffective, or the trial sponsor ran out of money. Clinical trials cost huge sums of money, can take years, and depend in the end on the drug not only being effective, but in being able to actually prove this to the satisfaction of one or more regulatory agencies.

Drug sales? Let’s focus on the MBAs of the biotech world, the sales and marketing group. A drug that sells more than a billion dollars a year is usually classified as a blockbuster or, to continue the sports metaphors, a home run. These types of successes are hard to come by, because to meet this requirement a drug must treat a very large number of patients, be very expensive, or both. It costs just as much to get a drug that brings in $100M/year approved as one that brings in $1B. This is one reason Big Pharma and biotech companies like to swing for the fences with drugs tailored for large markets.

Number of patients taking the drug? This is the primary focus of the pharmaceutical development team. Working with the clinical group, they try to convince doctors (as well as potential patients) of the benefits of taking the new drug. They concentrate their efforts on patients who will most clearly benefit from the drug and overcome physician inertia. This is the natural (and often well-deserved) resistance of doctors to prescribe a new drug over one that has been on the market for years. Many doctors will wait until a new drug proves itself to be safe in the general population before prescribing it for their own patients.

So far I have covered six different definitions of success. Now imagine a biotech company that hit every one of these marks. (Genentech’s Avastin and Amgen’s Enbrel can claim to have reached all these measures of success.) Sounds like a pretty stellar outfit that should be on top of the pharma world. I wonder how many of you that noticed that one extremely important (and to my mind the most valuable) definition of success is missing: meeting unmet medical needs. Avastin and Enbrel have cleared this final hurdle as well. It might be hard to believe that a drug that satisfied all of the above criteria wouldn’t be the best thing since sliced bread, but to quote Gershwin “it ain’t necessarily so.” It is certainly possible to develop a drug that meets every definition of success that I’ve laid out above, but is simply not very effective or is no better than drugs currently on the market. New doesn’t mean better, it just means new. Tom Nesi, in his sloppily written but still interesting book Poison Pills: The Untold Story of the Vioxx Drug Scandal makes a compelling case for Vioxx being just such a drug.

So how can we as a society facilitate a process to generate more drugs that meet unmet medical needs? I would suggest that we create incentives for companies that develop drugs that meet this definition. Congress is currently debating (as part of health care reform legislation) the length of marketing exclusivity drug makers should get for follow-on biologics (this is distinct from patent considerations). Consumer groups are arguing for five years of exclusivity, while drug companies are asking for a twelve-year period. In a similar vein, I would use a period of market exclusivity to drive the marketplace towards the development of novel drugs. Companies that want to register “me too” drugs, agents that essentially act via the same mechanism as drugs already on the market should not be awarded market exclusivity (or get this for a very limited time). Firms that spend the extra effort (and likely money) to develop truly innovative drugs that hit new molecular targets should be rewarded for their investment by being rewarded with a 12-year period of exclusivity. Giving companies a greater reward for actual innovation should help spur the development of novel treatments for illnesses that still hunger for new medicines.

Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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  • Bob Busch

    I am a 20 year veteran of the pharmaceutical industry. This is a great article, in my opinion. It covers a lot of ground and is objective. The failure rate for start-up drug companies is very high. I don’t think the public really understands that.

  • CMCguy

    Because drug development takes combination of so many disciplines, many of which you well highlight, the best outcome is for something that achieves success across all/most those perspectives. At the same time majority of people doing the work have to be content with small victories because the full blown accomplishments are rare.

    I disagree with indicated approach to “punish” “me-toos” as first frequently when a program was initiated there was nothing directly to duplicate (and once become aware of competition that is ahead of you the investment so high that its too costly but to carry on). Occasionally companies will work on “well-trodden” areas but usually only because do believe have something new and/or what is out there has serve shortcomings. Secondly me toos can at times be benefit for portion of patients where other drug do not work/have bad tolerance (drugs rarely one size fits all). Finally, such products provides some stability/source of funds as the profits from me toos do get put back into R&D so will promote innovation in different areas.

  • PaulH

    Good article.
    The only area that is missing is a discussion on access – making a needed treatment cost effective to both the maker and user.
    Relative to “me toos”, these should be purer drugs and should lead to less side effects and interactions than the original. As more of the population is on multiple drugs, this becomes more important and utlimately benefits the user.