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as a limited liability corporation, instead of a typical corporate entity. Most VCs have never invested in a deal structure like this, Posada says. Others have done it—San Francisco-based Ablexis is a noteworthy example—but Posada said he encountered some curiosity and a lot of skepticism while pitching this idea to investors over the past year.
There are tons of different business models in biotech, and you can find examples of success in all of them. There is the classic fully integrated biopharmaceutical company (think Gilead Sciences, Biogen Idec, Dendreon, Vertex Pharmaceuticals), which seeks to capture the entire value chain for itself by discovering, developing, and marketing its own products. There is the platform technology play (Alnylam Pharmaceuticals, Regulus Therapeutics), where a company has a novel technology that it licenses to numerous partners that use the platform to try to develop multiple products. There are virtual companies that have no labs, but form small teams of crack scientists and developers that push one or two drug candidates through some critical early tests (VentiRx Pharmaceuticals).
Each business model can work depending on the situation, but none of those approaches changes the cold reality that most drugs fail in clinical trials, and that even if successful the drug development process takes a decade or more and costs hundreds of millions of dollars.
Posada is the first to admit his model isn’t a silver bullet for what ails the biotech industry. He says it can only work in certain situations where you can gather really strong medical evidence on a tight budget. That’s not really possible in most types of cancer drug development, where you often need months or years of follow-up on patients. And this model is absolutely lean and mean—Resolve is a virtual company in the sense that it doesn’t have fancy company labs, and it relies on a small team of consultants and a network of contract research organizations that must deliver on aggressive time frames, and on slim budgets.
But until we come up with a really revolutionary technology that makes drug development much cheaper, faster, and more predictable, entrepreneurs are going to have to think hard about new business models like the one Resolve is putting to the test. If everyone continues with business as usual, a lot of people betting on an IPO or the M&A deal are going to end up very disappointed.
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