Using Frugal Business Model, Orphagen Targets Orphan Receptors

Xconomy San Diego — 

The decline of venture capital investments in life sciences startups has provoked a lot of angst in the U.S., with many experts predicting a shortage of new drugs for the pharmaceutical product pipeline.

Life sciences startups typically require hundreds of millions of dollars before they can show that an experimental drug might work in clinical trials with real patients. But San Diego’s Orphagen Pharmaceuticals runs against the conventional wisdom. As a case study in frugality, Orphagen has survived as an independent drug discovery company for over a decade, scraping by on grants and one crucial pharmaceutical partnership while enduring a mixed bag of challenges, risks, battles, and rewards.

Orphagen CEO and founder, Scott Thacher, says he believes the freedom to explore and rapidly respond to discoveries makes their independent research path worth the extra adversity.

The company, with fewer than 10 employees, aims to discover molecules that bind and regulate so-called orphan nuclear receptors—a high potential field with a lot of interest in academia. Yet Orphagen is focused on a stage of discovery that many consider as “too early” for venture capital. So why did Thacher position the company as a translational lab, outside the resources of an academic institute?

Scott Thacher

“You do different things in different environments,” Thacher says. “Incentives really aren’t there in pharma to do high-risk, early stage work, and the incentives aren’t there in academia to do the high-risk translational work.”

For Thacher, “the whole concept of a small company is exciting,” He says a staff of 8-10 is ideal for ingenuity and invention. “In our small company, our backs were against the wall. We had to find compounds for these unexplored orphan receptors, there was nothing else we could do.” In terms of production, he says startups are uniquely compelled to generate new value. “There really is a big focus on invention, versus marketing and development.”

Still, it hasn’t been easy. Orphagen began operating in 2003, with funding from three federal Small Business Innovation Research (SBIR) grants Thacher had written, after he resigned as … Next Page »

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