Mark W. Schwartz

Opinion

July 15th, 2010

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In the last two years, biotechnology companies, especially the smaller ones, have gone through a dramatic restructuring of priorities and focus. Like so many industries which have prioritized their businesses to the immediate, the cash efficient, the safe, the low risk, and the cash conserving, biotech has done the same. Some biotech companies have done it out of necessity, and some have done it out of fiscal prudence, but almost all biotech companies have reduced or eliminated early stage research, early stage development programs—essentially all efforts other than their latest stage development efforts. Research labs have shrunk considerably or been closed, and all development programs other than the key lead program have been shut down or suspended.

About 10 years from now, roughly the time it takes to develop a new drug, it is likely that the medical community will be lamenting the fact there is a dearth of new medicines to treat the range of diseases we will be grappling with. Cancer, heart disease, diabetes, autoimmune diseases, and many others—many of the potentially new treatments in the labs and early development programs just a few years ago are now shelved, shut down, or left to falter as research and early development programs are being killed. If we think the number of new molecular entities, the number of truly innovative new medicines making it through the tortuous FDA approval process is low today, it will likely be even painfully lower a decade from now.

It is ironic that while corporate biotechnology has been cutting back all but the latest stage programs, massive federal dollars have been flooding into universities and research centers. Although a few recent articles have bemoaned the lack of real products emanating from our landmark work in sequencing the human genome, there is an extraordinary amount of early stage work being done at our university labs. Unfortunately, with the cutback in early stage biotech funding, there is little money, and fewer resources to pull these technologies out of the university environment and spend the “slogging dollars” required to move the research from the lab to the development environment. Given the long time lag in the biotech product cycle, it will take years for this diminished “pull” of academic research into the corporate development world to manifest itself as a striking and potentially alarming decrease in innovative treatments for critical diseases. This situation is compounded by the fact that many great advances, including many great new drugs, were discovered by serendipity. “Spurious” results seen on one indication turn out to be primary endpoints for another. Serendipity requires numbers—many programs, many efforts, increasing out research work, not decreasing it.

Is there a solution to this inevitable drop in new product development? Other than a miraculous near term turnaround in the economy (unlikely), what can all of the players do to keep the early stage research flames alight? Every player can make a contribution:

• Universities can alter licensing terms to ensure the rapid and risk adjusted movement of their technology from the institution to the company. We need lower up front/early payments and more risk sharing on the part of the institutions.
• Investors and VC’s will have to take the longer term view, recognizing that one program or one compound does not an industry make. Funded companies will have to generate more opportunities and move them to partnerships faster.
• Management teams will have to be willing to take on the risk of the early stage startup, partner early and often, and create as many “shots on goal” as possible.
• Pharmaceutical companies will have to learn to develop partnerships faster and more efficiently with biotechnology companies and early stage programs. Both biotech companies and pharma will have to develop a partnering model allowing for more dollars spread over more projects to help winners and weed out the losers. Pharma cannot continue to sit on the sidelines and wait for investors (and management teams) to take all the risk, and step in to partner only after key data emerges.

Will all of the players move consciously to ensure a robust future pipeline of new treatments? Will each institution make the difficult adjustments to their own business models? Can one group do it without the others moving as well? Will players be forced to move as the market pressures their business model? Or will they find other outlets (ie: green tech for investors, bio-similars for pharma) and possibly move away from discovery on a permanent basis? Let’s hope that all parties will find a way to make the discovery model work. The future of new treatments hangs in the balance.