The age of virtual pharma: Challenges and solutions

While big pharmas still depend upon small biotechs to feed their discovery and development pipeline, small biotechs need big pharma less and less. Myriad development and financing options have emerged since the salad days of 2008, giving small firms the luxury of choice and unprecedented flexibility, according to speakers in “The Age of Virtual Pharma” discussion at Biotech Showcase 2016, January 11 in San Francisco.

As examples, Frank Armstrong, chairman of Xceleron, Summit Therapeutics, Redx and Faron Pharmaceuticals, and board member of TranScrip, cited the three very different product development strategies of Summit, Mereo BioPharma and Juniper Pharma.

Summit spun out of Oxford University a few years ago. It has limited grant funding and an arrangement with the Wellcome Trust and, in 2015, listed on NASDAQ. Mereo BioPharma is a private company founded in 2015 by partners from Phase4 Ventures with three programs from Novartis in Phases II or III. It raised more than USD 100 million from Novartis and private equity, and has a strategic collaboration with ICON. NASDAQ-listed Juniper Pharmaceuticals focuses on women’s health. Its three business streams involve Crinone^® (marketed by Allergan and Merck KGaA), a vaginal ring drug delivery system and integrated product development with the Molecular Profiles segment of Juniper.

None of these companies have many commercial products. Instead, they have focused on developing one or two products rather than platforms, Armstrong said. “All have the flexibility to retain product ownership into Phase III and are building their development capacity in-house for orphan and niche products.”

“Big pharma is interested in early stage or late stage development,” largely ignoring Phase II products, said Colin Broom, CEO, Nabriva Therapeutics. Therefore, companies need to identify and develop underappreciated assets. “You need focused discovery, skilled management and development teams, fast decision making and creativity. With CROs, you don’t need a large organization.”

Panelists also stressed virtual companies’ abilities to commercialize products themselves. That means focusing on products with smaller, manageable markets. Orphan and niche indications, and products for well-defined populations are good candidates. Hospital markets, Broom pointed out, require less commercial effort than products targeting physicians or international markets. “You get the greatest value by building a viable commercial enterprise,” Broom said. “Identify the asset that lets you do that.”

ContraFed does that with a disruptive alternative to antibiotic resistance. “Our lysins are in clinical trials in the US,” Julia Gregory, CEO, said. One program assesses CF-301 against staph aureus bacteremia, while another tests CF-301 as a combination therapy. A real-time video showed CF-301 eradicating staph 12 times faster than vancomycin. “We’re also using human antibodies to cover all seasons and pandemic strains of influenza, developing a three-antibody cocktail to extend the treatment window beyond what’s possible for small molecules.”

Collaborative outsourcing is helping ContraFect finance their development. Gregory helped pioneer the practice as CEO of Lexicon, developing 10 drugs simultaneously with Symphony Capital and Quintiles. “Symphony took three of the drugs, with the provision we could get them back, providing expertise and buying stock in the company. That raised USD 265 million in 2007.” The company also raised USD 500 million in another equity deal with pharma.

“We had done the forecasting for all 10 trials and identified who could help with portions of them. Quintiles wanted the portfolio and to help fund the clinical trials, so developed a reduced-cost-based development plan based on shared risk.”

In considering collaborative outsourcing, “retain your strategic and critical assets to ensure to have control,” Gregory advised. “Outsource commodities, specialized or infrequent activities and funding.”

Gregory also advised looking beyond just the largest CROs. “Compare CROs’ capabilities, willingness to share risk and ability to devote their energies to small companies or projects. There are some fantastic CROs that are small, efficient and dedicated.

“Partnering with pharma is a very good way to move multiple programs simultaneously,” she continued, and helps validate companies and technologies. “But pharma moves slower than other partners. If you want to race forward, find other funding sources.”

There also is concern that the control demanded by big pharma may be greater than the benefit. Gregory countered that some regional partnering deals that bring expertise in exchange for markets or regions are beyond her company’s capabilities.

There’s another point to consider, too. Time. “Saving time is like raising money," Gregory said.

Xceleron, for example, de-risks compounds for clients, focusing specifically on circulating cytokines, said Mike Butler, CEO. The objective is to answer critical questions as early as possible in a drug’s development cycle. For example, “a disposition profile looking at kinetics costs about USD 300,000 but has saved clients six months of time and USD 1.5 million.” Likewise, he said, “a metabolite profile often shaves seven months off the usual development timeline, and one big pharma company (AstraZeneca) said it shortened the time to registration by a full year.”

Clearly, virtual companies have innovative options to help them thrive. The key, panelists agreed, is to think creatively with the next few years in mind.