It’s the market. Because of diminishing capital for biotechs, the contraction of 2001 saw companies eliminating or dramatically cutting budgets for discovery. Moving forward what was already in the pipeline took top priority. Since this was apparently an industry-wide decision, very few new drugs or targets were being discovered. And thus today, the mantra of “buy drugs when we need them” has come back to haunt our industry because the new way of doing “discovery” is vastly more expensive than that of the past. It consists of big pharmas and large biotechs discovering what therapeutics exist in smaller biotech companies founded in the ’90s followed by purchasing the company for the product for about $500 million apiece. This form of contract discovery isn’t sustainable. There are only a handful of companies remaining that can fill the needs of this current pipeline drought. And the larger companies admit they are not capable of efficiently renewing the pipelines themselves. (That’s another Xconomy Forum piece).
Secondly, back to the “burned investors” of old. As the industry was contracting, new start-up seed-stage investments that often go to discovery-based companies came to a halt. Because of our horrid past, the impatient investors of today are playing it ultra-conservative. They are investing in late or later stage drugs (which only gives them about 3-5X on their return), they are investing in companies that already have a drug aimed at a known, market-validated biological target (i.e. another drug that hits the same target on cells as Genentech’s Rituxan, ImClone Systems’ Erbitux, or Amgen’s Enbrel), or they are investing in new technologies that ultimately are going to be used to target known, safe validated targets. My question was always “why do you want to invest in something that’s going to be 7th to market?”
So the unintended consequences of both of these forces have converged today to create a black hole of discovery and development for new and/or better therapeutics for multiple disease indications.
Unfortunately, this is also the formula for the demise of many other facets of our industry:
First, in the case of antibody companies – the buy-out sweepstakes means your board of directors grooms your company just for that. As a result, there is a rush to select your therapeutic candidates – today’s impatient investor demands these in the first 1.5 to 2 years of growth of the company (from the time you purchase your first piece of equipment). Because you’re being groomed as a buy out, you have to remain small and efficient. The bad part? Companies of this small size can only develop two, perhaps three, antibody therapeutics on their own; therefore, once you’ve selected your leads, all resources go to the development stage to rapidly attain the $500M price tag, and discovery becomes a thing of the past or is given a token amount of attention. The founders? They are typically not amused by the latter and are either removed or rendered insignificant, not necessarily in that order.
The effects:
This new model eats at the pioneering spirit of founders of any antibody-based company targeting cancer, infectious disease and autoimmunity. There are well over 400 scientifically validated targets for antibodies in human disease and countless others waiting to be discovered. And you, the founder, are supposed to be happy with just being able to knock off two or three of these targets and stopping…..even though you know you have a technology that is orders of magnitude better than the standard practice?
And what does this model do for Seattle’s supposed initiative to become a biotech hub like Boston, San Diego, and the San Francisco Bay Area? This approach is no way to create a biotech hub, it’s the exact recipe for how to destroy one.
