A recent meeting focused on “Reinventing Biotech’s Business Model” provided an interesting window into the spectrum of approaches being used to create new biotech companies. Unfortunately, it did little to relieve the concerns I recently voiced regarding the expanding numbers of “virtual” biotechs. This model is becoming a popular archetype for the creation of new biotech companies because they require much smaller initial capital investments than traditional biotechs. The basic idea is to build a company around a small managerial group who then farm out most of the basic operations to contract organizations. These outsourced functions usually include research and development, clinical trials, intellectual property, regulatory, financial, and even human resources.
These disposable companies are not designed to reach adulthood.They are raised for the sole purpose of being gobbled up while still young fry by the larger, wealthier fish in the pond. While some of these companies have been acquired for attractive valuations, I remain concerned about their potential to create useful medicines. There are several other attributes of “virtual” biotechs that contribute to my anxieties beyond the distortions these companies may introduce in the biotech ecosystem. The first has to do with the quality of the science on which at least some of these companies are likely built, and the second concerns the fact that “virtual” companies are not likely to contribute much towards the development of robust biotech clusters.
Most biotech companies, no matter their business model, need to start off with some sort of molecule that they plan on turning into a drug or treatment that will attract funding from investors. “Virtual” companies, however, are not equipped to do independent research, as they have no dedicated lab space. So where do their drug development projects come from? They generally originate from one of the three places that are also plumbed for drug leads by more conventional biotechs:
1) New ideas provided by entrepreneurs directly or indirectly associated with the new company.
2) Castoffs from Big Pharma or biotech companies that did not develop them for a variety of reasons (e.g. change in clinical focus; drug performance wasn’t stellar in early trials; prioritization left no money for development; projects left over after purchase of more valued corporate assets).
3) Published data on potential drug targets, which mostly arise from academic research papers.
It is this last category that is the primary source of my trepidation. One might expect that research chosen as the basis for forming a new company would be described in ground breaking, high profile papers. After all, practically all science builds upon previous discoveries, which is why many researchers spend so much time reading the literature and attending conferences. This concept was famously summarized by Isaac Newton in a letter he wrote in 1676 to his rival Robert Hooke, “If I have seen a little further it is by standing on the shoulders of Giants.” Suppose, however, that instead of standing on the shoulders of Giants, Newton had found himself kneeling on the feet of Dwarfs? What would he have seen and come up with from that position? Would he
