The past decade has seen dramatic change within the life sciences industry, as technology develops in leaps and bounds.
The life sciences industry has changed dramatically over the last 10 years: cancer treatments using a patient’s own immune system to selectively kill cancer cells and gene therapies that treat deadly childhood diseases are just two treatment areas that were previously out of reach. Incredible advances are happening at warp speed. Where it once took an entire year to sequence a single gene, it now takes mere seconds.
These rapid advances in medicine are extraordinary, but they are stressing systems less adaptable to change. The long-held standards underlying patenting, drug approval and pricing, as well as public/private investment models, are being challenged and changed. Nearly all players in the life sciences industry – academic institutions, large pharma, investors, startups, and others – are quickly learning that they need to be adept and adapt. Indeed, in order to navigate the rapid evolution of medical innovation, organizations must also proactively find new paths through the legal, regulatory, and financial health care landscapes.
TO BE OR TO BUY: CRITICAL COMPONENTS OF CREATING A HEALTHY LIFE SCIENCE COMPANY
Whether you are a company with a breakthrough technology or an investor, there are ways to increase the likelihood of success. Early on, companies need to identify the specific barriers to exclusivity, regulatory approval and pricing and begin to customize the paths to market for their product. The earliest stages of a company’s life cycle provide some of the most crucial opportunities to spend intellect, though not necessarily excessive capital, in order to create new strategies for success.
KNOW THYSELF: DEFINING THE FIRST STEP FOR EARLY-STAGE COMPANIES AND INVESTORS
Reducing risk is synonymous with increasing valuation. From the outset, companies must develop strategies that reduce risk, but they often do not need to immediately execute these strategies. Determining both what to do and when to do it is critical to increasing value while preserving capital. The first valuation increase often results from obtaining key experimental data, platform intellectual property, or forming critical collaborations. The ideal investor is one who has the money, timeframe, and risk tolerance to get the company over this first valuation hurdle.
"Reducing risk is synonymous with increasing valuation"
UNDERSTAND THE DESTINATION AS WELL AS THE ROUTE
Achieving success goes beyond crafting a company model that is attractive to early investors. It means also having long-term strategies that anticipate the company’s eventual exit, whether in the form of an initial public offering (IPO), acquisition, or continued growth into a commercial therapeutic company.
Finding the route requires identifying and planning for present and future risks, and thinking through strategies to eventually mitigate them. While working to actually reduce risk can be expensive, it is a high value undertaking if done at the right time. Ultimately, prioritising advancing the technology, developing key partnerships, assessing third-party patent risks, obtaining a layered patent/exclusivity portfolio and gaining regulatory approvals are all part of a path to success.
When it comes to risk, the importance of timing is often underestimated. Knowing when to expend resources to reduce risk – not too early or too late – is as critical as knowing how to control risk.
HOW TO PRIORITISE: UNDERSTANDING THE RISKS AND WHEN TO TACKLE THEM
Within the life sciences industry, different specialty areas – be they drug therapies, devices, patient diagnostics – all face similar issues, though with different solutions. To make matters more complicated, the paths to success vary greatly within a single field. The following are critical elements to consider in order to spot potential hurdles, develop strategic approaches, and position a company for success:
Assess and Adjust Management
Having experienced management is an initial indication of a well-positioned company, though not always a guarantee. A company that has an executive who knows the target field and/or understands clinical trials, or is a serial entrepreneur are all good places to start. A board with top-notch investors and industry leaders is also a good indicator. The critical denominator is management that can engage in informed decisionmaking in the rapidly evolving life sciences industry. Indeed, building a strong management team is one of the best forms of general risk mitigation for an early-stage company. For investors, the strength of management can be an excellent gauge of a company’s future in an unpredictable environment for growth.
There are multiple avenues for achieving market exclusivity, including
> Patents: Obtaining critical patents can be a valuable and early milestone. A plan for strategic staging for lifecycle management can also deliver high value at little cost early on.
> Patent-term extension (PTE): PTE extends the life of a patent for a novel therapy beyond normal expiration as compensation for regulatory delays. Critical to PTE is obtaining the right patent before clinical trials begin.
> Regulatory exclusivity for new drugs: A drug that is a new chemical entity (NCE) approved by the US Federal Drug Administration (FDA) may qualify for five years of exclusivity. Critically, this exclusivity is not tied to having a patent.
> Orphan designation: Drugs that treat small patient populations may qualify for “Orphan” designation. Like NCE exclusivity, Orphan status is not tied to a patent. Unlike PTE, which is only available upon drug approval, Orphan status can be obtained years in advance as an early risk mitigation strategy.
> Market dominance through sales: Treatments for small patient populations, therapeutics having high manufacturing costs, or products with obsolescence, i.e., certain medical devices, can sometimes achieve long-term exclusivity through early market dominance. Even a relatively short period of patent or regulatory exclusivity can create the window needed to economically block competitors.
RETHINKING THE REGULATORY PATHWAY
Once a company makes it past proofof-principle, the greatest risk of failure comes during the regulatory approval phase. This has always been true, but with the development of treatments that work by entirely new mechanisms, the uncertainty can become even higher. And yet there are also opportunities to achieve better outcomes.
By using novel combinations of drug therapies (biomarkers and big data, for example), some clinical trials are becoming faster, more definitive, and more predicative of the ideal patient population. New combinations of new technologies create a synergy that can allow refined endpoints for otherwise complex disease phenotypes. New regulatory trial paradigms are leading to better outcomes for all stakeholders, including the most critical: patients themselves. In short, novel therapeutics and allied technical advances are changing the routes to regulatory success.
PUBLIC OR PRIVATE
A game changer in the current market has been the ability of companies to raise money by going public through an IPO. Some company IPOs now occur before a single company drug has even become approved for a clinical trial. While a public offering can be attractive as an early exit and major fundraising strategy, it comes with risk: public markets bring increased transparency. So while a misstep in a clinical trial may be no surprise to private investors, it can translate into precipitous stock drops in the public markets.
In the Life Sciences industry, we are seeing more groundbreaking and lifechanging treatments for patients than ever before. Getting these therapies to the market can be as challenging as the human health issues they solve. Success requires innovative thinking to overcome new hurdles, and having strong advisors with a track record of success at each step in the process is critical. And while reward does not come without risk, efficient and creative risk management clearly pays off.