business models that biotech companies employ a. m. pappas & associates francis j. meyer, phd...
TRANSCRIPT
Business Models That Biotech Companies Employ
A. M. Pappas & Associates
Francis J. Meyer, PhD
Vice President, Enterprise Development
KFBS Biotech Speakers Series
November 25, 2002
Francis J. Meyer, PhDVice President, Enterprise Development
• PhD, Pharmacology, University of Maryland Medical School
• Senior Management of 2 medical product companies• Associate Dean for Technology Licensing, Johns
Hopkins University School of Medicine, 10 years• Associate Vice Provost for Technology Development,
University of North Carolina-Chapel Hill, 5½ years• A. M. Pappas & Associates, 2 years
– Life Science Venture Capital Fund Management & Advisory Services
Presentation Outline
• Mission of biotechnology companies• Biotech business models with examples • Linking financial models with business
models• Regulatory or ethical concerns that
could alter the business model• How does a technology itself influence
the business model
Mission of Biotechnology Companies
• Varies
• Focus on Human Health Companies
• Using a platform to develop drugs
Designing Drugs
Target Compounds Leads
Leads to Drugs
Leads Evaluation Drug
Drug Development - A High Risk Undertaking
Time 10-15 years from discovery to market; patent life 20 years
Cost $700 million + (includes costs of failures)
Success 1 approval/ 5000 cmpds screened; 1 approval /5 cmpds entering clinical trials
Return 3 in 10 approved drugs recover development costs
Clinical TrialsDiscovery/Preclinical
Testing Phase I Phase II Phase III FDA Phase IV
Years 6.5 1.5 2 3.5 1.5
Test Population
Laboratory and animal
studies
20 to 100 healthy
volunteers
100 to 500 patient
volunteers
1,000 to 5,000 patient
volunteers
Review process/approval
Additional post-
marketing testing
required by FDA
Purpose
Assess safety,
biological activity and formulations
File IN
D at F
DA
Determine safety and
dosage
Evaluate effectiveness, look for side
effects
Confirm effectiveness,
monitor adverse
reactions from long-term use
File N
DA
at FD
A
Success Rate
5,000 compounds screened; 250 enter
preclinical
5 enter clinical testing1
approved
Life Science Development Cycle
Discovery Development
Lead Optimization
Preclinical Development
Human Trials
FDA
FDA
Genomics
Proteomics
System Pathways
Cell Biology
Target Validation
Assay Development
Expression
Sequencing
Screening
Target ID
SynthesisLead
IDCompounds
Natural Extracts
HTS
BIOLOGY
PATIENT MANAGEMENT
DIAGNOSTICSTHERAPEUTICS
COMMERCIALIZATION
CHEMISTRY
Business Models for Human Health Biotech Companies
• Product Companies
• Subscription Companies
• Service Companies
Product Companies
• Product Company– Develop products through clinical trial
stage
• initial products partner with pharma
• later products sell and market directly
– Examples: Inspire, Panacos, Signase
Subscription Companies
• Subscription company– Develop genomics databases – Pharma subscribes to databases– Subscription fees – No downstream royalties– Examples: Millennium
Pharmaceuticals, Inc., Incyte Genomics, Inc., Celera Genomics Corp., GeneLogic
Changed Model
• Most subscription companies have become fully integrated pharma or research companies
• Wall Street less value for subscription-only companies
• Examples: Human Genome Sciences, Inc., Millennium Pharmaceuticals, Inc., Incyte Genomics, Inc., Celera Genomics Corp.
Service Model
• Product is service
• Full range of services to support pharmaceutical companies ideal
• Technology know-how strong
• IP less important
Service Model
• Contract Research Organization (CRO)• Full range of services to support pharma
– Preclinical– Clinical– Regulatory– Post marketing– Production/Manufacturing– Specialty Testing
• Staff, know how, databases are the assets• Examples: Quintiles, Piedmont Research
Service Model
• Chemistry Service Companies – Chemical Libraries, Scaffolds,Synthesis – Staff, Know How, Databases, Libraries, IP, Robotics are the
Assets– Examples: Albany Molecular Research, Aurora Biosciences,
Tripos, Synexis Chemistry & Automation
• Smart Screening Companies– Development and Use of Proprietary Models ( animals &
others)– Staff, Know How, Databases, Models, IP, Robotics are the
Assets– Example, EnVivo
Tool Companies
• Product companies that sell tools, not as a service, but as a product
• Example: Chip companies such as Affymetrix, Aclara, Caliper
Development Companies
• Development companies (Devco model)– In-license compound, take it through
Phase II or III clinical trial– Out-license to big pharma
• Downstream royalties
• Example: Pozen Pharmaceutical, Inc., DevCo Pharmaceuticals, Inc.,
Bioinformatics Companies
• Service & software company
• Variation under subscription
• Many to categorize
• Examples: Bioinformatics Group, Incellico, Divisions of IBM, SAS
Linking Financial Models with Business Models
• Business model independent of source of capital funding
• Example: AlphaVax, Inc.– NCBC– SBIR– Foundation– Venture Capital
• There is a point when co.may not want venture capital money
• Very early stage
Regulatory or Ethical Concerns That Could Alter Business Model
• Drugs
• Diagnostics
• Medical Devices
• Research Reagents/Tools
• Stem Cell Research– Geron & Univ. of Wisconsin
How Does the Technology Itself Influence the Business Model?
• Platform technology
• Products
• Services
• Databases / Tools
Critical Factors in Start-Up
• Management Team
• Business Model
• Technology
A Company for Today
• Profile:– Post Genomic– Rapidly Identify & Validate Disease-
Causing Cancer Genes– High-Throughput Functional Cloning– Developing Data, Tools and Therapeutics– Treat Based on Individual Disease Profiles
A Business Model for Today
• Profile:– Combination of Subscription, Tools &
Products– Logical Evolution of Income Producers
Over Time– Strategic Partners from Day One– Several Sources of Cash & Conserve
Today’s Fund Raising Climate
• Cash is Very Hard to Get
• Only the BEST are Obtaining Funding– BEST Management– BEST Business Model– BEST Technology– BEST Products– BEST Markets
Conclusions• Constant change will continue
– Biz models change to adapt to science change
– Genomics, functional genomics, bioinformatics, proteomics, etc.
• Which model is best?????– “ Morphing”
• Management team• First 8 years of genomics will pale
compared to next 25
A. M. Pappas & Associates
If interested in additional information contact:
Fran Meyer at 919-998-3314 or [email protected]
Pappas Ventures I Portfolio• Aclara BioSciences (Nasdaq: ACLA) (Mountain View, CA)
• Arena Pharmaceuticals (Nasdaq: ARNA) (San Diego, CA)
• ArgoMed (Cary, NC)
• Bio-Informatics Group (Cary, NC)
• EBM Solutions (Nashville, TN)
• Elitra Pharmaceuticals (San Diego, CA)
• Nereus Pharmaceuticals (San Diego, CA)
• Panacos Pharmaceuticals (Gaithersburg, MD)
• Reprogenesis (acquired by Curis) (Nasdaq: CRIS) (Cambridge, MA)
• Signase (Houston, TX)
• Variagenics (Nasdaq: VGNX) (Cambridge, MA)
• X-Ceptor Therapeutics (San Diego, CA)
Pappas Ventures I PortfolioAclara Biosciences biochip company developing microfluidic lab-on-a-chip technology with applications for genetic analysis, high throughput drug screening and clinical diagnostics
Arena Pharmaceuticalsbiopharmaceutical company that has developed a technology to accelerate the development of lead compounds targeting G-protein coupled receptors
ArgoMedcompany developing a proprietary, water-induced thermotherapy device and technique to address the non-surgical treatment of benign prostatic hyperplasia (BPH)
Pappas Ventures I PortfolioBio-Informatics Group company developing an innovative, proprietary 3-D biochip to enhance the capacity, efficiency, accuracy and automation of gene screening; NC State University
EBM Solutionshealthcare information company that provides evidence-based disease treatment protocols via the Web to physicians and patients; Duke, Emory, Mt. Sinai NYU, OHSU, Vanderbilt and Washington University
Elitra Pharmaceuticalsantimicrobial functional genomics company focused on the identification, development and commercialization of novel antimicrobial compounds that target essential gene products of pathogenic organisms
Pappas Ventures I PortfolioNereus Pharmaceuticals drug discovery and development company focusing on marine environments as a source of small-molecule compounds for the treatment of inflammation, cancer, and infectious diseases; Scripps Institution of Oceanography
Panacos Pharmaceuticalsdrug discovery and development company focusing on novel antiviral compounds targeting the treatment of HIV, RSV and hepatitis; University of North Carolina at Chapel Hill
Reprogenesis (now Curis)company developing in vivo tissue augmentation/ repair products; MIT and Harvard
Pappas Ventures I PortfolioSignase cancer therapeutics company developing novel, small molecule inhibitors of a critical cell replication pathway to inhibit tumor growth; M. D. Anderson Cancer Center
Variagenicspharmacogenomics company with proprietary gene variance detection technology anticipated to streamline drug development
X-Ceptor Therapeuticsbiopharmaceutical company focused on research in the field of orphan nuclear receptors; Salk Institute, Baylor College of Medicine, UT Southwestern and Ligand Pharmaceuticals
Pappas Ventures II Portfolio• Calyx Therapeutics Inc. (Hayward, CA)
• Cognetix, Inc. (Salt Lake City, UT)
• Dynogen Pharmaceuticals, Inc. (Boston, MA / RTP, NC)
• Incellico, Inc. (Durham, NC)
• NuVasive, Inc. (San Diego, CA)
• Peninsula Pharmaceuticals Inc. (Fremont, CA)
• Plexxikon, Inc. (Berkeley, CA)
• Sensys Medical, Inc. (Chandler, AZ)
• Syntonix Pharmaceuticals, Inc. (Waltham, MA)
Pappas Ventures II PortfolioCalyx Therapeutics pharmaceutical company focusing on oral therapies for diabetes and inflammatory diseases utilizing natural plan extracts with demonstrated clinical activity in humans
Cognetix biopharmaceutical company developing peptide therapeutics for the treatment of epilepsy, pain and anesthesia; University of Utah
Dynogen Pharmaceuticalsneuroscience-based drug discovery and development company targeting novel therapies for genitourinary and gastrointestinal disorders
Pappas Ventures II PortfolioIncellicobioinformatics company developing proprietary solutions that will significantly streamline biological and genomic data mining and processing
NuVasivemedical device company that has developed a minimally invasive system for spine surgery
Peninsula Pharmaceuticalspharmaceutical development company focused on in-licensing and developing clinical stage pharmaceutical products.
Pappas Ventures II PortfolioPlexxikondrug discovery company that utilizes a structural proteomics approach to discover novel pharmaceuticals
Sensys Medicaldeveloper of non-invasive technology for blood glucose monitoring
Syntonixbiopharmaceutical company focused on the discovery and development of innovative drug delivery technologies for improved administration of protein drugs and vaccines; Harvard Medical School