BioVentures for Global Health (BVGH), the biotech industry-oriented advocate for global health, recently issued a substantial report, Global Health Innovators: A Collection of Case Studies (available at BVGH Case Studies). It is the latest volley in BVGH’s effort to engage biotech companies in applying their substantial scientific and technical resources and entrepreneurial energy to finding solutions to the neglected infectious diseases, the barrier being, despite biotech being a no-profit-now-maybe-profit-someday industry, investors don’t like the global health ROI math. BVGH’s report takes a major whack at dispelling this conventional wisdom and replacing it with real-world examples of companies as important players in global health.
The report is a technical tour de force since the authors (primarily Priya Mehta, BVGH’s Director of Global Health Markets) examine the many factors (e.g., relationships, motivation, cash and IP flow, value, problem-solving methods) of six partnerships, each with three to five actors, through interviews with participants and reviews of enabling documents. Further, the report tracks the evolution of the partnerships through time as the goals, participants, and motivations change, for example, for more than seven years in the most complicated (and least likely to succeed) case, the development of a TB vaccine. The case studies include timelines, diagrams of who is doing what to/for whom, benefits perceived and actual to the participants, and, most helpful, a summary of the major challenges overcome and those now faced. Although, there is some description of the targeted diseases, potential products, and underlying technology, the main focus is on the mechanics and dynamics of the partnerships.
Although there is risk in generalizing from case studies, the report makes several observations that provide guidance for companies looking at ROW products and markets, and may eventually prove to be insightful:
- -a few vaccine companies are seriously pursuing global “niche” markets even in the absence of a developed world market;
- -a few of the not-for-profit product development partnership organizations (PDPs) are starting to view biotech companies as cost-effective participants and contractors in their product development programs;
- -the partnerships bring both less tangible (reputation, employee retention, knowledge) and more tangle (nondilutive financing) benefits;
- -IP ownership/management is not a problem (but then only profitable products begat suits);
- -some companies are willing to subsidize their global health efforts through discount-priced services, “donation” of employees, and out-of-pocket cash; and
- -a few companies (maybe only one- Vertex) are undertaking a global health product development effort at shareholder expense without articulating an ROI. The report’s take-home message is: despite limited (but improving) financial incentives, biotech companies have found that undertaking global health projects through partnerships is feasible and has strategic value.
At the risk of criticizing a cake for having too little icing, I have the following comments:
- -Case 1 doesn’t really provide guidance to companies since the primary actor is not a company but is a PDP (in this case Drugs for Neglected Diseases Initiative) which employs a CRO (at a discount, which is good) and a quasi-CRO, a public entity called the Central Drug Research Institute of India.
- -In two cases, the business relationships were not characterized accurately, possibly due to concern not to offend. For example, it looks to me that the structure joint venture formed in Case 2 heavily favors Emergent Biosciences. Through the JV, Emergent transfer some of the technical risk while the other partners assume all most of the financial risk in return for a nonexclusive license which could be valueless should Emergent pull out. Further, it seems to me that one lesson that is not stated is that the involvement of an academic institution in drug development partnerships may result in an overly complicated and possibly unworkable structure. A second example in Case 3, Genzyme seems to gain the majority of the benefit form the partnership: getting its compounds tested at against new targets, gaining knowledge about new lead compounds (those owned by the Broad Institute’s sponsoring institutions), and being paid and only contributing some unquantified opportunity cost.
- -The report ignores the large pharma players. Although Case 6 includes Sanofi-Aventis which seems to be making a major play in serving underserved markets, the challenges they face in pricing, approval, and competition from low-cost competitors are explored only briefly.
- -Finally, the report could have placed the cases in the overall context of biotech/pharma involvement in global health product development, for example as it is described, albeit in a cursory and now out-dated way, in BVGH’s R and D Landscape database (R and D Landscape).
“Many biotechnology companies are inspired by the opportunity to address tremendous unmet needs in global health.” The report is a good first step in finding ways to convert inspiration into investment.