Skin in the Game

The recent announcement that the Cystic Fibrosis Foundation Therapeutics, Inc. (CFFT), and Vertex, the well-established biotech company, had extended their collaboration to find “correctors” of the genetic defect underlying cystic fibrosis (defective transmembrance conductance regulator proteins, Vertex press release) got me thinking about the need for better business development efforts by organizations developing treatments for neglected/global diseases.  The CFFT (CFFT) is the non-profit wing of the Cystic Fibrosis Foundation (CFF) that was set up in 2000 to sponsor the development of therapeutics for cystic fibrosis from preclinical through clinical studies and which has steadily built a broad and deep portfolio of potential treatments (CFFT pipeline).  Cystic fibrosis is a rare genetic disease that afflicts about 30,000 persons in the US and 70,000 worldwide, and is characterized by an overproduction of mucus that greatly shortens life (median survival age is 30 years in the US).  The CFF/Vertex collaboration started in 1998 and has resulted in three drugs in development, one with recent positive Phase 3 results.  CFFT has put $75 million into Vertex to date and the extension adds another $75 million over the next 5 years.  I couldn’t find a current number for the annual funding of CFFT’s projects, but according to their site, $66 million was expended in 2005.    This is an impressive commitment bearing significant results and I think the CFFT strategy is one that the global health drug development organizations, especially the “product development partnerships” or PDPs, may want to emulate.

Here’s my quick comparison of the drug development approaches of the CFFT and a PDP like the Drugs for Neglected Diseases Initiative which is developing drugs for trypanosomiasis, leishmaniasis, and Chagas (DNDi):

Focus Single disease with few patients Single to several diseases with many, many patients
Priorities Foundation-driven Advisor- and donor-driven
Projects All development (the CFF funds basic research) Research and development
Funding recipients Mostly companies Mostly academics, few companies
Portfolio breadth Wide, multiple approaches Narrow, a few candidates
Portfolio depth Screening through trials Screening through trials
Commitment Multi-year, 5-10 years Depends on donor commitment
Type of biotech/pharma partners Small to mid-sized Some small, mostly big
Relationship structure Business partnership (details below) Grants
Primary market US Developing world

Clearly, CFFT is more willing to establish a business relationship with companies and use their expertise to push promising drugs.  Of course in dealing with companies, the CFFT has an advantage over the PDPs in that CF treatments are insurance-reimbursable, at least in the US, so a case can be made for a return on investment, but for some neglected diseases and countries, and for small companies needing product revenue and market validation, PDPs could make a similar case.

Business development requires a good pitch and I think PDPs could learn from how the CFFT sells partnering for drugs for its rare/neglected disease to companies.  PDPs start from the assumption that there is no market for their products and the biotech/pharma industry isn’t interested, e.g., “New models of drug discovery have been developed to overcome the lack of modern and effective drugs for neglected diseases … which have no financial viability for the pharmaceutical industry” (Chatleain and Ioset 2011). The CFFT starts with the assumption that it offers a business relationship to a company with has advantages to both parties and structures its agreements to reduce technical and market risk and motivate commitment.  According to a 2007 presentation by CFF’s VP of alliance management, the CFFT’s standard agreement requires that:

  • the company matches the funding provided by CFFT;
  • compensation includes pay-for-performance milestones;
  • failure to meet milestones is grounds for termination and a grant of all rights to CFFT with a reciprocal royalty to the company if a resulting product is sold; and
  • upon product approval CFFT is paid a multiple of its funding or a royalty on sales (Wetmore 2007).

So the CFFT reduces the risk to the company and its investors by providing commitment to a long-term relationship (with qualifications), money, and connection to its network of researchers and companies, and motivates the company to succeed by conceding the majority of the potential profits.  The company responds by committing attention and its resources, that is, by putting skin in the game.

My recommendation is that PDPs do a better job of business development by pitching the value of drugs for neglected disease, both to society at large and to companies’ bottom lines, and by offering term sheets that engage and motivate companies.   This advice should not be news to the PDP managers, since more than five years ago in a comprehensive study of PDPs for the Wellcome Trust, Moran et al. noted:  “Although the funds required to support small company activity are relatively small, PPPs [PDPs] can find it difficult to provide these in their current constrained financial situation. Some PPPs also lack sufficient experience and understanding of small company bottom lines to structure attractive deals with these commercially focused and IP-protective firms. This is particularly relevant when all or most PPP staff come from non-industry backgrounds. Companies complain that ‘they don’t seem to understand that we do need to make a profit (overall)’ ” (Moran et al. 2005) [does anyone know if this study has been updated?].  Someone (patients?  foundations?  consultants?) has been able to argue successfully that companies can make money on drugs for rare diseases (c.f., “Rare Diseases All the Rage with Big Pharma,” FierceBiotech article).  It’s time the PDPs and the global health advocates go beyond talking about the lack of an attractive “business model,” invent one, and start pitching deals.


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