Last week, National Pubic Radio ran a short story on its Morning Edition program that was produced by my local station, WBUR, called “One Man Does It Faster, Cheaper Than Big Pharma,” (NPR story) and it sparked my interest as an advocate for faster, cheaper drug development for global disease (e.g., my post, “Drug Discovery on the Cheap,” 11/4/10). The basic premise of the story was not new: that there are an increasing number of start-up biotech companies that, rather than being bricks-and-mortar and fully staffed with the attendant overhead costs, rely on CROs (contract research organizations [for-profit companies]) to do the majority of the drug development work. The executives of a “virtual” biotech company typically have multiple years of pharma or biotech company experience and assemble relatively modest funding (a few millions of dollars), license a promising prototype drug candidate, e.g., from a university, and aim at the goal of developing sufficient evidence of efficacy in human trials, i.e., the “value inflection point,” to convince a deep-pocket pharma company that it is worth buying and spending the big bucks (hundreds of millions) to finish the drug’s development and bring it to market. Since the NPR story was short on details, like the name of the company involved, and since I’d like to figure out how to apply faster/cheaper drug development to global health, l did some research on it.
The transcript of the NPR article wasn’t much help though, since it identified the main interviewee, Dennis Goldberg, as CEO of neXus Therapeutics (which he was about 5 years ago) and another interviewee, Michael Webb, as associated with a UK office rental company (he is a former biotech exec and chair of Massachusetts Biotechnology Council board). With a bit more sleuthing, I realized that the company cited is LipimetiX (LipimetiX), that the Dr. Goldberg is its CEO and a principle of Benu BioPharma Inc., a consulting company for virtual biotechs (Benu), that Dr. Webb was interviewed as a backer of LipimetiX through his role as managing director of Exponential Pharma Partners (EPP), another firm specializing in virtual drug development companies. Now I was getting somewhere since I knew about EPP through Fred Meyer, who is an EPP director, colleague, and fellow weekend cyclist, and knew that EPP is pioneering a specific type of virtual biotech structuring, in which each company is set up as a stand-alone limited liability corporation, making it possible and attractive for a big pharma to buy into the LLC as a investor and get an option to buy the project/company after clinical proof-of-concept is reached. Win-win for everyone if the company founders have picked the right drug development project with a clear and fundable inflection point. In addition to LipimetiX, EPP has applied this model to a second company, Embara NeuroTherapeutics (Embara press release).
So what other examples of virtual biotechs, especially of the LLC type, are out there and are they informative for the formation and success of a similar effort for drug development for global health? In a June 2011 article in The Atlantic (Atlantic Backyard Biotech article), I found an example of a virtual (non-LLC) biotech which the article implies has an interest in applying its product to low-resource countries: FerroKin Biosciences (FerroKin). This use may be imaginative though, since its drug, an iron chelating compound, treats the consequences of blood transfusions for diseases like sickle cell anemia, not a treatment used in the developing world (see my post, “A Really Neglected Disease,” 7/29/10). The every helpful FierceBiotech newsletter (FierceBiotech article) steered me to a May 2011 article by Luke Timmerman, editor of Xconomy Seattle, about the use of the LLC model by the virtual biotech company, Resolve Therapeutics, whose one-trick pony is a drug to treat lupus, an orphan disease (Xconomy article and Resolve). Another Xconomy article (Xconomy article) quotes Resolve’s CEO, Jim Posada: “the model can only really work in specific types of diseases, where it is possible to create value with a new drug after only $10 million to $15 million of early stage testing.” [I know Jim slightly since he replaced me after I was fired a director of business development for GlycoFi and did a great job is helping it get acquired by Merck in 2006.]
The same FierceBiotech article mentioned Nimbus Discovery (Nimbus, Nimbus), a local company that was founded in 2009 and garnered some attention recently when the paragon of investing caution, Bill Gates, bought in (Nimbus press release). The company uses the LLC model in which each drug development program is in “its own dedicated subsidiary” that can be acquired outright through purchase “without the costly infrastructure, operating burn rates, and downstream obligations associated with traditional acquisitions or licensing deals” (Nimbus Partnering). I learned about another virtual company recently as a volunteer mentor in the start-up accelerator program, MassChallenge, where I met Leoinide Saad, CEO and sole employee of Alkeus Pharmaceutical (Alkeus). The company is preparing to start clinical trials of a drug to treat a rare genetically-based retinal degenerative condition called Stargardt’s disease and the world’s leading cause of blindness, age-related macular degeneration. He’s taken his company to this point without professional (venture capital) investors and we talked about getting to that value inflection point without them.
So what do I need to start my virtual global disease LLC? First I need to find a drug prototype that:
- addresses a global need (primarily) to fulfill the company’s mission and a developed world need (possibly an orphan indication) to attract individual, foundation, and government funding;
- is backed by substantial in vivo data;
- is inexpensive to license, e.g., from a university that takes its responsibility as a publicly-funded institution seriously;
- has an advanced IP portfolio that doesn’t need a lot of cash to maintain; and
- has a definable and relatively cost-effective path to proof of efficacy.
Then I need to concoct a believable exit strategy, one that is likely to yield a drug being launched. Finally, I need to add in a chunk of my savings, a couple years of my life, pro bono advice from all those I have helped out over the years, support of friends and family, and hope for the best.