Drug development is increasingly expensive. The estimated average investment required for developing a novel drug to the market varies from hundreds of millions to billions of euros depending on who you ask. Whether you blame it on the tough regulations, poor harvest of low-hanging fruits, or an inefficient industry, it is definitely a shipload of money.
Ironically a simultaneous trend is a clear decrease in the approval of drugs with roots in Big Pharma, i.e. in large pharmaceutical companies. In other words: Drug development is more expensive than ever, yet most drugs are initially developed by small (read: poor) development companies and biotech startups.
That doesn’t make any sense. So how does this industry work?
Inventions leading to novel drug candidates are typically made at universities. Their inventors believe in their potential. Maybe also a couple of group members do believe. The rest of the world remains skeptical as similar inventions are made by the thousands. So the only way forward is often a startup company with some seed funding to start early preclinical development.
If everything goes well (which is exceptional in drug development!) the drug candidate may make it to early clinical studies and, with deep-pocket investors, even reach a clinical proof-of-concept. Now, after spending some dozens of millions of euros the game will get bigger – and so will the interest by Big Pharma. Did someone mention clinical proof-of-concept? I saw it first! Well I am Bigger Pharma than you!
Because that’s how the Big Pharma commonly maintains their clinical development pipeline. Their scouts are snooping on interesting biotech startups, analyzing posters at scientific conferences, reading articles and press releases, doing their best to acquire or in-license assets that fit their strategy and risk profile.
In the meanwhile the biotech companies are of course doing their best to get heard of by Big Pharma. The small companies (and their investors) are looking for a large partner to maybe provide the missing X hundred million euros for pivotal clinical studies. It’s really just like romantic mating of picky singles, to the extent that an entire dating industry has emerged: There are Biotech x Big Pharma speed dating events (BD conferences), BioTinders for matchmaking, and the industry definitely provides relationship counseling for singles (BD consultants). And trust me, you seldom get married at first sight. Dating can take years. (It is considered ethically acceptable to date several partner candidates simultaneously.)
Finally, if a match is made in heaven, the dreams of the small biotech company come true while the large pharmaceutical company can boast with strengthening its pipeline. There is of course a prenup: For instance, the biotech could receive 50 million euros at signing of the partnering agreement, 200 million if pivotal clinical study is launched, another 200 million if market approval is reached, and then maybe hand over to the Big Pharma who would market the drug and continue paying royalties to the biotech based on actual sales.
Sounds like simple and fun? See you at the next biopharma partnering conference!
Herantis has two clinical stage drug candidates based on globally leading science, currently in or approaching clinical proof-of-concept studies in Parkinson’s disease and secondary lymphedema. Herantis has not signed any partnering agreements on its assets.