Beyond borders: biotechnology industry report 2013

Adapting to a rapidly changing environment

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Adapting to a rapidly changing environment, by Denise Pollard-Knight, PhD, Managing Partner, Phase4 Ventures

Denise Pollard-Knight, PhD, Managing Partner, Phase4 Ventures

Things are changing quickly in our industry. Payers are increasingly requiring evidence of health outcomes. Over the last five years or so, biotech companies and investors have therefore become more focused on demonstrating economic value — for instance, by showing survival benefit for an oncology drug or, increasingly, superiority to branded or generic competitors.

In the past, chemistry, manufacturing and control data was the area where we were most focused, but we now focus more on data related to reimbursement. Even with our earliest-stage preclinical investments, we want to understand the overall competitive landscape: payer attitudes, competing products, the size of the market, etc.

Flexibility and differentiation

Payers’ needs are not the only things that can change rapidly. Even as companies conduct research and development, the standard of care is likely evolving in the background. Clinical trials therefore need to be designed flexibly, so they can adapt to changing market conditions. In oncology, for example, new therapeutics are being approved all the time — often by combining two or more medications.

If you are in Phase II trials and can’t add an arm to your study to incorporate a new therapeutic, your study may be out of date before it’s completed. You might have to adjust to other surprises as well — some compounds might get delayed and others move faster than expected, or you might learn about products you didn’t even know were in development.

Even if they are not doing a head-to-head trial, companies still need to consider how they will differentiate their products in a Phase II study. This might be done through biomarkers or other means of identifying a niche for your product (e.g., relapsed patients or a subset of patients who can’t be given a therapeutic because of particular side effects). It might be achieved through flexible dosing. Or you might demonstrate lower toxicity for a new cancer drug — allowing providers to safely administer higher doses.

All of this requires different skill sets and approaches to due diligence. In addition to scientific advisory boards, we speak to lots of clinicians. We sift through what we’ve learned and then have a broader discussion with the board and some shareholders about what size study we can do from a finance and timing perspective. We bring together real experts for each indication and carefully thrash out clinical design protocols — especially for Phase II studies.

A key step in this process is to put yourself in the shoes of the larger company in a partnering deal and ask what differentiation the buyer or in-licenser will want to see. Because, as would be expected, pharma companies are much more focused on pricing and reimbursement and the product differentiation required to succeed. One consequence of this trend is that most mergers and acquisitions are now based on earn-outs and milestones tied to sales. Another is that the bar has been raised on what big pharma companies expect from Phase II data.

If you sign a partnering deal at the end of Phase I, for example, the complexity of what you will be asked to do in Phase II is a lot more than you might have expected five years ago. If you’re in oncology — or in even some other indications — identifying biomarkers has become the new standard. And so you have to start developing those biomarkers pretty early in Phase I to have them ready to go into Phase II.

Keys to success

To succeed in a rapidly changing competitive environment, companies need to keep an eye on market developments and have their wits about them. Regardless of what product you are developing or your stage of development, the key is to understand the changing standard of care, what will differentiate your offering — and what it will take to get there.