Passage to prosperity
- Article 2 of 7
- iSight, July 2003
Successful clinical trials are the key to creating biotechnology companies with lasting value, but the clinical trials process is fraught with danger. Companies that do not communicate their results effectively could fall into the chasm.
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For many biotechnology companies, reaching clinical trials, or being ‘in the clinic’, is almost an end in itself. Gone are the days when platform companies were heralded as ‘hot’ because they could “mitigate against product risk” – a quote from only four years ago. These days, note company directors and many investors, it is all about products – ‘therapeutic’ products and nothing else.
Therapeutic blockbusters, or at least profitable niche compounds, represent big revenue opportunities. It is, therefore, not surprising that many biotechnology companies are pursuing that course.
But not all the answers provided in the course of conducting clinical trials are black and white – and those companies that pin their hopes on certain trials at a certain point in time producing exactly the results they were looking for are bound to end up disappointed. What is important is that companies learn to communicate their results effectively, says Sabine Kaiser, investment director, Healthcare, 3i Germany. There is a real art to communicating ‘grey’ results at the right time, she says: “Companies need to learn how best to make their results presentable and how to time their communication.”
Most companies have now moved towards a product-driven business model and have focused on getting their own products to the market – or only partnering after phase II clinical trials when their products have shown their effectiveness and have created substantial value.
Arakis, a drug developer based in Saffron Walden in the UK, for instance, prides itself on the fact that it has, so far, not had to partner with any big pharmaceuticals to get its products to phase II trials. “That’s where the most value is,” says CEO Ken Cunningham. “We don’t want to dilute it for our shareholders.”
With the same goal of maximising value in mind, Vienna-based cancer immunotherapy company, Igeneon, has been pushing its lead project into phase III without a partner. “With sufficient focus, a smart clinical strategy and the commitment of key investors, reaching phase III is doable even for a small biotech company,” says CEO Hans Loibner.
CLINICAL NECESSITY
Just getting to clinical trials is an achievement in itself. Those venture capitalists that are still investing in early-stage biotechnology opportunities look at ‘time to clinic’ as a crucial factor in their investment decisions. As a result, reaching the ‘clinic’ often triggers milestone payments from existing investors. And for those companies that want to be able to attract new investors, it is almost a prerequisite.
However, reaching the clinical stage brings new challenges to biotechnology companies, their corporate partners, their investors and the financial community as a whole.
Many of these challenges relate to the internal capabilities of the company. “What made the company successful until now is different from the skills, organisation, resources and experience needed for the clinic,” says Thomas Pollare, investment director, 3i Sweden.
“Research-driven organisations must become development-driven ones and they have to manage a large network of external partners and service providers,” he says. “All of this must also be done to strict industrial standards, and brilliant research must be channelled into a standard pharmaceutical product development process.”
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