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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Companies can take different approaches to this, either buying in expertise or outsourcing it. In any case, internal expertise must be built – in order to stay on top of the projects when they are being outsourced or partnered.
Of course, finding the right partner or partners for outsourcing is also key. Companies such as Covidence, based in Eschborn, Germany, manage clinical trials on behalf of other companies. What are the benefits of going to a smaller supplier? “We know exactly what the customer wants and we know all the problems that one can have as a customer,” says CEO Luc Opsomer. “Our motto is ‘evidence with confidence’.”
THE COMMUNICATION PROBLEM
But while the capability-related challenges of executing clinical trials are now broadly accepted, and managers of biotechnology companies, as well as their investors, are pushing to actively confront them, there is one challenge that is not often anticipated – communication.
Because so much emphasis is now being placed on the status and the advances of a company’s clinical development programme, the communication challenges have been compounded.
As Arakis director Andy Richards admits, one of the key components to any biotechnology company’s success is image. If a company gets its communication wrong, says Richards, it can expect “bad things” to happen.
Many of those ‘bad things’ are counterintuitive. For instance, the value attributed to a company by market analysts or investors can actually drop once compounds have moved into the clinic. The reason is that, when a product reaches the clinic, the valuation criteria of a company tend to narrow.
The value of an immature company is attributed to its early-stage pipeline or its technology. For more advanced companies, says Kaiser of 3i, this early stage is often completely disregarded in a bid to reduce the complexity of the valuation calculation. Instead, investors only look at the most advanced compounds. Suddenly, there is no longer any value attached to the early pipeline or the technology, while the risks associated with the more advanced compounds will be heavily scrutinised.
Interim results, in particular, can be very damaging if handled incorrectly and are something of a catch 22. On the one hand, they are very useful for showing whether or not a company is on the right track, and for giving essential answers about safety. Such results can also help to fine-tune further clinical trials and thus increase the likelihood of reaching a statistically significant result.
The problem is, by definition, such results are interim and ought to be treated as such. They can provide answers to certain questions and give hints as to future outcomes, but they are not meant to provide a final result. But for impatient investors looking to read the future, such ambiguity is difficult to handle. A company can, therefore, gain or lose considerably, depending on how it positions its interim results or even whether it reveals them at all.
Even encouraging clinical results, which should testify to the advancement of a company, can create problems if handled inappropriately. And if everything isn’t going to plan, it is even more important to take the right communication approach.
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