Business Models That Biotech Companies Employ

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Business Models That Biotech Companies Employ

  1. 1. Business Models That Biotech Companies Employ A. M. Pappas & Associates Francis J. Meyer, PhD Vice President, Enterprise Development KFBS Biotech Speakers Series November 25, 2002
  2. 2. Francis J. Meyer, PhD Vice President, Enterprise Development <ul><li>PhD, Pharmacology, University of Maryland Medical School </li></ul><ul><li>Senior Management of 2 medical product companies </li></ul><ul><li>Associate Dean for Technology Licensing, Johns Hopkins University School of Medicine, 10 years </li></ul><ul><li>Associate Vice Provost for Technology Development, University of North Carolina-Chapel Hill, 5½ years </li></ul><ul><li>A. M. Pappas & Associates, 2 years </li></ul><ul><ul><li>Life Science Venture Capital Fund Management & Advisory Services </li></ul></ul>
  3. 3. Presentation Outline <ul><li>Mission of biotechnology companies </li></ul><ul><li>Biotech business models with examples </li></ul><ul><li>Linking financial models with business models </li></ul><ul><li>Regulatory or ethical concerns that could alter the business model </li></ul><ul><li>How does a technology itself influence the business model </li></ul>
  4. 4. Mission of Biotechnology Companies <ul><li>Varies </li></ul><ul><li>Focus on Human Health Companies </li></ul><ul><li>Using a platform to develop drugs </li></ul>
  5. 5. Designing Drugs
  6. 6. Leads to Drugs
  7. 7. Drug Development - A High Risk Undertaking <ul><li>Time 10-15 years from discovery to market; patent life 20 years </li></ul><ul><li>Cost $700 million + (includes costs of failures) </li></ul><ul><li>Success 1 approval/ 5000 cmpds screened; 1 approval /5 cmpds entering clinical trials </li></ul><ul><li>Return 3 in 10 approved drugs recover development costs </li></ul>
  8. 8. Clinical Trials 1 approved 5 enter clinical testing 5,000 compounds screened; 250 enter preclinical Success Rate File NDA at FDA Confirm effectiveness, monitor adverse reactions from long-term use Evaluate effectiveness, look for side effects Determine safety and dosage File IND at FDA Assess safety, biological activity and formulations Purpose Additional post-marketing testing required by FDA Review process/ approval 1,000 to 5,000 patient volunteers 100 to 500 patient volunteers 20 to 100 healthy volunteers Laboratory and animal studies Test Population 1.5 3.5 2 1.5 6.5 Years Phase IV FDA Phase III Phase II Phase I Discovery/ Preclinical Testing
  9. 9. Life Science Development Cycle Discovery Development Lead Optimization Preclinical Development Human Trials FDA FDA Target Validation Assay Development Expression Sequencing Screening Target ID Synthesis Lead ID Compounds Natural Extracts HTS BIOLOGY PATIENT MANAGEMENT DIAGNOSTICS THERAPEUTICS COMMERCIALIZATION CHEMISTRY Genomics Proteomics System Pathways Cell Biology
  10. 10. Business Models for Human Health Biotech Companies <ul><li>Product Companies </li></ul><ul><li>Subscription Companies </li></ul><ul><li>Service Companies </li></ul>
  11. 11. Product Companies <ul><li>Product Company </li></ul><ul><ul><li>Develop products through clinical trial stage </li></ul></ul><ul><ul><ul><li>initial products partner with pharma </li></ul></ul></ul><ul><ul><ul><li>later products sell and market directly </li></ul></ul></ul><ul><ul><li>Examples: Inspire, Panacos, Signase </li></ul></ul>
  12. 12. Subscription Companies <ul><li>Subscription company </li></ul><ul><ul><li>Develop genomics databases </li></ul></ul><ul><ul><li>Pharma subscribes to databases </li></ul></ul><ul><ul><li>Subscription fees </li></ul></ul><ul><ul><li>No downstream royalties </li></ul></ul><ul><ul><li>Examples: Millennium Pharmaceuticals, Inc., Incyte Genomics, Inc., Celera Genomics Corp., GeneLogic </li></ul></ul>
  13. 13. Changed Model <ul><li>Most subscription companies have become fully integrated pharma or research companies </li></ul><ul><li>Wall Street less value for subscription-only companies </li></ul><ul><li>Examples: Human Genome Sciences, Inc., Millennium Pharmaceuticals, Inc., Incyte Genomics, Inc., Celera Genomics Corp. </li></ul>
  14. 14. Service Model <ul><li>Product is service </li></ul><ul><li>Full range of services to support pharmaceutical companies ideal </li></ul><ul><li>Technology know-how strong </li></ul><ul><li>IP less important </li></ul>
  15. 15. Service Model <ul><li>Contract Research Organization (CRO) </li></ul><ul><li>Full range of services to support pharma </li></ul><ul><ul><li>Preclinical </li></ul></ul><ul><ul><li>Clinical </li></ul></ul><ul><ul><li>Regulatory </li></ul></ul><ul><ul><li>Post marketing </li></ul></ul><ul><ul><li>Production/Manufacturing </li></ul></ul><ul><ul><li>Specialty Testing </li></ul></ul><ul><li>Staff, know how, databases are the assets </li></ul><ul><li>Examples: Quintiles, Piedmont Research </li></ul>
  16. 16. Service Model <ul><li>Chemistry Service Companies </li></ul><ul><ul><li>Chemical Libraries, Scaffolds,Synthesis </li></ul></ul><ul><ul><li>Staff, Know How, Databases, Libraries, IP, Robotics are the Assets </li></ul></ul><ul><ul><li>Examples: Albany Molecular Research, Aurora Biosciences, Tripos, Synexis Chemistry & Automation </li></ul></ul><ul><li>Smart Screening Companies </li></ul><ul><ul><li>Development and Use of Proprietary Models ( animals & others) </li></ul></ul><ul><ul><li>Staff, Know How, Databases, Models, IP, Robotics are the Assets </li></ul></ul><ul><ul><li>Example, EnVivo </li></ul></ul>
  17. 17. Tool Companies <ul><li>Product companies that sell tools, not as a service, but as a product </li></ul><ul><li>Example: Chip companies such as Affymetrix, Aclara, Caliper </li></ul>
  18. 18. Development Companies <ul><li>Development companies (Devco model) </li></ul><ul><ul><li>In-license compound, take it through Phase II or III clinical trial </li></ul></ul><ul><ul><li>Out-license to big pharma </li></ul></ul><ul><li>Downstream royalties </li></ul><ul><li>Example: Pozen Pharmaceutical, Inc., DevCo Pharmaceuticals, Inc., </li></ul>
  19. 19. Bioinformatics Companies <ul><li>Service & software company </li></ul><ul><li>Variation under subscription </li></ul><ul><li>Many to categorize </li></ul><ul><li>Examples: Bioinformatics Group, Incellico, Divisions of IBM, SAS </li></ul>
  20. 20. Linking Financial Models with Business Models <ul><li>Business model independent of source of capital funding </li></ul><ul><li>Example: AlphaVax, Inc. </li></ul><ul><ul><li>NCBC </li></ul></ul><ul><ul><li>SBIR </li></ul></ul><ul><ul><li>Foundation </li></ul></ul><ul><ul><li>Venture Capital </li></ul></ul><ul><li>There is a point when co.may not want venture capital money </li></ul><ul><li>Very early stage </li></ul>
  21. 21. Regulatory or Ethical Concerns That Could Alter Business Model <ul><li>Drugs </li></ul><ul><li>Diagnostics </li></ul><ul><li>Medical Devices </li></ul><ul><li>Research Reagents/Tools </li></ul><ul><li>Stem Cell Research </li></ul><ul><ul><li>Geron & Univ. of Wisconsin </li></ul></ul>
  22. 22. How Does the Technology Itself Influence the Business Model? <ul><li>Platform technology </li></ul><ul><li>Products </li></ul><ul><li>Services </li></ul><ul><li>Databases / Tools </li></ul>
  23. 23. Critical Factors in Start-Up <ul><li>Management Team </li></ul><ul><li>Business Model </li></ul><ul><li>Technology </li></ul>
  24. 24. A Company for Today <ul><li>Profile: </li></ul><ul><ul><li>Post Genomic </li></ul></ul><ul><ul><li>Rapidly Identify & Validate Disease-Causing Cancer Genes </li></ul></ul><ul><ul><li>High-Throughput Functional Cloning </li></ul></ul><ul><ul><li>Developing Data, Tools and Therapeutics </li></ul></ul><ul><ul><li>Treat Based on Individual Disease Profiles </li></ul></ul>
  25. 25. A Business Model for Today <ul><li>Profile: </li></ul><ul><ul><li>Combination of Subscription, Tools & Products </li></ul></ul><ul><ul><li>Logical Evolution of Income Producers Over Time </li></ul></ul><ul><ul><li>Strategic Partners from Day One </li></ul></ul><ul><ul><li>Several Sources of Cash & Conserve </li></ul></ul>
  26. 26. Today’s Fund Raising Climate <ul><li>Cash is Very Hard to Get </li></ul><ul><li>Only the BEST are Obtaining Funding </li></ul><ul><ul><li>BEST Management </li></ul></ul><ul><ul><li>BEST Business Model </li></ul></ul><ul><ul><li>BEST Technology </li></ul></ul><ul><ul><li>BEST Products </li></ul></ul><ul><ul><li>BEST Markets </li></ul></ul>
  27. 27. Conclusions <ul><li>Constant change will continue </li></ul><ul><ul><li>Biz models change to adapt to science change </li></ul></ul><ul><ul><li>Genomics, functional genomics, bioinformatics, proteomics, etc. </li></ul></ul><ul><li>Which model is best????? </li></ul><ul><ul><li>“ Morphing” </li></ul></ul><ul><li>Management team </li></ul><ul><li>First 8 years of genomics will pale compared to next 25 </li></ul>
  28. 29. A. M. Pappas & Associates If interested in additional information contact: Fran Meyer at 919-998-3314 or fmeyer@ampappas.com
  29. 30. Pappas Ventures I Portfolio <ul><li>Aclara BioSciences (Nasdaq: ACLA) (Mountain View, CA) </li></ul><ul><li>Arena Pharmaceuticals (Nasdaq: ARNA) (San Diego, CA) </li></ul><ul><li>ArgoMed (Cary, NC) </li></ul><ul><li>Bio-Informatics Group (Cary, NC) </li></ul><ul><li>EBM Solutions (Nashville, TN) </li></ul><ul><li>Elitra Pharmaceuticals (San Diego, CA) </li></ul><ul><li>Nereus Pharmaceuticals (San Diego, CA) </li></ul><ul><li>Panacos Pharmaceuticals (Gaithersburg, MD) </li></ul><ul><li>Reprogenesis (acquired by Curis) (Nasdaq: CRIS) (Cambridge, MA) </li></ul><ul><li>Signase (Houston, TX) </li></ul><ul><li>Variagenics (Nasdaq: VGNX) (Cambridge, MA) </li></ul><ul><li>X-Ceptor Therapeutics (San Diego, CA) </li></ul>
  30. 31. Pappas Ventures I Portfolio <ul><li>Aclara Biosciences </li></ul><ul><li>biochip company developing microfluidic lab-on-a-chip technology with applications for genetic analysis, high throughput drug screening and clinical diagnostics </li></ul><ul><li>Arena Pharmaceuticals </li></ul><ul><li>biopharmaceutical company that has developed a technology to accelerate the development of lead compounds targeting G-protein coupled receptors </li></ul><ul><li>ArgoMed </li></ul><ul><li>company developing a proprietary, water-induced thermotherapy device and technique to address the non-surgical treatment of benign prostatic hyperplasia (BPH) </li></ul>
  31. 32. Pappas Ventures I Portfolio <ul><li>Bio-Informatics Group </li></ul><ul><li>company developing an innovative, proprietary 3-D biochip to enhance the capacity, efficiency, accuracy and automation of gene screening; NC State University </li></ul><ul><li>EBM Solutions </li></ul><ul><li>healthcare information company that provides evidence-based disease treatment protocols via the Web to physicians and patients; Duke, Emory, Mt. Sinai NYU, OHSU, Vanderbilt and Washington University </li></ul><ul><li>Elitra Pharmaceuticals </li></ul><ul><li>antimicrobial functional genomics company focused on the identification, development and commercialization of novel antimicrobial compounds that target essential gene products of pathogenic organisms </li></ul>
  32. 33. Pappas Ventures I Portfolio <ul><li>Nereus Pharmaceuticals </li></ul><ul><li>drug discovery and development company focusing on marine environments as a source of small-molecule compounds for the treatment of inflammation, cancer, and infectious diseases; Scripps Institution of Oceanography </li></ul><ul><li>Panacos Pharmaceuticals </li></ul><ul><li>drug discovery and development company focusing on novel antiviral compounds targeting the treatment of HIV, RSV and hepatitis; University of North Carolina at Chapel Hill </li></ul><ul><li>Reprogenesis (now Curis) </li></ul><ul><li>company developing in vivo tissue augmentation/ repair products; MIT and Harvard </li></ul>
  33. 34. Pappas Ventures I Portfolio <ul><li>Signase </li></ul><ul><li>cancer therapeutics company developing novel, small molecule inhibitors of a critical cell replication pathway to inhibit tumor growth; M. D. Anderson Cancer Center </li></ul><ul><li>Variagenics </li></ul><ul><li>pharmacogenomics company with proprietary gene variance detection technology anticipated to streamline drug development </li></ul><ul><li>X-Ceptor Therapeutics </li></ul><ul><li>biopharmaceutical company focused on research in the field of orphan nuclear receptors; Salk Institute, Baylor College of Medicine, UT Southwestern and Ligand Pharmaceuticals </li></ul>
  34. 35. Pappas Ventures II Portfolio <ul><li>Calyx Therapeutics Inc. (Hayward, CA) </li></ul><ul><li>Cognetix, Inc. (Salt Lake City, UT) </li></ul><ul><li>Dynogen Pharmaceuticals, Inc. (Boston, MA / RTP, NC) </li></ul><ul><li>Incellico, Inc. (Durham, NC) </li></ul><ul><li>NuVasive, Inc. (San Diego, CA) </li></ul><ul><li>Peninsula Pharmaceuticals Inc. (Fremont, CA) </li></ul><ul><li>Plexxikon, Inc. (Berkeley, CA) </li></ul><ul><li>Sensys Medical, Inc. (Chandler, AZ) </li></ul><ul><li>Syntonix Pharmaceuticals, Inc. (Waltham, MA) </li></ul>
  35. 36. Pappas Ventures II Portfolio <ul><li>Calyx Therapeutics </li></ul><ul><li>pharmaceutical company focusing on oral therapies for diabetes and inflammatory diseases utilizing natural plan extracts with demonstrated clinical activity in humans </li></ul><ul><li>Cognetix </li></ul><ul><li>biopharmaceutical company developing peptide therapeutics for the treatment of epilepsy, pain and anesthesia; University of Utah </li></ul><ul><li>Dynogen Pharmaceuticals </li></ul><ul><li>neuroscience-based drug discovery and development company targeting novel therapies for genitourinary and gastrointestinal disorders </li></ul>
  36. 37. Pappas Ventures II Portfolio <ul><li>Incellico </li></ul><ul><li>bioinformatics company developing proprietary solutions that will significantly streamline biological and genomic data mining and processing </li></ul><ul><li>NuVasive </li></ul><ul><li>medical device company that has developed a minimally invasive system for spine surgery </li></ul><ul><li>Peninsula Pharmaceuticals </li></ul><ul><li>pharmaceutical development company focused on in-licensing and developing clinical stage pharmaceutical products. </li></ul>
  37. 38. Pappas Ventures II Portfolio <ul><li>Plexxikon </li></ul><ul><li>drug discovery company that utilizes a structural proteomics approach to discover novel pharmaceuticals </li></ul><ul><li>Sensys Medical </li></ul><ul><li>developer of non-invasive technology for blood glucose monitoring </li></ul><ul><li>Syntonix </li></ul><ul><li>biopharmaceutical company focused on the discovery and development of innovative drug delivery technologies for improved administration of protein drugs and vaccines; Harvard Medical School </li></ul>

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