HEALTH NEWS

Big Pharma Creating Startup Firms to Do Drug Research

Written by Shawn Radcliffe on October 11, 2017

Pfizer and other pharmaceutical companies are investing in independent startups, hoping to find the next popular and profitable drug.

big pharma investing in start ups for drug research

Pharmaceutical companies are trying to capture a little bit of the startup magic.

Pfizer and several other firms have invested in a small spinoff company that will develop drug therapies for underserved patients.

With $103 million in initial funding, SpringWorks Therapeutics will focus at first on therapies for post-traumatic stress disorder (PTSD) and three rare forms of cancer.

Pfizer owns the rights to the drugs that will be tested.

This is good news for people with diseases that are harder to treat.

But it may also be a sign that Big Pharma is willing to step outside the bureaucratic box in search of the innovation that startup companies are so well known for.

Biotech startups focused on drug development aren’t new phenomena.

What’s different about this particular startup is that it’s heavily financed by large pharmaceutical companies.

Different… but not unique.

Another startup, Symic Bio, received $73 million in funding over the past three years, including money from pharmaceutical company Eli Lilly.

Still, for each of these, there are dozens more startups that see pharmaceutical companies as the pot of gold at the end of the rainbow, not at the beginning.

Small but agile

Getting a new drug into the hands of patients who need it isn’t an easy thing.

“Most people don’t know the painstaking labor and efforts that go into the development of a drug from inception to the patient finally taking it,” said Dr. Jeffrey Hausfeld, chairman of the board and chief medical officer of BioFactura, a pharmaceutical startup that develops and commercializes biosimilar drugs.

It can take years for scientists to identify or create promising new compounds for treating disease.

This is followed by several rounds of laboratory and clinical testing before the drug hits the pharmacy’s shelves.

Hausfeld pointed out that while the early stages of this drug development pipeline thrive on innovation, later steps like manufacturing and distribution depend more on consistency and reliability.

The large size of a pharmaceutical company — with tens of thousands of employees — can make it ideally suited for the later stages of the pipeline, but it may hinder its ability to come up with new products.

“Smaller companies are much better at innovating and potentially taking a product pretty far down the road as they grow,” Darryl Sampey, PhD, president and chief executive officer of BioFactura, told Healthline.

Startups — sometimes with only half a dozen employees — are built for creativity and agility.

“If somebody has a great idea,” Hausfeld told Healthline, “we have the ability and the nimbleness to check it out and do an experiment or two, and see whether or not our idea has merit.”

Some startups innovate by developing new drug compounds. Or by looking for new uses of existing compounds.

Others find better ways to move compounds through early laboratory and clinical testing.

If successful, a startup may hand off a promising new compound to a pharmaceutical company for further testing — in exchange for an upfront payment and royalties on successful drugs.

Or a larger pharmaceutical company may acquire a startup outright, along with its new compound.

This happened with San Diego-based Trius Therapeutics, which researches antibiotics.

In 2013, Cubist Pharmaceuticals acquired Trius and Optimer Pharmaceuticals for more than $1 billion.

The next year Merck spent $8.4 billion to buy up Cubist.

Big payout, big risk

For successful startups like Trius, the payout at the end of the R&D rainbow can be huge.

But successful startups have to overcome several challenges.

A big one is money.

“Startups have a lot less money, and they have to be very efficient in the way that they spend their money,” said Joseph Mallon, JD, PhD, an intellectual property attorney at Knobbe Martens.

“This is essentially the difference between them and a larger pharmaceutical company, which doesn’t have that life-or-death struggle over funding that the startups have,” Mallon told Healthline.

This is especially true for drug development, where doing science is expensive.

“It’s not uncommon for drug startups to make hundreds — if not thousands — of brand new compounds and test them,” said Mallon, “not knowing which one is going to have the perfect balance of properties to treat a human being without adverse effects.”

So, in order for a startup to succeed, it needs more than just great ideas. It needs a steady flow of cash.

“It’s my job to go out and find investors who are willing to take a risk on a small biotech firm that could potentially give them a nice return, even though there are no guarantees,” said Hausfeld.

Startups also have to find talented staff willing to work in a less stable environment, where employees have to be more independent and fend for themselves.

“Startups really appeal to creative people that are do-it-yourselfers. I think that’s where a lot of the great ideas come from,” said Sampey. “Those are typically people who take more risk and are looking for some kind of reward.”

Although the financial rewards of a new drug entice many to ride out the rough waters of the startup world, there are also other benefits.

“This is not easy. This takes a lot of time, a lot of effort, and a lot of money,” said Hausfeld. “Hopefully at the end it will benefit society by the advances that we make.”

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