Viewing Risk Through a Medicines Co. Lens
The Medicines Co. (TMC) has pioneered a strategy of in-licensing otherwise unwanted-compromised--late-stage products that it can acquire for little money and then, moving quickly to approval, drive sales through Phase IV positioning trials. The financial equation works for investors who are realizing that, as Big Pharma interest in signing large-dollar discovery deals wanes, they will now have to fund both technology and product development. That dramatically changes the risk/reward ratio which made investing in discovery-based biotechs worthwhile-and makes a development strategy like TMC's more attractive. The strategy is hardly risk-free: many compromised products are compromised because they don't work; and even when they do, the developer doesn't know a priori in which indications they do work-one of the reasons the company almost failed.
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The Medicines Co. stands to lose $1 billion in revenues from a clerical mistake in a patent extension request; the company, arguing patients will lose, continues to ask Congress to help fix it. But in a Democratic congress, the fight is distinctly uphill.
The fundamental business model for platform technology companies hasn't changed: Build the platform, and apply the resulting discovery capability to internal product development while leveraging its value to raise cash or barter for resources. But investors today prefer companies that can articulate a short route to proof-of-concept data,. And unlike 6-10 years ago, more start-ups are now being formed around clinically savvy drug development teams that are better able to select alternative paths to near-term opportunities--be it in-licensing or even M&A--that allows companies greater flexibility.
One way for Pharma to bolster its lagging growth would be to capture some of the value of the compounds it has shelved during development. Start-ups have created technology platforms and systems biology approaches and are in place to reposition such stalled drugs in new indications, or to reformulate marketed compounds to extend the product life cycle. Nonetheless, drug firms largely remain reluctant to part even with compounds they have decided not to develop themselves. Drug makers say the issue is resources, but it is also desire. Until Big Pharma further loosens its grip on its compounds that are stalled in development, in-licensing will remain an opportunistic, case-by-case exercise, and biotechs must accept the fact that access will depend largely on advance insider knowledge of pharma firms' pipelines.