By Emily Walsh, Ph.D. & Bill Gruber
First published online in Bioentrepreneur, 10.1038/bioe.2011.11, Nature Publishing Group, a division of Macmillan Publishers Limited.
Comprehensive due diligence on research constraints, regulatory and reimbursement barriers, as well as patient and physician preferences is important to increase the chances of success for a life science business.
As many of us know, either from urban legend or through experience, 9 out of 10 startup companies fail. Although we tend to blame pressures outside the industry, such as the recent economic crisis, for such failures, in truth, unfavorable business conditions may just accelerate the failure of companies destined to falter anyway. One avoidable reason for failure is that entrepreneurs do not do their homework on the external forces that affect the adoption of breakthrough science in their R&D programs. Instead, they lock onto an idea or technology and become mesmerized by its uniqueness rather than its utility—a trap that snares many.
One factor that distinguishes successful entrepreneurs from others is an ability to look not at the technology or therapy they hope to bring to patients but at the business they are creating in the process. History shows that most startups do not become fully integrated companies; instead, they require partnerships or an acquisition to fully realize their potential. Though there are differences in developing a drug and device (Box 1), you need to start with the end in mind, meaning that you need to take a prospective partner's view by imagining the types of questions they will ask as they determine whether to partner with or purchase your idea, company or technology.
Think beyond technology
Historically, many academics have considered industry, at best, as a necessary evil. And it is common for us to hear our friends in academia wistfully say that science and discovery should be done somehow outside the influence of business principles.
We completely agree that this is a fair position to hold in a world in which business principles are completely misaligned with potential health impact. However, the US healthcare system, while arguably deeply flawed, is converging through various market and governmental forces on models in which therapy, need and reimbursement are increasingly aligned. Also, this principled refusal of business considerations, although satisfying on some level, may ultimately prove counterproductive to the goal of delivering new therapies to patients.
So for the entrepreneur, it is imperative to imagine the needs of not only the ideal patient (the one with the biomarker or clinical presentation that perfectly fits what the technology can do) but also that patient's family, insurance company and doctor. But do not stop there: also consider that doctor's office and support staff, whether they have the training to deliver the therapy or the facilities to do so. Then take those considerations and multiply them by the 1,000 or 100,000 or 10 million patients you hope to reach, and include in those patient populations the vagaries of humans interacting with the healthcare system (compliance issues, ability to understand their disease and/or treatment, comorbid conditions, and so on).
Do not let these big questions paralyze you or dissuade you from moving forward. In truth, you will not need to have all the answers anyway. However, at the very least you must understand and appreciate all the open questions. Even if it is true that 'somebody else can figure that out', this sort of attitude will certainly raise red flags to any partner or acquirer. They'll walk away from your innovation perhaps without fully understanding it, and certainly they'll assume there are more gaps in your plan beyond the one they have just discovered.
Doubtless this exercise is not for the weak of heart. There will be many gaps and risks that you will find as you consider the full path to a patient, but with your deeper understanding you will be taking the first step toward ensuring that your therapy reaches patients one day.
Research uncertainty
Perhaps the greatest risk you will face as an inventor and entrepreneur building a business is uncertainty about when to stop exploratory research. Stop too soon and perhaps you miss a key capability that would change the development path. Stop too late and you will have blown through all your cash and have nothing left to bring your therapy to the clinic, and your intellectual property will be on its deathbed.
At its core, the debate regarding research and the influence of business is that research should not be constrained by time. This is a fallacy. Research should be time bound to force prioritization of ideas and to provide a sense of urgency for proving a hypothesis and moving on. The key to making this happen is to break the research down into smaller pieces rather than trying to tackle an enormous multivariate project with open-ended objectives. This does not preclude a researcher reacting to new data and changing paths appropriately by any means. In fact, as a researcher discovers new variables that have an impact on the primary objective, they should address them in turn. This may call for a re-scoping of the project or a reassessment of priorities the team needs to be working on.
An even better approach is to understand all the possible data outcomes before an experiment begins and plan a path (including estimating resources, funds and expertise required) for each likely contingency. Although you may not be able to a priori predict every outcome, you can imagine the best and worst likely cases. Often this planning exercise will improve the design of the study at hand and allow you to shorten timelines, decrease iterations and limit the cash required early on for a new technology, thus reducing the greatest risk overall.
Regulatory risk
Between recent changes in both guidelines and practice at the US Food and Drug Administration (FDA), the regulatory risk with every project has gone up considerably. The FDA is now often requiring new testing and documentation never required before, in part due to pressures they feel in their role as approvers of new technology and in part because we have a deeper understanding of the risks of new technology. The impact on the entrepreneur from this is longer timelines, greater costs and complexity, and more uncertainty. Understanding the regulatory requirements and monitoring the changing requirements going forward is critical to managing your regulatory plan and reducing risk.
Regulatory risks can challenge the development of both devices and drugs. For drugs, it commonly occurs that diseases that were once underserved orphans, with expedited regulatory paths to market, will have more complex and lengthy pathways should a competitor's breakthrough technology make it to market first. Recently, there have been a couple of high-profile examples of this scenario. In one such case, a therapeutic with an impressive efficacy profile was met with substantial additional safety hurdles because it was the second product to market—the medical need was no longer unmet. In addition to these regulatory requirements, these follow-on orphan drugs are facing slower adoption from doctors, who are less willing to cease a known efficacious and safe therapy for a possible better treatment with unknown side effects in the case of a particular patient.
Challenges in patient practice
It is also important to understand how your product's target disease or condition is treated today. In part, this is because the reasons why, how and when certain treatments are administered could be based on obvious medical and/or biological necessity or on more nuanced practice-based considerations. Every aspect of delivering the therapy can have an impact, from training the physicians who conduct the administration to turf battles between various specialties to concomitant treatments for a particular patient population.
For drug therapies, these challenges are increasingly complicated in the aging population. This requires balancing not only side effects that might exacerbate comorbid disease but also drug-clearance mechanisms that might result in over- or underdosing of concomitantly prescribed medications. As a result, your drug's profile might require additional and costly clinical studies in the relevant population to prove its safety before marketing.
Competing specialties present yet a third type of challenge. For example, patients with peripheral atherosclerotic disease can be treated with balloon angioplasty and stenting by the vascular surgeon, interventional cardiologist and the interventional radiologist. Each of these specialties has different imaging equipment and skills based on where they were trained and who trained them. Referral patterns are also crucial, as the vascular surgeon and cardiologist see patients in their office and usually have longer-standing relationships with their patients. The interventional radiologist does not typically have an office and expects to get referrals from the other two specialties or primary care doctors. So if you plan to design a product and sell it to the radiologist, you may miss a huge portion of the market, as the vascular surgeon and cardiologist may not like your approach.
Of course, competing with a specialty's current business can also create challenges for a seamless entry into the market. Imagine a disease that is often primarily referred to and treated by a surgical specialty. Developing a new prophylactic drug in such an indication might seriously undermine the surgical revenues of their practice, and thus prescription increases might be slow unless an informed populace of patients is requesting the drug. This might dramatically change your plan for how best to get the drug to patients.
Execution
Execution risk exists at every point along the development path for drugs and devices; however, the greatest timeline and cost impact occurs during the clinical development phases.
Imagine the following scenario: your breakthrough technology that will inevitably revolutionize medicine is passing every animal model test with flying colors. Your first project that treats a specific disease indication is 12 months ahead of all others. The disease in question is a rare but deadly seasonal indication with no standard geographic localization and no predictive test to identify susceptible patients. Moreover, imagine that patients are diagnosed by everyone from the emergency ward to a primary physician to a range of specialty doctors. What do you do next? In some cases, the best approach might be to wait 12 months for the next indication to be ready for prime time and hope that no competitors beat you to market on that one.
Many entrepreneurs assume that the scrutiny that investors apply to indication selection has to do with wanting to maximize market opportunity. Although that is certainly part of the equation, they are also desperate to understand whether the trial is technically achievable. If you have a simple path with a great technology that will be disease modifying, but you will need to screen 100 patients for every 1 patient you enroll, then you could be on a very long and very costly path to approval. That said, for a broadly applicable technology, such a path might be absolutely acceptable for second and third programs after the technology is validated. But proving your technology in the clinic (rather than in animals) is the true goal after all, isn't it?
Other risks
Spend the time up front to do the homework before you start designing your therapy. The more questions you can ask about the various people who will interact with your product, the better. You should interview as many potential users as possible. Make sure to listen to what they are telling you rather than to what you want to hear. If they think your idea is harebrained there is a chance you could be missing something. You should also speak with the nurses and staff who would interact with the device or drug you are developing. Many people fail to realize that although the doctors may love your technology, if the nurses hate it because it takes a long time to prepare or administer, or if it is too complex for them to learn, or the packaging takes a pro wrestler to open, then you are destined for failure.
Another issue regarding technology or drug adoption is payment. How is the treatment going to be paid for? Are there existing payment codes or not? Will the insurance companies or Medicare pay for your hot new solution? Understanding this is imperative in today's economy. Even if the drug is not covered today it could be covered in the future; however, the entrepreneur must realize that the benefits of the treatment must be very compelling to win the economic justification over a current, cheaper technology.
Once you feel confident about the need and the economics, it is important to seek out the smartest people on the planet to help you. This may seem silly and demeaning, but you need to realize that you are unlikely to have the specific expertise or experience to expeditiously solve every problem. Rather, finding people who can solve these problems is your job. Founders often have a blind spot, and that results in a 'not invented here' mentality that puts artificial constraints on the company and increases the risk of failure. What you should realize is that there are experts all over the place with fantastic experience and knowledge on the exact topic or problem you are trying to solve. Better yet, they are willing to consult for just the amount of time you need them and many times will work for equity or a reasonable hourly rate. Do not let your ego get in the way of success. Look outside! You will be surprised with what you find.
Do your homework
You should talk to industry experts before you ever start a company. How can you plan a trip if you do not know where you are going? The industry experts can help you define the problem. Although they think they also know the solution, you should be cautious. A market of one person will not allow you to raise money, build a company and change the world with your product. Talk with potential users early and often, and make sure you aren't just speaking with the key opinion leaders that do thousands of these treatments a year. The needs of the average doctor are usually quite different than those of the world-renowned thought leader.
In the end, a solution looking for a problem is a waste of time, energy and valuable resources that could be used to solve a real issue that has no solution. So start with the end application in mind and build something that solves that unmet need. This will not only simplify the development of your innovative technology but also serve you well when embarking on an acquisition or partnership process.
Emily Walsh, Ph.D. is a Principal Consultant at Halloran Consulting Group in Waltham, Massachusetts. Bill Gruber is CEO at Solace Therapeutics in Framingham, Massachusetts.
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