From The Editor | August 12, 2014

When To Invest In Protein Production: The Risk-Reward Calculation

By Louis Garguilo, Executive Editor, Outsourced Pharma
Follow Me On Twitter @Louis_Garguilo

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A message to biotech start-ups, scientist-entrepreneurs and life sciences organizations banking on your exciting protein-based drug-discovery programs and technologies: When it comes to the timing of your investment, if you don’t pay now, you might pay (much) more later.

Outsourced Pharma spoke with service providers about the decision-making process regarding the timing of crucial—and at times hefty—investments in development and production of proteins. Above all, they stress the decision to put your money to work upfront or hold off investment until further clinical validation will follow you for a long time.

Investment strategy will influence the timing and progress—or in some cases, lack of progress—of your overall program. It can also affect your chances for out licensing down the road (more on that later). This may not be a unique business conundrum, but for an early-stage life sciences company, the risk-reward stakes are high.

In A Hot Space (And The Hot Seat)

The promise of biologics investigation and ultimately commercial biopharmaceuticals and biosimilars is driving innovative platforms and technologies for protein research and reagents, purification and expression, and development and manufacturing advancements. There is a palpable elevation in motivation at both the scientific and C-suite level to move protein-based programs into the pipeline.

According to Genetic Engineering and Biotechnology News, the three top-selling drugs in 2013 were biologics: AbbVie’s Humira with global sales reaching $10.65 billion; J&J/Merck’s Remicade at $8.94 billion, and Genentech/Biogen Idec’s Rituxan at $8.92 billion. Cellcutluredish.com reports 8 of the top 15 best selling drugs in 2013 were biologics. Paul Bridges, worldwide head of Parexel Consulting, has said that by 2016 he expects even more biologics such as protein-based drugs will populate the top 10 list.

The promise of the role of proteins in new drug development has been a long time coming. For example, years ago, a first wave of monoclonal antibodies (MAbs) were disappointments, both clinically and economically. Some drug makers invested in expensive manufacturing infrastructure for a demand that failed to materialize.

Today as well, the reality and the hope can clash in the lab and clinic. Protein-based drug companies of all sizes look to rapidly identify a robust host strain that can be sufficiently and reliably scaled for production. Identifying a host strain producing high titers of soluble, active protein is critical to minimize long-term cost of goods, and avoid potential regulatory delays due to poor quality or insufficient productivity of the selected host. The hope is to meet analytically rigorous specifications of protein quality, yield, and potency that lead to the rapid development of a clinical and commercial stage manufacturing process.

But companies must decide relatively early in the process if a significant investment should be made or not. Opinions differ, and we are told, are often based on an individual decision-maker with some past experience. For all early stakeholders, though, and for potential partners and suitors, risks and their mitigation options need to be clearly understood.

Option 1: Limit Upfront Financial Risk

No surprise the first option regarding protein production is to take the least expensive approach—and usually the one of least internal resistance—early in the process. Despite initial enthusiasm for new programs, funds may be low, and as we all know failure in the clinic is an unfortunate but common part of the business.

Minimizing instrument and equipment purchases, streamlining contracts with providers, and limiting time spent on robust development and quality testing can save significant upfront investment dollars and still provide the requisite amount of material to conduct initial clinical trials. In a relatively short amount of time and limited cash outlay, a company potentially gains enough data to bolster internal interest if competing for dollars with other programs, provide fodder for VC investment, and gain visibility for shopping-out a program to pharma or other potential acquirers or partners.

There are risks, though. The most obvious is that the protein, lacking further study before heading to trial, may not meet desired quality or safety attributes. This could, in fact, negatively bias the trial, in a way setting yourself up for failure (instead of doing everything to gain initial success). As troubling, this quick-and-easy approach could result in a substance profile that then differs at later phase study. It may also preclude the best production process for a steady supply of material in the future.

However, some startups or academia-based investigators may feel they have no choice; they simply do not have the funding to do otherwise at an early stage. Moreover, some companies (big and small) are primarily looking for verification that the protein will perform as expected. Perhaps borrowing a page from the “fail fast” approach of their small molecule brethren, if the protein doesn’t perform as expected, companies can opt out of the program quickly without significant investment. Holding onto the purse strings can, in hindsight, look like a wise management and business decision if the program fails.

Another “positive” here is that less-than-desired initial results in the clinic might point the way to adjustments in strategy, such as moving to a promising backup program. And as mentioned above, even with the protein under-performing, there is at least some potential the increased program visibility and additional data might entice a partner with a similar program and/or deeper pockets.

Hopefully, though, positive results are returned from the clinic. At this point, companies may find it easier to fund requisite toxicology study and further process and development work to move to initial human trials. Now no compromise on quality can be in the thought process, and the scaling up of production of material is also a major consideration.

However, since this first option is more a fear of failure than a plan for success, there is the potential that even good results can have an unfortunate side. If the protein is not of sufficient titer, quality, or scalable under stringent cGMP standards, you might need to re-engineer a cell line or strain. Providers of these services tell us it is not unusual to have to repeat studies just performed to demonstrate attributes of the new material. This going-back-to-go-forward scenario can end up a larger financial burden than companies would have carried upfront. Of course, there is no guarantee the next trial returns more favorable results.

There is a final calculus for this option of least investment upfront. It is the expectation that the program will be acquired or partnered, so any subsequent investments for development et al. will be picked up by another company. Indeed, this is why funding is done in rounds and is a common business strategy in many industries: Get through proof of concept and then bring in more dollars.

But again, kicking the investment can down the road could have unintended financial repercussions. For one thing, the program may look riskier to a potential big pharma acquirer, who will discount the need for further investment when negotiating a licensing or purchasing deal. Conversely, savvy pharma will see the inherent value in a program that has taken on upfront costs and taken out more uncertainty. There is recoverable value in marketing a robust program for a high quality cell line or strain. And this brings us to Option 2.

Option 2: Risk Investing Early And Plan For Success

Many of the pros and cons for making upfront initial investments actually came out directly above. Fundamentally, you invest more early to ensure your best shot on goal in your initial trials and subsequent partnering activities. You enter the game with a better-known protein of higher quality and potential for robust scalability. You aim for results you can take major advantage of in your next phases, and if it is part of the strategy, at the negotiating table.

A provider we spoke with pointed to perhaps the weightiest of factors. “Although there are many considerations on many levels when making this decision, it ultimately comes down to perceived success for the project. If you believe the product you’re working on is going to be successful, you should consider making the appropriate investment upfront and saving yourself money, time, and effort down the line.” And, we might add, if you don’t have that faith, why should potential investors or partners (or in some cases even the FDA)?

Perhaps less straight-forward but also a question of personal perception is: Do more managers (or investigators) get booted from their jobs or experience a loss of confidence in their abilities because they planned for success or planned for failure, no matter the ultimate results of initial trials? The answer is certainly debatable, but your thinking on this may be revealing of the strategy you pick.   

The science of proteins and protein production applied to drug discovery, development and manufacturing has advanced over the years. This is both a cause and effect in the proliferation of startups, entrepreneur-scientists in academic settings, and others in this field who rely on outsourcing service providers to progress their programs. In turn, providers have improved their services and technologies—and success probabilities. One provider told us that nowadays, with the appropriate investments, it successfully provides customers high quality material in sufficient supply for clinical trials around 85 percent of the time.

Perhaps, then, the decision to invest more sufficiently upfront to give your program the best chance of success has grown easier to make. With larger companies excited by the prospects of protein-based programs, and data suggesting a sustained comeback in VC funding of biotechnology, here’s hoping if you need it, the funding is there to do so.

Editor’s Note: Topics such as this regarding development and manufacturing outsourcing strategies, analysis and advice will be discussed in a fully open format at the Outsourced Pharma West Conference and Exhibition, November 10-11 in San Francisco. The conference will provide the opportunity to learn from experts at pharma, biotechs and CRO/CMO. For some informative pre-conference discussion, visit the Outsourced Pharma West Blog.

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