Table 2: VPC model: advantages and disadvantages ADVANTAGES Decreased time to product

Efficiency and speed of decision-making Enhanced risk management strategy

Decreased overhead and infrastructure costs Simple and small cohesive governance team Flexibility of project management and strategy Focus on core competencies

Access to new technologies on demand

Mitigated financial risk Simple lines of management communication Increased pool of talented employees

DISADVANTAGES Reliance on third party providers

Risk of disruption to product development Information and confidentiality exposure Intellectual Property compromised or lost Time co-ordination management is complex Dealing with large number of providers Differences in corporate cultures of providers Pass through mistakes by other providers

know-how and abilities of VPC core management team are critical to the success of the company’s endeavours. The competence of the management team must contain extensive industrial and aca- demic networks. Individuals must possess profes- sional portfolio, plus project and alliance manage- ment skills. They must have expertise in risk man- agement and financial valuation strategies. Licensing and administrative skill sets are of vital necessity. The obvious but necessary communica- tion and motivational skills to manage third party service providers are also required for a VPC to execute successfully on this business model. The critical interdependence of skill-sets between every single team member is a final metric that must be constantly monitored and evaluated since “the sur- vival of a VPC might be endangered if any one team member does not fulfill his/her management obligations”18. The importance of an outstanding management

team also pays a determinant role in the analysis of a VPC by investors such as the venture capital community19. Investors appreciate the VPC model since the risk and potential reward is clearly defined in such a unique proposition. Costs are kept down, and minimising time to product devel- opment, efficiencies of decision-making and com- munication are all appealing facets of the VPC model. However, without an able and talented management team to execute on such important matters, the company is just a virtual set of ideas,

Drug DiscoveryWorld Summer 2019

which is a consideration that always plays a critical role in attracting investment funding.

Examples:Virtual pharmaceutical companies The VPC model is much more suited to start-up, emerging and small pharmaceutical companies. However, there is a participatory history of large pharmaceutical companies being involved in shap- ing the development of the emerging VPC sector. Indeed some, such as BernardMunos (formerly Eli Lilly), have argued that large pharmaceutical com- panies have pioneered such an approach and have been transitioning to a VPC model since the late 1990s8. Even discovery, the last bastion of large pharmaceutical company in-house effort, has been outsourced to a myriad of academic groups and smaller pharmaceutical companies.

Large pharmaceutical companies Vertex Pharmaceuticals is now a fully-integrated pharmaceutical company. But in 1989, when Joshua Boger founded the company, a VPC-like model was adopted and some of these practices continue today. During that evolution the company has successfully launched three commercially avail- able drugs, namely Symdeko, Kalydeco and Orkambi, all therapies for various forms of cystic fibrosis20. Furthermore, Munos has articulated that Lilly also was an originator of the VCP approach. In 2000 eLilly was launched in an

References 1 DiMasi, JA,Grabowski,HG and Hansen, RW. Innovations in the Pharmaceutical Industry: New Estimates of R&D Costs. J.Health Econ. 47, 20-33, (2016). 2 Prasad,V and Mailankody, S. Research and Development Spending to Bring a single Cancer Drug to Market and Revenues After Approval. JAMA Intern.Med. 177, 1569- 1575, (2017). 3 Paul, SM et al.How to Improve R&D Productivity: the Pharmaceutical Industry’s Grand Challenge.Nature Reviews:Drug Discovery, 9, 203-214 (2010). 4 Schuhmacher,A,Gassmann, O and Hinder,M.Changing R&D Models in Research- Based Pharmaceutical Companies. J.Transl.Med. 14, (2016). doi: 10.1186/s12967- 016-0838-4. 5 Naylor, S and Pritchard Jr, KA. Integrated Platform-Drug Discovery and Development Companies: Part II Comparative Analysis.Drug Discov.World, Spring Edition, 46-52 (2019). 6 Nicol,D, Liddicoat, J and Critchley,C.A Role forVirtual Biotechnology Companies in Drug Discovery and Development? J.Commer. Biotech. 19, 10-19 (2013). 7 Hutchison, J.Virtual Drug Development. Innov. Pharma. Technol. 94-99 (2007). blic/IPTSEVEN94NP.pdf. 8 Robinson, R.Virtual Pharma: Cheaper and Faster, but Doable? October (2008), article/2008-10-virtual- pharma/. 9 Forster, SP, Stegmaier, J, Spycher, R and Seeger, S.Virtual Pharmaceutical Companies: Collaborating Flexibly in Pharmaceutical Development. Drug Discov.Today, 19, 348- 355 (2014).

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