Continued from page 13

10 Kamuriwo,DS.Timing in Business Model and Product Market StrategyTradeoffs: Performance Implications.Acad. Mgtment.Ann.Meeting Proc. 1, 1-6 (2009). doi: 10.5465/AMBPP.2009.44256471. 11 PricewaterhouseCoopers. Pharma 2020:Virtual R&D- Which PathTaken? (2008). life-sciences/pdf/pharma 2020_virtualrd_final2.pdf. 12VDDI Pharmaceuticals: http://www.virtualdrugdevelop (Website last accessed June 21st 2019). 13 Powell,DM and Schroder, P. Addressing Pharmaceutical Industry Disruptors with Virtual Partnerships, Corporate Renewal and Active Risk Management. IVEY Business J. July/August (2012). /publication/addressing- pharmaceutical-industry- disruptors-with-virtual- partnerships-corporate- renewal-and-active-risk- management/. 14 Restaino, LG and Seltzer, P. TheVirtual Pharmaceutical Company:A New Pathway to Market. BioProcess Intl. September 15 (2016). ufacturing/manufacturing- contract-services/virtual- pharmaceutical-company-new- pathway-market/. 15 Kim,M-S.The Hybrid Virtual Pharma Model: Focusing on Core Competencies and the Role of Academia. June 21 (2019). science-consulting/kineticos- articles/the-hybrid-virtual- pharma-model-focusing-on- core-competencies-and-the- role-of-academia/.

attempt to harness the potential of internet capa- bility in drug R&D. This led to the development of initiatives such as InnoCentive, Collaborative Drug Discovery and Chorus8. In the latter case, a small team was established to expedite projects from candidate selection to proof-of-concept data for Lilly’s Phase III pipeline18. Since its creation in 2002, Chorus has supported 72 global develop- ment programmes (57 Lilly and 15 non-Lilly), some of which have progressed to Phase III and as marketed products. Chorus has been able to run its operation with 25% of its budget as fixed over- head costs and 75%of the financial resources allo- cated to the external costs of the drug projects. Overall Lilly’s concept of virtual R&Dmet its orig- inal goals since the average success rate in Phase II improved significantly (54% Chorus versus 29% traditional Lilly) and its productivity increased by a factor of 3-10 compared with Lilly’s traditional clinical development model18.

Small virtual pharmaceutical companies The dynamics associated with small pharmaceuti- cal companies have changed dramatically over the past decade. It has been argued that the vertical integrated pharmaceutical model is finished. The future lies with VPCs and the world of virtual part- nerships13. As we describe in Figure 1, the VPC is at the core of a myriad of virtual partnerships, and Powell and Schroder have described the manage- ment team of a VPC as the “Orchestrators” of this process, predicated on the three pillars of collabo- ration, risk management and information trans- parency13. Debiopharm exemplifies a spectacular example of the successful application of such a model. The company was founded in 1979 and has operated a virtual R&D model in drug develop- ment and in-licensing of potential drug candidates with the aim of partnering for sales and marketing expertise. It has one of the highest revenue rates earned per employee across pharmaceutical com- panies with an estimated value of $2.3 million/employee. This metric is in stark contrast to that of large pharmaceutical companies that are in the range of $300-500,000/employee18 (see Table 1). Other examples of VPC companies are discussed

Continued on page 15 14

below and include: 1. Success: Puma Biotechnology was founded in 2010 and adopted a VPC model to identify and in- license drug candidates already in clinical develop- ment. In 2011 it licensed three HER-2 compounds from Pfizer, sprinting to a successful IPO and rais- ing $138 million. One of the licensed compounds, Neratinib, was approved by the USA FDA in July

2017, the European EMA in September 2018 and the Australian TGA in March 2019 for the treat- ment ofHer-2(+) breast cancer. The currentmarket cap of the company is around $550 million. NovoCardia was another VPC-like company that in-licensed drug candidates. The company was founded in 2001 and procured a late-stage drug candidate, KW-3902, for treatment of congestive heart failure.Merck acquired the company in 2007 for $350 million, but caveat emptor; the drug can- didate failed to meet its Phase III clinical trial end- points in 2009 and was abandoned, but the origi- nal founders and investors of NovoCardia had clearly realised success. 2. In progress: Tioga Pharmaceuticals was founded in 2005 and is based in San Diego. The company has raised ~$57 million, and has just two employ- ees, including the founder Stuart Collinson (Chairman and CEO). Currently its sole drug can- didate, Asimadoline, is in Phase II clinical trials for the treatment of pruritus associated with atopic dermatitis. Collinson was recently quoted as saying “I think we’ve taken this to an art form with the degree of virtualisation that we’ve incorporated into this particular company.”21 3. Uncertain: VDDI Pharmaceuticals is based in Tennessee, USA. It was founded in 1999 by Stephen Porter and has seven employees. It has raised $3 million in equity financing and $8 mil- lion from the US DoD. It describes its business opportunity as an “in-licensing and out-sourcing model”. The disease areas of focus include infec- tious and cardiovascular disease as well as oncolo- gy. It is unclear as to the degree of success that this company has experienced since there are no reports on its website of successful drug candidates being put through their in-licensing, outsourcing process. However, the company website is replete with extremely useful information and insight on the VPC model12. 4) Beginnings: ReNeuroGen LLC was founded in late 2016 and is based in Milwaukee Wisconsin. The company is currently funded by NIH grants and has three employees. It includes the two authors of this article, Stephen Naylor (CEO) and Kirkwood Pritchard (CSO), as well as Billy Day, who is leading the R&D efforts of the company. The company also has a number of business, scien- tific and clinical advisors (specific disease domain expertise). One of the primary strategic partners in its evolving VPC model is the Medical College of Wisconsin. The ReNeuroGen team has developed a novel model associated with a number of disease indications that can all be treated with a peptide library of candidates effective against the enzyme

Drug DiscoveryWorld Summer 2019

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64