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The power of small

Prof Michael Walker explains how biotechs have the tools to beat big pharma at its own game

Molecules under microscopeThat there is something wrong in the world of big pharma everyone seems to agree. Currently it is just not prospering. The in-house pipelines of some big pharma companies seem cursed and the scramble to license in promising treatments has become even more intense. Increasingly it seems that biotechs have the upper hand and will be able to beat big pharma in discovering new therapies.

This belief is common not only through the biotech sector but is also increasingly permeating big pharma itself. As an example, Trevor Jones spent years at Wellcome before joining the Association of the British Pharmaceutical Industry (ABPI), where, as director general, he became the public face of big pharma in the UK — but he now thinks it's a good time to be in biotech. Putting his money where his mouth is, Trevor joined Verona Pharma, a small, start-up biotech, as non-executive director of the board in September 2006.

Big pharma's big problems
But what is the basis for the spread of this belief? In short, the typical approach of big pharma towards developing new products is fundamentally flawed.

Big pharma can be very simplistic in thinking in terms of a 'one molecule for one disease' paradigm. Such an approach was fine in the last century, especially for bacterial infections, but with asthma, auto-immune disease, and complex disease such as many cardiovascular diseases, such a simple paradigm no longer holds true.

Using the single target molecule approach, big pharma has built massive emporia to target cellular molecules very specifically. It also built beautiful technology-driven machines to help it achieve this highly specific molecular targeting, but such an approach may not always work well.

Appreciating complexity
There's an air of arrogance in believing that because you have a molecular target for a drug, and you have a drug that targets it, then you have cured the disease. However, this is an over-simplified approach. Between the target and the disease there can be a huge complexity: after all, nature hides her secrets well.

In addition to this over-simplification, big pharma has also been seduced by technology into having a purely reductionist approach to drug invention. Drug discovery is a highly complex process: you can't just build a big machine that will spit out drugs at the other end.

This has led many big pharma companies to look to biotechs to fill the holes in their pipelines.

"This is a good time to be a successful biotech company because there's so much change going on in the pharmaceutical industry, and many companies are looking to improve their portfolios by in licensing," says Trevor Jones.

"In the past five to 10 years, big pharma has got itself enmeshed in restructuring and, in my opinion, its R&D functions have become far too separate in terms of therapeutic focus. Many have forgotten that the objective is to get products to the market by the most efficient means, rather than 'travel hopefully'.

"I believe that the re-organisation of big pharma by therapeutic sector has led to too much internal competition rather than the corporate challenge of getting products to market.

Sometimes this has hindered their ability to exploit external opportunities. Of course, most big pharma companies are looking to in license Phase Three compounds but there aren't that many around."

The ascendancy of biotech
In general biotechs, without the laurels (and rewards) of decades of producing blockbusters to rely on, do not suffer from these same problems. Consequently many are out-producing big pharma in terms of new therapies.

For example, my own company, Verona Pharma, will soon be able to lay claim to producing a novel form of asthma treatment, a new therapy for severe coughing attacks and a new range of anti-inflammatory agents derived from Scottish starfish and other marine sources.

People ask, 'how can a small, almost virtual, biotech company do things that big pharma isn't doing?'

The answer is, it comes down to whether you have a good basis for starting a company. Yes, you need a good business model — but it is more fundamental than that. The critical questions are, do you have a good drug idea? And more particularly have you got good people to make it happen?

Strong foundations
To have a successful company, drug ideas, drug approaches and good people should be at the top of the list. Many companies, both big and small, don't have that and that is their downfall.

Most people in charge of companies today are molecular biologists and have no first hand experience of physiology and the complexity of what happens in vivo. For example, they think they don't need whole animal pharmacology, but it's imperative that we understand what happens throughout the body in response to drug administration.

There is a common misconception that small companies are more vulnerable than larger ones by virtue of their size alone, but there is no real reason to believe that small is bad. Drug discovery is always risky because you can't guarantee you've got anything until you get there. But it is not hard to do the right things so as to give yourself the best chance of success. For example, at Verona our approach is scaleable and will allow organic growth, which is desirable in the long term.

Another problem in industry today is that there's no continuity or shared, learned corporate understanding. Nobody stays in companies long enough to learn anymore — they move on in a few years without sufficient experience and valuable insight. This can be avoided by taking on people as companies grow so the employees can learn the company's ways and the rationality of their approach.

Finding funding
"The last two years have been doom and gloom over the funding for the biotech sector," says Trevor Jones. Verona's approach to accommodating that is "not spending money on the big phase III activity that gobbles up the cash."

However, although in general funding has been hard to come by recently, I also don't believe that showering millions of pounds at a project necessarily produces the right answers.
It may seem strange, but a surfeit of money doesn't guarantee success in this game. Look at the billions that big pharma invests. When you look closely at big pharma, in some cases all it seems to have got for all its investment is great buildings, which in these times of austerity are increasingly found to be empty.

For us the discovery of new drugs is a love affair. It is an intellectual challenge. We still teach students science, how to do better experiments, all as an aid to a better understanding of drugs — new and old. That is still what drives us. After all, what drives most successful companies isn't just the money: it is a desire to create something — in other words, creativity is the motivation.

That creative urge is in all of us, yet it's downplayed in industry these days. But it's the science that drives us, and discovery is the pleasure and the reward.

Intellectual rabbit hunters
All of the points I've made here can be summarised in my fundamental criticism of big pharma, which is that it is no longer creative or intellectually curious.

There are millions of ideas out there and a plethora of information. However, one of the troubles with ideas is that industry only follows through with them once someone else has already proven them to be true. That, I suppose, is due to herd mentality and fear of the unknown.

Biotechs do not have to be constrained by these same limitations. We at Verona, for instance, see ourselves as some kind of intellectual rabbit hunters. Prof Clive Page, PhD is chairman and co-founder of Verona as well as one of the inventors of the novel anti-inflammatory polysaccharide (NAIPS) technology we are developing. He flushes out potential drug ideas; we all examine them scientifically, keep a few and shoot the rest.

If someone has got an idea for a potential drug in which the path to a proof of clinical concept is clear, and relatively easy, we will consider it as a potential project. It is true that there appear to be too many such possibilities for us to deal with, so we have to pick carefully. However, we are always out there, looking.

The trouble with drug discovery is that people are always hoping for the best and fooling themselves — we try to avoid this. If Clive brings in a rabbit, we have a cool, clear look at it. Most times we get out a gun and shoot it, but there is a skill set involved in making such choices: it does not need a magic formula.

Despite losing sight of its intellectual curiosity, even big pharma claims that its prime aim is to contribute to reducing human ills. This claim is good because if its aim is solely to make money for shareholders, the companies aren't doing very well at the moment, as they do not have the necessary new drugs.

Nevertheless, shareholder value is clearly crucial to big pharma. However, when the pharma industry talks of shareholder value, I believe we should talk in the long, and not the short, term. If you create drugs that work you must automatically create shareholder value. Drug companies grow from genuine creative discoveries — and that is what biotechs are all about.

Michael WalkerThe Author
Michael Walker, PhD is chief executive officer and co-founder of Verona Pharma
He is an emeritus professor at the Department of Anesthesiology, Pharmacology & Therapeutics, University of British Columbia, Canada and has founded and managed various biotech companies in Canada and the UK, including Rhythm Search Developments (RSD), which evolved into Nortran Pharmaceuticals and subsequently Cardiome Pharma.

To comment on this article, email pm@pmlive.com

8th November 2010

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