Drug Discovery Model Horribly Broken

I know this deviates from our usual topics, but if any of you have ailments out there that don’t yet have good treatments for, or have loved ones that do, this affects you. It affects me because I work in this field. Glenn Reynolds links to an excellent article in the xconomy.com about why the Drug Discovery model is horribly broken. Based on my knowledge of this business, it’s pretty spot on. Let me quote from it a bit:

Inexperience can play a major role when it comes to these failures, and the biotechnology industry, by virtue of being comprised of so many small, new companies, is especially vulnerable to that. One 2008 analysispublished in Nature Reviews Drug Discovery found that 95% of the industry’s Phase III failures in 2006 and 2007 were products originating from biotechnology companies. During the period analyzed in the article, 65 drugs seeking approval experienced regulatory setbacks and 16 of those had 3-month delays. The vast majority of products with delays came from biotech companies. The authors ventured that “many of these delays may have resulted from poor quality NDA submissions, rather than from flaws in the drugs themselves.”

Sounds like a harsh assessment, but it appears as though it’s fairly accurate, at least based on a conversation I recently had with Greg Dombal, managing partner at Halloran Consulting Group, which helps life sciences companies with regulatory and quality assurance issues. I met Dombal last week, at the dinner to kick-off Xconomy’s XSITE summit, and some of the things he said were truly surprising. He says, for example, that about three quarters of the life sciences companies his group sees “have some fundamental gaps in competence.” In a “solid” 30-40 percent, he says, some of the issues can be found at the “C level”—meaning the chief executive, chief operating officer, and other top executives.

This reflects what I’ve seen in this business as well. The root of the problem is that the management culture in Big Pharma discovery organizations is hopelessly broken. As the industry is shedding research capacity, a lot of these managers are finding themselves looking for new opportunity, or out of work altogether. If a few people get together and get an idea for starting a biotech company, the venture capitalists, many of whom don’t seem to really understand this business, are typically going to insist that experienced industry people be brought in to run the company. It’s the old “Wow, you have a good idea. Now here’s a bunch of money and a new CEO to help you run things.” approach. This is a recipe for disaster, because these are largely the same people who are destroying the research arms of the large pharmaceutical companies. Dysfunctional people seem to always have dysfunctional friends, and they will bring those friends on board.

There’s also, concurrently, been a trend in Big Pharma to push as much risk onto biotech and small pharma firms as possible. For most of the last decade, if you didn’t have a compound in phase II clinical trials, none of the Big Pharmas wanted to talk to you. The big problem with clinical trials is that, even if you lucked out and got a reasonably competent management team, and your idea panned out (itself a not insignificant risk), the regulatory hurdles are substantial. Most people coming from the research and discovery parts of Big Pharma have little to no experience dealing with the FDA, creating and filing IND applications, running clinical trials, or filing NDA’s. Having been through this process up to the end of phase I with the company I work for, it was an unmitigated disaster, with problems nearly every step of the way, largely because of inexperience and misstep.

The solution for the pharmaceutical industry is letting biotech and small pharmaceutical companies drive the discovery engine, with Big Pharma exploiting their core expertise in regulatory compliance and marketing. We can get a compound to the pre-clinical stage, but I agree with this article that generally it’s been a disaster to let these smaller, inexperienced companies to take the compounds into the clinic. Venture capitalists also need to get it out of their heads they need people with pharma management experience running these companies. If these people were any good at what they did, Big Pharma would still have productive research organizations. Yes, there are good people in this bunch, but there are a lot of bad apples. If the people bringing fourth ideas to be funded have a good idea, the requisite background in the field and industry, they don’t need someone with a big pharma management background to lead them. They need someone who’s been successful and getting small enterprises up and running, and leading them to success. I would argue some of the more successful technology CEOs are better suited to run these types of biotech and small discovery operations than many Big Pharma types.