Risky Business

Last March, “risk management” was the watchword as the run on Silicon Valley Bank (SVB) prompted biotech CEOs and back office personnel into late-night phone calls with bankers and regulators to protect deposits and make payroll on time. SVB’s failure and the ensuing financial sector jitters were just the latest bolts to strike a stormy investment landscape for biopharmaceuticals, which in turn has prompted layoffs, closures, and development candidate fire sales.

In that context, the clinical research risks taken by individuals and companies included in this month’s issue are even more impressive. Our cover story, which focuses on three companies taking unusual paths into treating diseases of the human body’s largest organ — the skin — demonstrates the continued willingness to follow early scientific signals and observations through a gauntlet of unknowns.

Incyte, known primarily as an oncology company, received its first product approval in the dermatology therapeutic area last summer, with a treatment for vitiligo, an autoimmune disorder that causes patches of skin to lose pigment and change color. The move builds on Incyte’s history in immunology, but the decision to explore a completely new therapeutic area was a result of CEO Hervé Hoppenot’s willingness to take a risk, instructing the company’s discovery team to pursue any application of a product’s mechanism, regardless of where that pursuit might lead. As a result, the company is now exploring at least six additional clinical programs in dermatology, a shift that requires board consensus, new promotional capabilities, and a completely new distribution model.

In one of the wilder examples of risk-taking as it relates to the skin — skin flora, in this case — Tarsus Pharmaceuticals reformulated an animal health drug marketed by Elanco as a flea and tick treatment for pets into a human treatment for demodex mites, the microscopic arachnids that live on human eyelashes and are believed to be a cause of blepharitis. Tarsus is also developing the same active drug ingredient — lotilaner — as an oral, systemic therapy for the prevention of Lyme’s disease, by killing ticks before they can transmit bacteria to humans. The story of how Tarsus identified lotilaner as its development candidate of choice is, like many startup biopharmas’ stories, one of serendipity combined with a willingness to risk a charge into unexplored territory.

Taking risks in new therapeutic areas — calculated and managed, to the extent possible — is an intrinsic part of the biopharmaceutical enterprise, and in that respect, the state of the industry appears quite strong. The supporting infrastructure for placing bets on long shots, funding preclinical and early-stage research candidates, and capturing value in the commercial markets globally, however, remains on shaky ground. Unanticipated risks are always around the corner, and biopharma companies will increasingly need to build resilience into their business models — and be prepared to act or change course at a moment’s notice when the ground inevitably shifts again.