Magazine Article | December 1, 2009

Spurring Pharma Innovation

Source: Life Science Leader

By Suzanne Elvidge

There is mounting pressure across all the biopharma industry to innovate constantly in order to fill or maintain pipelines, allowing the companies to reach new markets and meet emerging unmet needs. This pressure is increased by patent expiries on blockbuster drugs and a growing inefficiency in biopharma R&D, according to some industry observers.

Under these circumstances, it’s unlikely that any one company can meet all of its pipeline requirements internally. This means that companies must turn to external providers to source innovative platform technologies and therapeutic opportunities.

There has long been a tradition of agreements and collaborations between biopharma companies and academia to provide the needed products and technologies. Rather than relying on these established patterns of partnerships, groups from both industry and academia are looking at new models to try to spur innovation and encourage entrepreneurs. As licensees are looking for as much certainty as possible and late-stage licensing opportunities are becoming increasingly scarcer, these models provide access to low-risk, internally validated, early-stage licensing and collaboration opportunities.

Organizations like Auckland UniServices and Enlight Biosciences are key examples of these new models and could have a lot to teach companies throughout the worldwide biopharma industry, companies both large and small.

The University of Auckland founded Auckland UniServices in 1988 as a wholly owned company with an independent board. The company’s role is to manage the University’s commercial research outsourcing and consultancy, create companies based on University research, and develop the University’s intellectual property estate. “The business of a university is research, and our mission is to apply our research skills and expertise to our clients’ needs, to increase the value of our intellectual property, and to enhance the global reputation of the university,” says Will Charles, general manager of technology development at Auckland UniServices.

Auckland University’s research revenues from industry make the university around NZ$100 million a year, as well as generate leads that have moved into clinical trials around the world.

Auckland UniServices leverages the internal and contract research under way at Auckland University. “We are doing the research anyway, so we feel that companies may as well take advantage of it,” says Charles.

While the researchers are given the freedom to “follow their noses,” according to Charles, they are kept in line with the market needs by being informed about current gaps and unmet needs. “We never tell researchers how to do their research; we just seed the ideas,” Charles adds.

As an example, Auckland UniServices is involved in Procter & Gamble’s “Open Innovation” initiative, gaining access to P&G’s detailed needs lists and pairing the university’s strengths with the company’s requirements. This continuous dialog strengthens the long-term strategic relationship with P&G.

Auckland UniServices takes patentable ideas from its researchers and conducts very early proof-of-concept preclinical trials, with a focus on the rapid transfer of intellectual property to industry. “We look to facilitate the innovation, not to run the companies long term,” says Charles.

In order to make sure that these ideas have the greatest chance of success, Auckland UniServices has its own committee of senior people from the pharmaceutical industry, which helps the company evaluate new ideas. “We use a checklist to triage the ideas and then take them to the market with the features and benefits to see if we are correct with our predictions. We also ask the targeted companies what kind of relationship they would like if we invested in the in vivo preclinical studies,” says Charles.

In order to get the start-ups off the ground, Auckland UniServices allocates up to Aus$1 million per company to support them until Series A funding. During this period, many of the companies remain housed and staffed within the university. The money comes from the Trans Tasman Commercialization Fund, a source of Aus$30 million of preseed capital for companies arising from universities in Australia and New Zealand.

“As a return for our funding, we receive equity and research payments from the start-up companies — so the model is that the companies pay for the early development research that goes on at the University,” says Charles. “Every Aus$1 we invest brings in NZ$6 in research revenue. Because UniServices, and not the University, employs the scientists who do the work under the supervision of the academic PI (principal investigator), we get academic brilliance with commercial timelines, delivery, and IP (intellectual property) management. Finally, we have an important philosophy with IP — ‘if you pay for it you own it.’”

PureTech Ventures, along with a group of the leading global pharma companies, announced Enlight Biosciences in 2008 to seek out and fund projects focusing on enabling technologies in drug discovery that address areas of specific interest to its big pharma partners. PureTech Ventures is a venture creation company specializing in company creation and early-stage investment. “In starting Enlight, we recognized that the venture capital community was migrating to later-stage deals and that the biopharma industry’s focus is increasingly on advancing compounds, with outsourcing for the enabling technologies,” says David Steinberg, founding CEO of Enlight Biosciences and Partner at PureTech Ventures. “Based on this, we saw an opportunity to bridge the ‘venture gap’ and exploit innovative technologies from academia, complementing our existing focus on therapeutics, medical devices, diagnostics, and research technologies.”

With a more specific focus than Auckland UniServices but using a similar model, Enlight Biosciences licenses enabling technologies, conducts early-stage proof-of-concept research, and then brings in external investors. Under Enlight Biosciences’ business model, the organization partners directly with pharmaceutical companies, rather than with the VCs.

Through this model, pharmaceutical companies support the development of new technologies but don’t have to develop them themselves, and the start-ups gain access to experience and strategic leadership. Enlight Biosciences’ pharma partners include Merck, Pfizer, Lilly, Johnson & Johnson, and Novartis. Each pharma company has made a significant financial investment, financing Enlight Biosciences and creating a fund of $78 million to establish new start-up companies.

Enlight Biosciences’ parent company, PureTech Ventures, sources the intellectual property from a huge network of university investigators worldwide, including Harvard University, MIT, the Mayo Clinic, Stanford University, Imperial College London, and universities in Israel, as well as industry sources such as Optosonics, Inc. “We begin by looking at the unmet needs and bring in key opinion leaders and leading academics to evaluate the concepts and look at innovators in the field in order to build a company that meets the needs of the market,” says Steinberg.

The start-up companies are incorporated from the start, with Enlight staff acting as interim management for the first 6 to 12 months. After this, Enlight Biosciences brings in an expert management team and will retain several seats on the board while the company is part of the Enlight Biosciences “family.”

“I’m not aware of any other organizations that work quite like this. There are other consortia, but they tend to operate virtually, whereas we provide economic incentives and in-house teams dedicated to driving the development of the technologies and the start-up companies,” says Steinberg.

As well as providing a source of innovation, these models can educate and inform the industry at large. For companies as well as academic institutions seeking to license out technologies, being informed by the voice of the market is vital in these increasingly competitive times.

“We are passionate believers in the market informing research, and we find that our involvement in contract research and our close relationships with potential partners attunes us to the needs of the market,” says Charles. Steinberg adds, “Collaboration is very important, as the biopharma industry has tended to be very insular in the past. By working across and networking within the biopharma industry, we discover where the unmet needs are, allowing us to spawn new companies that will drive innovation. This also works both ways — by participating in collaborations like ours, biopharma companies not only can get early access to innovative technologies, but can influence their development and strategy.”

When doing business with institutions, it’s important to remember the distinctions between the cultures in academia and in industry. “The difference between university and industry researchers is that university researchers will never do the experiment that kills the project, in case it stops the funding. Biopharma companies want to kill unproductive lines of research quickly — so it’s important for biopharma companies to reassure researchers that, if one project fails, there will be another to replace it. Otherwise, it will give the biopharma companies a poor impression of university researchers, that they don’t know what they are doing,” says Charles.

Organizations outside the biopharma industry depend on advisors in the industry, and it is important for them to seek external advice, especially about new areas and markets. However, it is equally important for biopharma companies, especially small ones or ones moving into new areas, to ensure they also source reliable and knowledgeable advisors. “My advice: It’s always worth spending money on really good advice, such as retaining people with sound biopharma industry experience,” says Charles.

Setting realistic deal values is important, for innovators in both academia and the biopharma industry and also for the potential licensees, in order to make deals come together as smoothly as possible. “We have noticed that much of the arguing in early stage agreements is about the value of the intellectual property. The value needs to be set at a level that is enough to give the inventors an incentive without being so much that it affects the deal,” says Charles.

These new models have much to teach, but only time will tell what type of an impact they have on innovation in the industry. “We need to let the experiment play out,” concludes Steinberg.

Case Study - Proacta Therapeutics

  • Founded: 2004
  • Technology from University of Auckland and Stanford
  • Developing therapeutics for cancer – hypoxia activated pro-drugs
  • Funding from Auckland UniServices: AUS$1.2 million
  • What’s different? “Fast follower” method of developing improved compounds using a unique medicinal chemistry approach

Case Study- Endra, Inc.

  • Founded: 2007
  • Technology from Optosonics, Inc.; Stanford; Texas A&M; University of Michigan; Washington University
  • Developing medical imaging technology that combines optical imaging with ultrasound for imaging of structures such as tumors, blood vessels, & lymph nodes
  • Funding from Enlight Biosciences (undisclosed)
  • What’s different? High contrast imaging at depths and spatial resolution exceeding existing techniques

Auckland UniServices’ And Enlight Biosciences’ Guide To Innovation

  • Spend money on good people and good advice
  • Generate cash and innovation through contract research (Auckland UniServices)
  • Look for unmet need and follow market-informed lines of research
  • Collaborate and network
  • Conduct in-house early proof-of-concept research to validate opportunities
  • Work in multidisciplinary units
  • Have dedicated teams for start-ups
  • Have a network of contacts to source IP (intellectual property) and create close strategic relationships with potential partners
  • Set a realistic value on the intellectual property
  • Remember the differences between cultures