Funding lower-priority clinical trials
March 2017
Exploring a new mechanism to fund the timely execution of deprioritized trials

Introduction: Some biopharma companies have built pipelines that offer more development opportunities than their resources allow them to pursue. Promising clinical trials may be moved down the priority list and their execution delayed – resulting in decline of asset value against a fixed patent expiration date. One potential solution is to package complementary trials and bring them into collaboration with the investor, CRO or other organizations and fund the execution of these trials outside the biopharma company. The potential advantages of this approach are four-fold: the trials supporting asset development will be delivered, investors have an opportunity to generate a high return, CROs expand their revenue base and additional patient populations may benefit.
 

Where are we now, and how did we get here?


A decade ago, as biopharma companies explored strategies to keep growing their product pipelines and businesses, effectively three approaches were identified and adopted:

  • Aggressive acquisition (buying pipeline) – e.g., Pfizer (10-year increase in share price – 36 percent)
  • Developing new and emerging markets – e.g., GSK (10-year decrease in share price – -24 percent)
  • Investing heavily in innovation – e.g., Novartis and Roche (10-year increases in share price – 34 and 25 percent, respectively).

 

A number of the companies that embarked on the innovation option have been very successful in research and development. These now have to deal with the reality that they do not have the resources to develop each asset in their overflowing pipelines in a timely manner, which leaves lower-priority assets in stasis.

By necessity, biopharma companies allocate their development resources to assets and clinical trials that promise the best return. Building upon common sense and sound business practice, pharmaceutical companies are sophisticated in prioritizing their development dollars. However, the down side of that equation is the opportunity cost of not progressing lower-priority clinical studies.
 

The value of development assets is based on potential future revenue. The limiting factor to that value is the patent expiration date associated with it. This means any critical path trial that is delayed postpones registration and reduces the value of an asset because the period over which revenue can be earned is shortened.
 

The impact and scale of this varies from company to company and across therapeutic areas. Companies are employing a variety of strategies and approaches to limit this opportunity cost. Examples of these approaches are trial acceleration (for example, by moving sites or simplifying trial design), limited operationalization and co-development deals with third parties. The last generally takes at least nine months to negotiate, and none of these approaches address the challenge at hand. With more and more focus on the cost of drug development and the price of medicine, this challenge is only growing.