Innovation in biopharmaceutical drug development is often driven by small biotech companies. A healthy venture capital market is now enabling small biotech companies to take their new treatments and products all the way through to commercialization for niche indications. This is a departure from the past, when they would more often license out their drug candidate to a large pharmaceutical company after Phase II. Complementing the increased availability of capital, regulatory bodies have also created a number of accelerated approval options (i.e., FDA’s breakthrough designation and EMA’s PRIME) allowing innovators to bring their new treatments to market more quickly.
However, while larger companies typically have the experience in-house to navigate complex regulatory processes and the ability to scale manufacturing flexibly to meet market demand, small and virtual biotech companies tend to lack this expertise due to their size and focus. As small biotechs seek to retain their independence further along in the development process, they must address these gaps in resources and experience. External partners such as contract development and manufacturing organizations (CDMOs) play an important role to close such gaps.
Opportunities for Biotech Innovators
Small biotech companies have traditionally relied on venture capital for funding through early development, before out licensing to larger pharmaceutical companies after achieving Phase II clinical results. In recent years, however, the available pool of venture capital has grown significantly – from $2.2B in 2013 to over $7B in 2017, in addition, investment rounds have been higher than previous years. This growth in capital and large cash injections have allowed small biotech companies to stay privately funded for longer and retain their independence further along in the development process, in some cases taking their products to market.
Complementing the growing pool of investment options is an increasing number of regulatory pathways for treatments, such as Breakthrough Designation. Since 2012, the FDA has made it possible to secure breakthrough designations for drugs that treat serious or life-threatening conditions, which created a fast-track approval process. This allows companies to apply for authorization to shorten their review period—down to about 60 days—and now we are seeing an increasing number of small biotechs take advantage of this expedited process. Similarly, EU programs like conditional marketing authorization and accelerated assessment serve to accelerate the drug review and approval process.
This dynamic has created a positive feedback loop: small biotechs that can secure accelerated approval also become more attractive for investment, meaning they can leverage the designation to secure additional funding and advance their drug product through the development process.
Small Biotechs Face Unique Drug Development Obstacles
However, the longer and farther into the development process that a small biotech takes a candidate, the more complex and costly the process becomes—in part due to regulatory requirements. For a larger company, regulatory demands are just part of doing business and an area where they have deep experience to navigate reviews as quickly as possible. For a small biotech, a long approval and review time can mean life or death for their drug candidate. This is often what drives small biotech companies to partner their candidate to a company that has the resources to see it through to market.
Speed is undoubtedly a biotech’s friend—a good example is the beneficial effect of faster regulatory pathways on smaller VC-backed companies outlined above. Manufacturing is following with a combination of faster development timelines, due in part to the use of proven platform processes with more predicable output, and more agile manufacturing due to single-use technologies and the ability to launch from same clinical assets and avoid tech transfers. Speed for biotech primarily means reducing the daily burn on limited financial resources. But there is also value in being first to market, possibly even more so for the niche/orphan indications that many smaller companies target. The advantage can be as high as 6% higher market share than the next competitor 10 years after launch. For some companies this may seem like a small margin, but it could be enough to keep small companies profitable and independent enabling them to invest in development of more drugs and treatments for patients.
Another challenge is forecasting demand for products in development, which is one of the trickiest areas for companies of any size. However, for smaller biotech firms there are added risks, since their business models and revenue streams are much more dependent on the success of the limited number of specialized drugs they have in development. Having access to manufacturing assets that can be scaled flexibly in response to demand can help mitigate these risks. For smaller firms that lack the required manufacturing assets in-house or the capital needed to build them, making sure their external partners provide a range of options and the ability to move between them is key.
Small biotechs tend to be pulled in a lot of directions at once, which can be a hindrance to their focus and a financial drain. As these firms look for ways to remain independent longer, they can benefit from partnering with organizations such as contract development and manufacturing organizations (CDMOs) that can help them navigate regulatory reviews, manage production and financial risks and quickly scale up if their product has a growing demand.
The Benefits of Partnership
CDMOs partner with both large pharmaceutical companies to support their manufacturing and distribution needs as well as small biotechs for development and clinical supply requirements. At Lonza Pharma and Biotech, about 65 percent of our customers are now small and mid-size biotech firms.
The industry is now recognizing that small biotech companies can hold their own in terms of innovation in drug discovery and development. CDMOs understand they can work directly with the smaller biotechs and help them bring new products to market quickly and efficiently. The benefit for small biotechs is that these types of partnerships also frees them up to focus on what they do best: innovation. Small biotechs can also direct their energy and resources toward strengthening product development, building their development pipeline and continuing with research that advances the industry and better serves patients.
Flexibility is also increasingly critical for small companies; the focus on precision medicines and orphan indications moves the focus from large-scale manufacturing and puts a greater emphasis on mid-scale or small-scale production. Instead of needing the capital and experience to produce 10,000- to 20,000-liter batches of drug substance, companies developing targeted and or more potent drugs may benefit from access to smaller-scale production (1,000- to 2,000-liter assets) or midscale (5,000- to 7,000-liter). By working with an external partner such as a CDMO, small biotechs can have the assurance that when demand changes they have the ability to scale capacity accordingly to effectively manage their products’ life cycle.
And as the industry moves toward a growing emphasis on higher-potency and specialized medicines, the importance of experience when it comes to forecasting demand and navigating regulatory review becomes increasingly relevant. Lonza has deep regulatory experience and has supported seven fast-track BLA submissions, 60 IND/IMPDs from 2012 to 2017 and 22 commercial biologics.
The greatest obstacle to small biotech companies is often time. An increased availability of venture capital, shorter development timelines to first-in-human trials and pathways for reduced regulatory review processes have helped to put time on the side of small biotechs. But there are still risks and challenges that can cause more problems for a small biotech firm than they would for a larger company. In order to support the future of innovative drug treatments, small biotechs benefit from partners that can help them through complex product development and regulatory reviews, quickly get them to the clinic and flexibly respond to their forecast demand and manufacture a drug to scale. Not only does this support innovation, but it gives small biotechs the opportunity to reinvest their success in perfecting drug developments and identifying new discoveries. This means better outcomes in terms of drug product development and better availability of precision medicines to target niche and orphan diseases.