Commercialisation of biotech assets – learning from the pioneers: part four

In the fourth part of his critical assessment of the options open to biotech companies to commercialising their assets, Dan Heapy looks at the pros and cons of going it alone and taking your own product all the way to market.

(Continued from 'Commercialisation of biotech assets – learning from the pioneers: part three')

Deciding to go it alone and manage the commercialisation of a biotech asset in-house is certainly a risky approach; but as with any brave choices, the potential rewards are much greater. The challenge for biotech companies tempted to seek those rewards is two-fold: funding, and having the right commercial skillsets to do it effectively.

"With a bigger choice of suitors, the opportunity to achieve value through sale has grown."

Finding finance and managing cash flow are always a major focus of any biotech company. That means to succeed requires the ability not just to find finance, but to focus those limited resources.

A really good example of a biotech which took this route successfully is Amgen; once a small biotech company, it is now one of the biggest pharmaceutical businesses in the world.

It started from nothing. But it was well-managed from the outset, with a very commercial focus. Any molecule in development which didn't have a large commercial potential was ruthlessly ditched. Rather than investigating things which were interesting to their scientists, or which were novel to science, it was all about commerciality.

Being able to demonstrate the potential returns, and carrying out an asset valuation, are very worthwhile things to do for two reasons: it can focus your R&D, but it can also help you gain funding.

Where does that commercial nous come from? In Amgen's case, from bringing in a new CEO who was able to bring a ruthlessness to their business, and an early acceptance that it's not all about regulatory and R&D development - you have to put dollars against it.

Once they managed to obtain funding, they were able to go through FDA approval with Epogen, with the finance allowing them to both gain approval and launch it themselves. They were now in the position of not only having a source of cash flow, but they also became a more attractive prospect for obtaining further finance for subsequent products.

But it was not all plain sailing, and Amgen has had to learn and evolve, particularly as their products began to face generic competition. In fact in 2007 they reduced staff, and started seeking partners for marketing their products in different markets.

This is actually a perfectly reasonable strategy – deciding which commercialisation route to take on a case-by-case basis, so going it alone with one product in a particular therapy area or market does not preclude partnering in another. Because Amgen was adaptable, it was able to come through difficult times and become the force it is today.

"With a bigger choice of suitors, the opportunity to achieve value through sale has grown."

This kind of commercial focus has not always been ubiquitous in the biotech sector, but the success of companies like Amgen means that more biotechs are recognising that focus – both clinical and commercial – are key to success.

Biotech has indeed learnt from the pioneers and become much smarter, recognising that investors are only going to provide funding if there is a demonstrable commercial potential, rather than the asset simply being a novel, innovative scientific medicine.

A slightly different route was taken by Celgene. It took on the once infamous thalidomide, and moved it into a different space. It was then able to use the product launched in the cancer space to provide cash flow for the development and commercialisation of its own product.

More importantly, it was able to use thalidomide as a learning tool, so that when its own product was brought to market, Celgene was much better equipped to prosper. The success of this strategy is evident is that Thalomid's (as thalidomide is now called) annual global sales of $250 million are dwarfed those of by Celgene's own product, Revlimid, at over $4 billion.

Celgene's approach provided both ongoing funding (through the income provided by the successful relaunch of thalidomide) and commercial understanding of the market for its own asset.

That need to learn can be the downside of the go-it-alone strategy. Launching such products, getting sales forces up and running, and creating your own company all require skillsets which are new to many biotech companies, and the growth involved will not be without pain.

"With a bigger choice of suitors, the opportunity to achieve value through sale has grown."

You have got to create something from nothing. As exciting as that prospect is, you will have to bring in experienced and potentially expensive people to lead that business, to create it in a way which works. It's expensive and risky, and it's all about getting somebody to fund that risk.

So there are three key lessons to making the go-it-alone route successful:

- Focus: it's not about investing in everything, use your money wisely.

- Know your commercial steps, both to market and how valuable your product could be. The better you can sell your product to the financers (which means linking it to the specific market and highlighting where your product could win), the better the prospects of getting them to invest.

- Be prepared to change: there are numerous ways of getting financing; once you have launched, there are numerous ways of keeping that moving. As we have seen, both Amgen and Celgene have had to evolve.

Ultimately a good product is at the heart of success - in fact it is essential. But the product alone will not guarantee success; you need to couple this with the commercial focus and understanding to make the right decisions about commercialising that asset be this the partnership route, the selling option, or to go it alone.

About the author:

Dan Heapy is Associate Partner at The MSI Consultancy – a CELLO HEALTH Business. Follow him on Twitter @DanHeapyMSI. He can be contacted at dheapy@msi.co.uk.

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