Common Pitfalls In Managing A Therapeutic Asset

8 Oct

By Lucy Parkinson, Senior Research Manager, LSN

Investors have told us that out of all the therapeutic assets they review, 50% are uninvestable or very difficult to work with as a result of mismanagement. At LSN, we often stress the importance of a company’s management team, and we support our clients in positioning a team to effectively showcase their experience and expertise. The team matters precisely because there’s a lot of ways a good therapeutic asset can be damaged by poor management decisions. This article will bring together some advice we’ve heard in conversation with experienced therapeutic investors and at the RESI Conference about what can go wrong at an early stage of therapeutic development that will damage a company’s future chances of finding an investor or a strategic partner.

Protecting Your Intellectual Property

Establishing a strong IP position is the issue most likely to cause difficulties for an inexperienced entrepreneur. If you’re attempting to commercialize a scientific discovery made at a research institution, it’s vital to ensure that your IP position is solid.

One reason this difficulty arises so often is that academic scientists who are focused on advancing their research careers may feel more pressure to publish their work than to patent it. “I’ve seen papers presented at scientific conferences that could collectively cure hundreds of diseases if the discoveries were patented – but many of the scientists don’t follow through on protecting their IP,” one expert told me. Many times, investigators will make public disclosures of their proprietary technology (via publication, oral presentation or a poster) without having filed at least provisional patent applications. Without strong patent protection, investors will walk away from these opportunities.

Scientists typically work with their institution’s tech transfer offices to file suitable patent applications on new discoveries, but these groups are limited to working with what the scientist gives them. The scientist needs to generate the kind of data that will support broad patent claims, even if it won’t get published in a journal.  If possible, the scientist should seek out an IP expert to help guide the process. If a start-up company has already been established, the academic entrepreneur needs to focus considerable resources on building the broadest IP portfolio possible.

Creating A Solid Data Package

LSN has consistently found that a large number of therapeutic investors are interested in assets at the preclinical or Phase I stage, where major value inflection points occur. However, at this product development stage, it’s critical to have a strong data package that attracts investment. It’s easy to make mistakes at or around the IND filing stage that leave your asset with a poor data package. If your data package can’t convince a pharma company that your asset has promise or they see that they will have to generate a new data package, they will likely walk away.

Common mistakes include using an unsuitable animal model, or using the wrong controls. Importantly, if there are approved agents that you are competing with, there should be comparative study arms that will indicate the strength of your asset and the required dosage.

In addition to bad trial decisions, an inexperienced team may also fail to address early issues related to manufacturing a drug. This is particularly the case for biologics, where it’s vital to select the right cell line to make the drug. Investors will want to know that the production method is stable, and can scale to produce sufficient quantities of the drug.

It’s not just a matter of inexperienced researchers committing errors – sometimes, specialists at CROs will drop the ball too. It’s vital for management to understand what an investor will want to see in the data package to prove out an asset’s potential, and how to design and perform a preclinical study that will meet those goals.

Defining Your Asset’s Safety Profile

This area is particularly concerning to investors who look at assets prior to IND enabling studies. It’s very important to provide an investor with indications that a new therapeutic agent is safe, otherwise the asset will fail at an early stage. If you can’t produce some strong indications of safety, investors will walk away from the table.

Keeping Your Focus

Many breakthrough discoveries have potential in a number of areas, and that can make it hard for an entrepreneur to zero in on the technology’s real commercial potential. At a pitch event earlier this year, I saw one entrepreneur present a company with 6 programs in the pipeline, and outlined a plan to raise a financing round to advance all these programs. Investors at the event were very skeptical, because they saw this program proliferation as a sign that the company lacked focus.

As was noted in last week’s edition of Next Phase, investors say that 95% of a company’s valuation rests on the lead program. Advancing a therapeutic program is difficult (and expensive) enough that a small company needs to put a lot of focus into advancing their lead program. It’s often useful to have other assets further back in the pipeline, as these programs can serve as a backup if the lead asset fails, but small companies need to be very selective and focused regarding which assets they bring through the IND and into the clinic. It’s a bad idea to aggressively pursue as many programs as you can dream up. Having a high level of focus is a sign that investors look for in order to assess the management team’s competence and ability to execute. Investors want to be assured that those funds will be focused on making rapid progress in advancing the lead program.

Showcasing Your Strength

For all these reasons and more, investors and strategic partners look very closely into a management team before signing a deal. In addition to looking for signs of these common mistakes, investors often prefer to work with teams that have prior experience of commercializing a therapeutic asset, either within a large pharma company or as part of a prior entrepreneurial experience. A scientist who doesn’t have that commercialization experience can do well to surround themselves with experts who do, perhaps including team members that specialize in complex areas such as IP or regulatory issues.

If you’re introducing your company to potential investors or strategic partners, it’s important to highlight the team’s prior successes and experience. Investors want to see a team that has the right expertise to cover the most major pitfalls; they also want to know that your team is levelheaded, focused on the lead program, and will stay on top of the details. Your team members are, themselves, an asset to your company, and when you pitch to an investor, you need to highlight them appropriately.

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