Virtual David and Massive Goliath: The New Drug Development Model


The pharmaceutical industry has changed dramatically over the past decade as the landscape advances along the path of leaner, meaner, faster and cheaper. Facing rising cost pressures, big pharma, biotechnology and specialty pharmaceutical companies continue to shrink their clinical development infrastructure and rely more on outsourcing.

This trend has left a large pool of highly skilled clinical research scientists available not only to join contract development and manufacturing firms, but also to form small and virtual pharma and biotech companies, which bring greater flexibility and innovation to drug development. In this challenging industry environment, pharma sponsors are intensely focused on finding promising compounds with the struggle to build pipelines quickly with smaller budgets.

There is a significant demand by biopharma companies for commercially relevant human clinical data. Companies must conduct larger, more complex and costly clinical trials to meet regulatory requirements, while continuing to concentrate on cost containment and shortening development timelines without compromising quality. The transformed environment has, in turn, driven change in the industry's business models.

These new industry dynamics underlie the burgeoning new generation of virtual biotech, pharmaceutical and medical device companies, a cost-efficient, "build-to-sell" model. The new business model replaces the former venture-backed life science companies that had the infrastructure to perform full R&D with the hopes of going public or being bought by big life science companies. Hundreds of virtual biotechs are estimated to be operating today, with recently as much as a third of the U.S. venture funding for biotechs going to virtual firms.1 2014 was a record year in biotech funding with near $6B invested.2 Cuttingedge technologies, including clinical data analytics with real-time data access, are playing a major role in the emergence and success of virtual companies. This article describes the operations and advantages of this new business model for drug development, and the technology enabling both virtual biotechs and their big pharma/biotech buyers to develop drugs with optimal efficiently as dictated by the current environment.

Virtual Biotech: A New Drug Development Model

The goal of a virtual biotech is to achieve clinical proof of concept for a drug candidate as efficiently and cost-effectively as possible. On a small budget, these companies operate with no laboratory and typically without official office space. The lean, nimble model is based on outsourcing as much of the development as possible to external service providers, including clinical trial and formulation contract research organizations (CROs) and consultants. Each development project is funded by venture capitalists as a separate entity.

For each drug candidate, virtual biotechs use the leanest development team needed, consisting of as few as one or two highly qualified scientists who have the management experience to manage a remote team of researchers. As big pharma R&D departments continue to shrink, more highly qualified clinical researchers are available to manage these companies.

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