Does Your Portfolio Review Reflect What the Patient Really Wants?
By Bert Spilker.
When evaluating the elements of a company’s strategic portfolio we often hear discussions regarding unmet need, development feasibility, and time to market. You will also hear talk of sales projections and various return-on-investment (ROI) metrics. But what goes unsaid is the fact that the quest for “radical” R&D innovation is often a more powerful determinant of which products are deemed worthy of further development, even if such an acute focus on innovation means that a treatment with hidden blockbuster potential is left unfunded. In short, despite the fact that a product may help patients in need and be able to achieve significant commercial success, if the product isn't deemed "sexy" enough in terms of its novel mechanism of action or cutting edge technology it won’t make the cut. And that should be cause for great business concern as there is no process more vital to the long-term viability of a pharmaceutical company than that which creates a strong R&D pipeline replete with novel applications of good science that also meets the short-term demands of the company’s P&L sheet.
An example of this creative dilemma is a drug currently in development by Relox Medical, a small start-up company whom I represent as chief executive officer. This drug candidate has been shown to help restore daily living and mobility in chronic stroke patients. A Phase 2b, double-blind, placebo-controlled trial at six sites in the US showed statistically significant improvement (p<0.0001) in day-to-day activities such as walking, bathing, climbing stairs, and eating, as well as in muscle strength, balance and coordination. Few adverse events were noted and none were categorized as serious. For the 6.5 million chronic stroke survivors in the US alone and the 800,000 new chronic stroke cases seen each year, the thought that such a product might be approved some day is great news. And for one whose company is developing this new product, the fact that annual sales projections exceed $1 billion comes as great news too.
The challenge for us at Relox Medical is that at the present time we lack the estimated $16 million needed to fund the Phase 3 program required to meet
regulatory requirements and bring this potential breakthrough product to market. This is a nominal commitment of funds for such a potentially robust
commercial return. But despite the compound’s status as a possible future blockbuster, the push back from investors or pharmaceutical company partners
is not about safety, efficacy, or even revenue projections. Instead, it seems to be related to what we see as a short-sighted evaluation about the
perceived level of innovation. In this case, the patent protected product is a combination of intravenous magnesium and oxygen paired with a
patent-pending device called the Accu-RateTM Safety Monitoring System.
And while magnesium with oxygen may not sound “sexy,” to the investment observer, the chronic stroke patient who can’t use their arm to bathe or groom independently and who needs some assistance to eat, dress, sit on or stand, doesn’t care about the novelty of the science – it’s the results that matter. In fact, the many chronic stroke patients who participated in the Phase 2b, double-blind, placebo-controlled trial who saw post treatment improvements that included more independence in regards to bathing, grooming, eating, dressing, toilet use, bladder control, and the ability to navigate stairs and walk 50 to 100 yards unaided probably believes this is the most innovative and scientifically “sexy” product ever.
Unfortunately, the investment groups that could finance the Phase 3 trials for this chronic stroke treatment -- whether this be licensing departments, venture groups inside big pharmaceutical companies, independent VCs, hedge funds, or investment bankers -- all have check lists of what they “require” before agreeing to even meet or discuss a new product. These checklists are understandably necessary and generally sufficient, but, they could screen out potential blockbusters if the group evaluating the product is unable or unwilling to think creatively and not be totally restricted by such rigid criteria. Every group that evaluates a new product seems keen on getting to a “no go” decision as soon as possible, and often appear to be unwilling to spend sufficient time to fully evaluate and understand the unique opportunity being presented. And that uniqueness at its core is what's needed for all innovative breakthroughs.
The success of small start-up companies with unique products is dependent on their ability to find development partners who are willing to spend the necessary time to listen to the company’s presentation in a face-to-face meeting as that is the only way to explore the true viability of a product. Even when regulatory, reimbursement, intellectual property protection and other parts of the development and marketing puzzle are in place and all the medical breakthrough and safety aspects are acknowledged, the issue of the “inviolate” checklist seems to trump an innate sense of what drives pharmaceutical development and the creative thinking that can position this development around a real market need. As a result this potential blockbuster product, and others like it, may be fated to die on the vine if an interested partner that is willing to find the right balance between helping patients in need through innovation, and helping patients in need, period, can not be found.
My suggestions to remedy the problem of screening out potentially important drugs that may not meet every item on the company’s checklist is to:
Following these three practices, in addition to conducting traditional due diligence, will help to avoid missing potentially important licensing or acquisition opportunities.
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