Focusing on value drivers to reduce risk in early-stage drug development

Parexel Biotech 

In today’s environment, the competition for capital is intense. Even while regulatory approvals are on the upswing, innovators are interested  in understanding why some companies secure investment while others with a validated clinical asset remain unfunded. 

What can a startup do to improve the prospects of securing funding in that crucial period when moving from the academic bench to the corporate desk? How can they reduce their risk as they advance toward clinical studies? What should they be thinking about to increase their chances of success in the short and long term?

Here, we share the highlights of the multi-stakeholder panel discussion including investor, market access, and biotech leadership perspectives to guide developers in their decision-making.

Creating a roadmap

Excitement about a promising asset is a given – but it’s not enough to convince an investor to fund your project. One of the most challenging aspects of this phase is to focus. It’s critical to prioritize how to spend finite resources, even at the earliest stages, and to keep the final goal in sight. 

While the patient is always your number one customer, there are many other stakeholders along the way: investors, board members, and regulators among them. They will all expect that you have done everything correctly from the outset – for example, setting up a good trial master file or taking a highly exacting approach to drug formulation. Don’t be tempted to do it later, because it will cost you more in the long run and could damage your credibility.

Articulating the product differentiation for investors 

Recognize that investors are a major part of your journey and treat them as partners. “You’re not yet a revenue-generating company, and you’ll be consuming cash for many years. And keep in mind that the best outcomes in biotech occur when you have cash on hand,” according to the investor panelist. 

Investors' focus differs depending on the specific area of concentration, but two stand out: 

1. In the early to middle stages, investors are willing to underwrite risk, whether mechanistic, clinical, or development. But they will not underwrite competitive risk. To the extent possible, highlight the long-term value story. How are you progressing the molecule relative to the rate of change and standard of care? By understanding product differentiation, investors are more likely to take part in it. Investors realize that biotech value creation happens in steps, knowing that innovators go through the generation of a dataset which could result in increased asset value. 
2. The investor will want to know specifically how the current round of funding will be used. What are the datasets generated with this infusion of capital, and what de-risking steps are you taking? Ascending dose strategy is an example of such a step. 
   
   Your team needs to understand the clinical populations, the barriers to entry, the competing elements of drug development, and the financial impact. One tactic is to look for a strategy that might have a high barrier to entry. For example, seek out a rare disease indication in an untapped area or a technology that can unravel the complexity of biology by understanding the mechanism of action.

Balancing risk considerations

Regarding risk in the context of companies that are developing novel platform technologies: “There is tremendous technological risk associated with an allogeneic cell therapy platform, for instance,” a panelist noted. “But with that in mind, some of these companies have tried to reduce variables in clinical and competitive areas and have swung too far in the other direction. They tend to lose sight of the commercial opportunity and the clinical benefit to patients. That’s how you end up with the fiftieth CAR-T program in the preclinical stage. It’s essential to be able to articulate the value of the technology for the patient population and the future standard of care.” 

Platform companies are often valued by their lead assets and programs. Innovators might have many options but need to make decisions and prioritize in a way that maximizes the value of their capabilities. For example, be sure to have a validated biomarker that is closely aligned with the ultimate disease state. That is hugely important for de-risking throughout the development process, along with a flexible clinical development strategy.

Generating evidence efficiently

One fundamental element for de-risking development, of course, is to generate the evidence to enable differentiation and meaningful outcomes. But how can that be done in a capital-efficient way? Any plan for evidence generation must focus on the target patient profile and the unmet need. Is there a certain demographic or phenotype that is not responding to the different modalities on the market today?

Toward that end, an enormous amount of real-world evidence is available that can be mined to segment populations. Startups can delve into animal data, human data, and clinical trial data to look for a signal. Tools such as artificial intelligence (AI) and machine learning allow people to learn from the discovery program and recognize how and when to change course. Developers might decide to target a different population or a different biomarker, for instance, add secondary endpoints, or even discontinue development. 

Using AI as a predictive tool

AI can be used effectively as a predictive tool if it’s set up the right way. One of the foremost reasons for failures from Phase, I to Commercial is the translational gap from preclinical testing in animals and moving to test in humans. You can use some similarities for safety protocols and predictive efficacy, but there are still big gaps that are not well understood. That said, AI holds great potential – for example, to test on humans early in the process and feed that data into an AI platform, essentially testing on the participant you intend to treat.

In conclusion

The ability to understand the value of your innovation and effectively describe it in the context of the competitive profile: De-risking your development program rolls up into these foundational tenets. These principles will drive every aspect of your endeavors, from developing your clinical strategy to attracting investors, protecting your intellectual property, and exploring commercial opportunities.

About Parexel

With Parexel Biotech you get the personal, responsive, and committed approach of a small CRO, with all the benefits of a large CRO. We provide a customized approach to support from early asset evaluation and clinical development to exit strategy. Since our inception in 2019, we have helped many biotechs achieve their strategic milestones with a tailored development roadmap to accelerate growth and unlock asset value, leveraging our established global resources, deep experience, and the unrivaled expertise of our people. 

About Health Advances

Health Advances is a strategy consulting firm that focuses exclusively on the healthcare industry. We are scientists, clinicians, and business professionals who share a passion for supporting commercialization and driving the adoption of innovations that improve healthcare. The firm employs nearly 200 full-time professionals in four global offices.

We help clients realize growth opportunities worldwide for healthcare technologies, products, and services. Our consultants partner with senior executives and investors on their highest-stakes strategic decisions. We understand the complexities of each technology and disease state and appreciate the context within the entire healthcare ecosystem. Our consultants understand regulatory constraints, referral patterns, and economic incentives that can impact the adoption of products and services. As a result of our deep knowledge of the complexities of the healthcare sector, we dig deeper, think broader, and reach further. This enables us to provide our clients with innovative perspectives and actionable insights that help them make more confident strategic business decisions that capitalize on their company’s growth potential.

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