Tl;dr To assess the importance of commercial considerations for a biotech’s first drug launch, I analyzed 50 companies, broken into platform and non-platform, and determined whether the primary motivator was proof-of-concept vs. commercial success. I found that nearly all platform companies prioritized proof-of-concept, while non-platform companies skewed towards commercial success.

Background & Approach

Platform biotech companies have risen in popularity over the last few years, coinciding with an uptick in venture capital money flooding the industry. Novel platforms tend to emerge alongside scientific and computational advances, with many of the current batch deploying machine learning-informed approaches. Typically, a biotech platform is defined by three core principles:

(1) Deploys differentiated technologies or scarce scientific competencies

Examples: Usually a novel and fundamental scientific advance(i.e. CRISPR-Cas9, RNAi), an engineering innovation (CAR-T, LNP), or differentiated technology (single cell sequencing, AI/ML)

(2) Possesses strong protections / moats around their core technology or value-add

Examples: Typically (1) licensed IP from academic institutions, (2) scientific expertise and know-how, (3) for AI, large, high-quality, proprietary data sets and / or (4) manufacturing plants or CMC expertise

(3) The platform technology is scalable and theoretically target / TA / indication agnostic

Examples: single cell sequencing, AI/ML, protein engineering, Tx peptide fragments

This got me thinking – since the core platform technology is theoretically indication agnostic and platform companies are typically deploying a novel approach, it would make sense that these companies de-risk drug development by following the lowest hanging “biological fruit,” (proof-of-concept) rather than prioritizing commercial potential. In this way, clinical success can de-risk the platform approach, which can then be applied to more commercially robust diseases without fear that a clinical failure will sink the platform’s reputation. It’s not unusual to see a company prioritize a smaller indication in order to establish clinical data, pricing and brand recognition before advancing towards larger, more competitive indications.

Conversely, non-platform companies would need to consider commercial potential from the onset, since there isn’t a novel technology or approach that is getting credit with any clinical success.

While many of the platform companies founded in the last decade or so are in the clinic, most do not yet have a commercially approved drug. Thus, to test this thesis, I analyzed the first commercial launch of 50 US and European biotech companies, with a mix of 15 platform and 35 non-platform. I wanted to address a few questions:

• Was this asset primarily prioritized based on commercial considerations or proof-of-concept? How did that vary between platform and non-platform companies?
• Of the platform companies, how many doubled down on platform risk & biological risk vs. those that just isolated platform risk by pursuing a canonical target?
• If there was a follow-up asset, was it in the same therapeutic area or was it different?

I classified companies as platform vs. non-platform based on the criteria noted above. Importantly, a platform has an expiration date. That is, a company can be built around a novel technology that eventually becomes standard practice across the industry, and thus subsequent companies using that technology are no longer platform companies. A great example is Genentech, which had a platform based around recombinant DNA when it was first founded. While the approach was novel in 1976, it has since become an ubiquitous tool for drug developers and would not suffice today as the only technology to build a platform company around. Today, we don’t think of Genentech as a platform company, but rather a mature biopharma – there’s a constant evolution.

To determine whether a drug launch was primarily commercially motivated, I tested it against a few questions:

• What was the initial indication and how compelling was that market (market size, # of patients, pricing power, competitive landscape)?⁽¹⁾
• Was the drug acting against a canonical or novel target?⁽²⁾
• Was the company formed around a specific therapeutic area or disease?⁽³⁾
• Were subsequent drug launches in the same TA / indication?⁽⁴⁾
• Was development of the molecule prioritized with the understanding that disease applications would be determined later?⁽⁵⁾

1. Large unmet need, limited competitors and premium pricing with a difficult-to-treat disease indicate commercial prioritization
2. Canonical targets (defined as already clinically validated through efforts of other drug developers) offer de-risked biology but reduced commercial opportunity if drug is a “me-too”, while novel targets can offer the reverse
3. Companies focused on a disease area (typically rare disease) are prioritizing commercial factors and limiting area of biological discovery
4. Similarly, disease franchises indicate commercial considerations are driving R&D
5. Several drugs were the result of focused R&D efforts around a specific molecule or target, with indication prioritization deferred to later

It is important to note that all biotech companies are fundamentally influenced by biology – you can’t get around it and simply will your way to an approved drug in a big indication. However, there is a clear difference between companies pursuing first-in-class treatments in pre-defined indications or therapeutic areas versus companies limiting biological risk via targets & diseases offering the greatest chance of clinical success, at the expense of commercial potential. The goal is to get a sense as to which is more important across different types of biotech companies.

I excluded specialty pharmaceutical and generic / biosimilar companies to focus on a more relevant set of companies that pursued novel drug development. Data sources included GlobalData, company filings, press releases, and equity research. For a complete list of companies and their classification, check out the appendix.

Now, on to the results.

The Results

• As expected, a majority of platform companies are driven by proof-of-concept, while a majority of non-platform companies are driven by commercial interests
  • The data is actually more robust for platform companies driven by proof-of-concept if you adjust for Moderna and BioNTech, which were the only two driven by commercial interests (to launch COVID-19 vaccines, an outlier event)

• Most non-platform companies were built around disease franchises and thus follow-on drugs were typically also in these same pre-selected indications or therapeutic areas
  • There was no clear trend here for platform companies as the n was small and many recent platform companies did not have multiple drug launches

• Regardless of a platform, nearly all companies did not self-commercialize their first drug. Given the well documented struggle of small biotech companies attempting to build out a competitive commercial infrastructure, this makes sense to me

• There was no clear trend around the pursuit of novel targets, with roughly half of all companies choosing either path

Seeing so many platform companies weigh proof-of-concept over commercial consideration brings up the notion of platform-disease fit. As others have noted, while a platform can theoretically be applied to everything, it makes sense to build in a stepwise manner and prioritize the disease it can best address. We see this most prominently with gene therapy platform companies – oftentimes, the first indication is bespoke, but represents an attainable, important proof-of-concept for downstream, larger indications. This is just smart drug development.

It was interesting to see target selection as mixed as it was, particularly for platform companies. This suggests that many are comfortable doubling down on biological and platform risk, by launching an initial asset against a target for which there are no approved drugs. It is important to note that many platform companies are around for a decade or longer before launching their own asset, so there is ample time to build biological conviction, particularly if the platform is well suited to interrogate a specific target. There are many de-risking decisions to be made during drug development, and target selection is just one of them.

Looking at the next generation of platform companies that are still in the clinic, we continue to see a mixed trend. For example, many of the leading cell therapy companies pursuing novel approaches are doing so against targets with a well understood association with the disease and multiple FDA approved therapies:

• Allogeneic CAR-T: Allogene (CD19, BCMA), Caribou Biosciences (CD19), CRISPR Therapeutics (CD19, BCMA), Gracell Biotech (CD19), Precision Biosciences (CD19, BCMA), Poseida Therapeutics (BCMA)
• CAR-NK / CAR-NKT: Athenex / Kuur Therapeutics (CD19), Century Therapeutics (CD19)
• CAR-M: Carisma Therapeutics (HER2)

This approach isolates platform risk, allowing investors, management and providers to assess the merits of the approach, rather than debating whether it was the target or the platform that contributed to a clinical failure. Importantly, a novel cell therapy approach can leapfrog current treatments against the same target, even if efficacy & safety is similar, if manufacturing, dosing, or cost are better. With multiple ways to differentiate, it’s no surprise to see de-risked targets prioritized. Demonstration of those additional value drivers is critical – without it, expect the market to collectively groan at another CD19 CAR-T candidate.

Conversely, leading AI/ML companies in the clinic are leveraging multiple approaches, with some pursuing canonical targets, some repurposing targets for new therapeutic areas and some pursuing first-in-class targets altogether:

• Canonical targets: Recursion Pharma (HDAC, PKC, MAP2K1 / MAP2K2), Relay Therapeutics (FGFR2, PIK3α), Compugen (TIGIT)
• New TA or indication: Insilico Medicine (CD167 for fibrosis), Exscientia (EXS-21546 for oncology), Valo Health (ROCK 1 / ROCK2 for metabolic disorders & S1PR for CV)
• Novel target: Compugen (PVRIG)

However, while this analysis shows that pursuing platform proof-of-concept is an established route, it does not necessarily mean it is the correct decision for all companies, in all environments. Indeed, while the idea of a biotech platform is not new, the robust private funding environment (and supportive public markets) prior to late 2021 / early 2022 led to an explosion in these types of companies that were far away from a commercially viable drug. The subsequent public market backlash against such companies relative to asset-oriented players is well-documented, although nearly all biotech companies touched historic lows over the past year, so neither approach was “safe”. It can’t be overstated enough – the ultimate goal of any therapeutic biotech company, platform or not, is to develop effective and safe drugs, either for themselves or for partners. It is reasonable to give the most recent batch of platform-oriented companies more time to reach that goal, but ultimately that will be the measuring stick for success.

Implications

So, what are the overall takeaways for drug development from this analysis? I see a few:

• When deploying a novel approach or technology, it is common to follow well-understood biology and test broadly for platform-indication fit; for canonical approaches, while biology is still king, companies are more picky about the disease area to maximize commercial potential
• Of note for the current batch of platform companies, there is established precedent to proving your approach or technology works and worrying about commercial applications later. For most companies, that meant being a differentiated late-launcher in a crowded target & indication, but having a pipeline behind the lead asset that got investors excited about future applications
• Non-platform companies should start thinking about building disease franchises early – owning a niche de-risks your early launches and builds a competitive moat that can form the backbone of your company as you later expand into adjacent therapeutic areas
• If it’s your first launch, strongly consider sticking to precedent and partnering with a larger pharmaceutical company; companies that didn’t do this but still found success tended to target rare disease indications with a few thousand (or less) patients globally
• Platform companies are given a longer runway to achieve this, but ultimately the true measurement of success for all companies is in bringing differentiated, efficacious and safe drugs to market
  • On a longer time scale, it will be interesting to assess the public market performance of companies who prioritize commercial considerations vs. those that do not

Appendix – complete company list & classifications