Through an alliance announced last July, Pfizer has partnered with venture firm Flagship Pioneering to develop 10 new drug candidates using technologies within Flagship’s startup ecosystem. The novel partnership model marks a more strategic approach to linking drugmakers with startups to hunt for new medicines.
Under the agreement, which Flagship calls the Innovation Supply Chain partnership, both parties will work together to identify opportunities for creating new medicines that align with Pfizer’s interests. The pharma giant will then fund the selected development programs and later have the option to license or acquire the asset.
It’s a collaborative approach that suggests a more effective and efficient R&D process. The programs are designed to deliver exactly what pharma needs, while plugging in startups who can create these medicines can help get research up and running faster.
What could a partnership model like this mean for the biotech sector? Here, we take a look at what its entails and consider how it could influence drugmakers’ efforts to fill their pipelines.
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Pfizer and Flagship: what does the deal involve?
Essentially, Pfizer and Flagship have agreed to strategically pool their resources to create a new model of R&D.
Both parties will come together to identify opportunities for developing 10 single-asset programs—an effort that each has said they’ll commit $50 million upfront towards. Then, Flagship will look to its ecosystem of over 40 companies and biotechnology platforms to identify which startup could bring the medicine to life, explains Paul Biondi, general partner at Flagship and president of Flagship’s drug discovery and development unit, Pioneering Medicines.
After that, there’s a phase where both Flagship and Pfizer can invest to generate some data that demonstrates whether the idea is feasible. Various investigations like this are run to determine which development programs to move forward with.
“We can ultimately create 10 programs that Pfizer would fund, and both Flagship and the bioplatform company would be eligible for upfronts and success milestones, and royalties, if we can advance the asset,” Biondi says. That amount could be up to $700 million for each program that’s successfully commercialized.
So far, two programs have been announced: one this June to hunt for a new obesity drug with ProFound Therapeutics, and another in August with Quotient Therapeutics to identify targets for cardiovascular and renal diseases. Both startups are Flagship-founded.
What sets this model apart from other types of early-stage collaboration, such as incubators or accelerators, is the level of strategic input from Pfizer throughout. “It’s almost like a pre-collaboration,” Biondi explains.
Normally, pharma companies would look to the wider landscape to find startups of interest and then assess each option to see if it fits the bill. Incubators and accelerators may offer startups with resources and guidance to develop their work, and often have relationships with pharma companies. Yet startups would still need to pitch their proposition and hope that it lands.
Whereas in this case, Pfizer works with Flagship to predetermine what medicine they want to make and is presented with a startup that has the technology to do it. “That’s the nature of why we call it an innovation supply chain,” says Biondi. “We’re trying to supply Pfizer with a regular, more planned aspect of innovation that we know is of interest to them.”
And because the nature of the relationship between the startups and Pfizer has already been established under the terms of the deal, programs can be set up quickly, he adds. “We can get things up and running in a matter of months.”
The bigger picture: another way to outsource R&D
The partnership between Pfizer and Flagship has been billed as the first of its kind. Yet it’s also part of a sector-wide shift towards tapping startups for R&D: per healthcare investment firm HBM Partners, 63% of drugs approved from 2013-18 originated at smaller companies.
This model presents another strategy for drugmakers seeking to source medicines from smaller firms.
Handling R&D in-house is expensive while pharma companies are under pressure to keep their pipelines stocked—especially as many best-selling drugs are due to lose patent protection by the end of the decade. Here, working with startups offers efficiency: typically, they’re more agile and can do R&D faster than industry behemoths. It can also give pharma a window on innovations and breakthroughs which could help further their interests.
“[Pharma] companies are very heavily focused on: ‘How do I increase my R&D productivity?’,” says Laurent Van Lerberghe, biotech investor and former C-suite executive at Sanofi. While pharma companies will always manage some R&D internally, “they will look more and more to additional sources. They’ll work with different biotechs, and not always by acquiring them.”
This could be through an incubator model, such as Johnson & Johnson’s JLABS program where startups are given access to lab space and resources to advance their ideas as well as connections to investors. J&J, on the other hand, gets early visibility on research breakthroughs that may be aligned with their priorities.
Big drugmakers—including Merck, Sanofi, and Novo Nordisk—have also incorporated a venture capital arm into their business which is specifically focused on areas that are relevant to them. This gives pharma companies faster access to both startups’ scientific expertise and the drug they develop, says Van Lerberghe.
Yet because innovation is moving at such a rapid pace—AI and ML are helping to uncover novel biology in leaps and bounds, for instance—pharma companies are faced with a new challenge: how can we access all of this insight and determine what could move us forward?
With an increasing amount of potential targets to go after and more available modalities to do so, “it almost forces [pharma] companies to think to themselves: ‘Gosh, I have to have a more systemic, effective way of accessing a lot of the innovation that’s happening out in the biotech sector’,” says Biondi. “It’s almost impossible for a pharma company to think, ‘Hey, I can bring all that in house’.”
A model like Flagship’s may be an answer, where pharma companies work with a partner who puts forward technologies that are best-placed to advance their interests—with the resulting R&D program designed to deliver exactly what they want.
What does this mean for startups?
In the biotech startup world, most new drug companies wouldn’t survive if a big pharma or biotech didn’t buy the asset at some point, says Van Lerberghe. Partnership models that leverage startups for drug sourcing are then certainly good news for smaller firms.
Specifically, a partnership model like Flagship and Pfizer’s could benefit startups who are developing a lot of assets, says Founder and CEO of Vivan Therapeutics, Laura Towart. “In our case, we are identifying so many new drug combinations and new targets that it takes a lot of time to try and shop each one to pharma. So if you have a relationship with pharma, they can just assess everything and determine if they’re interested. And then if not, you’re free to move on to another pharma.”
This could help startups cut their losses by knowing which programs to move forward with and which to kill. “It’s hard to expend a lot into a program without knowing you have a clear buyer,” says Towart.
Partnership models that give startups the chance to secure early pharma buy-in may also create funding opportunities in a challenging market. While Ernst & Young reports that deal activity has been on the rise this year, funding rounds have been bigger but fewer in number—and early-stage ventures are often left behind.
Plus, defining a thorough process for vetting bioplatforms and tailoring R&D to pharma’s needs, like Flagship has done, can increase the odds of a startup making it, says Van Lerberghe. “What people observe is that by putting a lot more rigor into these steps, then you increase the rate of success really quite significantly.”
This means that both startups and venture firms could face less risk and stand to gain a lot more. “For VCs, there is this view that you need to invest in 25-30 companies, and most of them will fail but one or two might succeed,” says Van Lerberghe. “If [Flagship’s model] can move it to two to three successful companies out of the 25, we can imagine that the return becomes astronomical.”
Looking ahead: working better together
Biondi and Van Lerberghe agree that we’re likely to see more partnership models between pharma, venture firms, and startups in the coming years. After all, pharma companies need to fill their pipelines and virtually all drug startups need pharma support to survive.
Since announcing their alliance with Pfizer, Flagship has entered into a similar partnership with GSK and has plans to roll out its approach further. While a partnership model exactly like Flagship’s isn’t necessarily an option for all firms—Flagship has a portfolio of over 40 companies with platforms that could be broadly applied, along with the financial resources to co-invest—Biondi predicts that we’ll see companies create versions of it that suit them.
“I think that there are other flavors of this. We’ll certainly iterate and try to create this as a better and better model for us…but I’m sure there will be derivations where people try to build on this concept.”
We may also see a rise in other types of alliances for advancing R&D, such as with research and medical institutions. For instance, Vivan Therapeutics has partnered with the Institute of Cancer Research to develop multi-target drugs. “The ICR is very well funded, and they can take drugs all the way through trials and to market themselves,” says Towart. “For us, it’s been really advantageous.” Vivan is currently seeking pharma partnerships as well.
In any case, having partnership channels with pharma is always a good thing for biotech, Biondi adds. “If you look across the biotech industry at every successful company, they have always done it in some way, form or fashion, in partnership with someone else.”
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