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Venture Capital in Life Sciences (II): Pharmacogenomics and Personalized Medicine

dna_and_pills.176112324_stdPharmacogenomics focuses on understanding the response rates and side effects of a treatment at the individual level. It analyzes the influence of genetic variation on drug response in patients by correlating gene expression or single-nucleotide polymorphisms with the efficacy or toxicity of a drug, hence improves clinical outcomes. The field of pharmacogenomics has applied in cancer, cardiovascular disorders, depression, bipolar disorder, attention deficit disorders, HIV, tuberculosis, asthma, and diabetes.

In the previous article on personalized medicine, we discussed that much of the medicine on the market has used a one-size-fits-all approach to disease; however, the way a patient responds to a particular therapy can vary widely depending on his or her sensitivity to and ability to metabolize a drug. Small differences in genetic sequences among patients can lead to significant divergences in the outcomes of treatment.

From the social perspective, through establishing the genomic and clinical characteristics between each of the subtypes, personalized therapy strategies are more robust and more effectively targeted treatment, which will lead to better and longer survival; from the economic perspective, personalized medicine will lead to reduced medical costs, and investors could allocate capital to those companies that would benefit from the improved outcomes.

Nowadays, there are a few therapies for cancer and HIV that utilize personalized medicine, as they require a diagnostic test to see whether a particular therapeutic agent will lead to an optimal clinical outcome at a larger extent. With many scientific breakthroughs, the pace of the hunt for personalized medicine has been picking up rapidly, and there is no doubt that there will be more research and ultimately treatments to come.

Investing in personalized medicine is both investing in the technology and the impact that it will have on the system:

  1. There are life science tools that will allow greater exploration of personalized medicine. Even if it may be difficult to determine the biggest beneficiaries, a way to anticipate this is to follow the science and see what types of experiments using what types of machinery science. I am with one of our biomedical portfolio companies at the 105th Annual Meeting of the American Association for Cancer Research (AACR) in San Diego, California, where 18,000 researchers and patient advocates are presenting the latest and most exciting basic, translational, and clinical discoveries. Events like this provide a unique opportunity to learn about cutting-edge advances, obtain feedback on research, and make connections that will foster future collaborations.
  2. Acquisition of biological material for archives or libraries will be an important value-creating aspect of any business model, for instance, blood samples. The companies with comparative convenience in obtaining such samples from tiered network hospitals have absolute advantages in their research and experiments. Many western professionals in the field have mastered world-class methodologies, however, they have not had sufficient chance experimenting and practicing, due to the low morbidity in local areas.

The Blockbuster Business Model

Utilizing the variations in the genetic code to develop therapeutic agents could have a wide-ranging impact on the business models of medical products companies. The blockbuster model refers to an unusually successful product or service with huge sales. It is commonly used in pharmaceutical industries where development costs, risks, and potential rewards are high. There are drugs that exist in company libraries that would fail when tested on a large population, but that might succeed brilliantly if they were tested on the “right” population, in which they can receive premium pricing for near-guaranteed outcomes.

The blockbuster model has served the pharmaceutical industry well; many of these companies have even built a large infrastructure around the blockbuster – thousands of sales representatives in a certain area, trained and paid to focus on the one or two breakout products in a company’s portfolio. If the average drug is expected to deliver only 5% return on investment whereas a successful blockbuster drug may yield returns 10-20 times as large. A number of medical companies have been built around the success of single products, although a risk facing these companies built around a single blockbuster product is to get too focused and dependent on the revenues it generates.

Going forward, niche medical companies in personalized drugs will need to experiment in order to create a new model, managing the inherent risks through a sound strategy and a thoughtful approach to execution. They will probably craft a tailored model constructed from inter-related building blocks. In fact, they are already using each of the blocks to compete successfully among the giants of the industry.

The Value-Added Venture Capitalists

Venture capitalists serve a very important role in life sciences and biotechnology by helping to bring fruition ideas and technologies that improve the quality of our life; technology and medicine in particular have benefited enormously from venture capitals, not only because the advances and breakthroughs in disease treatment and medical devices received venture funding. More importantly, the value add is what enables start-ups to make it past the initial hurdles of starting a business where others would normally fail:

  • VCs provide more capital than a bank would ever consider.
  • VCs provide expertise in the areas of marketing that many start-ups lack, and help them advertise and market their product and folks to make sure that products shipped out to the stores for sale.
  • VCs get involved with the strategic leadership, and provide start-ups with expertise and skills in management, operations, and business capabilities.
  • VCs bring access to extremely valuable networks of expertise and talent, which can be utilized for a variety of purposes.
  • VCs help start-ups arrive at the final product concept, otherwise they would have to test more different prototypes and models, and a lot of trials and errors.
  • VCs provide start-up companies with a kind of “declaration of the truth” that gives the start-up credibility in the eyes of the world.
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4 comments on “Venture Capital in Life Sciences (II): Pharmacogenomics and Personalized Medicine

  1. Hi there! This is my 1st comment here so I just wanted to give a quick shout out and tell you I really enjoy reading
    your posts. Can you suggest any other blogs/websites/forums that cover the same subjects?
    Thank you!

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