A couple of questions for Dr. Zydowsky:

After so many years as an influential player in the industry, what consideration did you have that led you to the decision of forming your own consulting firm?

Do you also see an increasing role that a private industry consulting firm could play in providing the bridge between start-ups and financing sources?

Michael

Michael,

Thank you for the questions. I saw the “opportunity and need” for someone with my skill set (scientific background coupled with start-up business experience) to work with “emerging companies” in all areas of finance, operations and coporate development. Yes, there is a void here as there are not many people who have my experience base, network and are good at transitioning into (and out of) a team at the appropriate time. Most young companies lack a full senior management team and need people who have breadth of experience and can help them (“hands on”) translate the scientific vision, develop the strategy and build a foundation on which to move from the raw start-up phase to a company that is ready for an IPO or acquisition. Having my own consulting business which is focused in this specific niche area also gives me the opportunity to gain even more experience from working with multiple clients, while allowing me to add value by “giving back”. I am very selective with the clients I choose and have been very fortunate to work with great teams doing great science. As a rule, I usually end up working with most of my clients on the average of 1.5 – 2 years so I really get to know their business and see the benefits of my contribuions. The only difference is I work with multiple clients in parallel. Starting my own business in early 2003 was a strategic move and building my business these last few years is something I have really enjoyed.

Last, I do believe that consultants like myself can help companies develop business plans, define the key milestones and operating budget, as well as identify the right investors (or source) of $$.

Lynne Z

Dear Lynne,

I am only beginning to learn and understand the biotech world from the perspective of a graduate student in life sciences persuing a PhD. I’m attending MaRS seminars to gain exposure to the field as well as taking a course at Rotman Health Care. I am struck by how differently the industry and its direction is interpreted by different speakers.

Some paint a very pessimisstic picture pointing out all the hurdles and to my surprise emphasize the rigidity of biologics development and regulation and the near impossibility of moving towards personalized medicine, which would be too costly (who would pay for genetic testing to tailor a drug? companies don’t want to shrink their market) and potentially lead to ethical problems of genetic code availability.

Others such as yourself view existing challenges as exciting potential opportunities. I realize starting a spin-off is not easy and that particularly in Toronto there is a tendency to go the licensing route, which, although less risky, is not as appealing as growing a company. Would you please comment on these opposing attitudes regarding biotech? Are the pessimists just realistic or perhaps too short-sighted? How do you interpret concerns regarding personalized medicine?

Thank you,
Joanna

My other question relates to the issue of strategic alliance formation, particularly their timing. Some view an alliance between a start-up and a large company as the best thing a small firm can ask for but that can lead to a loss of the IP if licensed too early. Phase III clinical trials have been shown as the most advantageous stage to form alliances but how is financing dealt with to reach this stage? What are other options small firms have to prevent premature loss of innovation and potential future revenue?
Thank you,
Joanna

Dear Dr. Zydowsky,

I was wondering if you could briefly comment on your experience dealing with the US Bioshield program. Is their any history of Canadian research groups and/or companies having success in getting funding from the Bioshield initiative? It seems like a very attractive opportunity to get some non-dilutive capital.

Also, I noticed that you mentioned that the program is focused on antibacterial. Is it fair to assume that anti-virals would also be of interest to such an initiative?

Thank you,

Fred

Dear Joanna,

Thank you for your comments. Our industry would not be where it is today if we took the glass half empty vs the glass half full approach to the callenges involved with building biotech companies. While we must all be realistic regarding the challenges, technology continues to evolve and change the way we approach drug discovery and development. The next generation of drugs continue to be developed.

That said, as discussed on Monday, one needs to always be aware of the current market forces as this will always impact all aspects of your business. Raising money to finance your venture isnt easy nor is developing drugs. The FDA does impose certain constraints that we have little to no control over, therefore you really need to understand the current regulatory environment and regulations and engage people with experience who can help you navigate these areas. Thats why you need to be smart and strategic and do a commercial assessment, develop financing,business and drug discovery/development strategies. You need learn from other successes and failures. Look carefully at some of the current companies and understand what makes them successful from both the scientific and business perspective, as well as what made them fail.

As for predictive medicine – yes there are going to be many ethical issues which will need to be addressed. However I beleive that we will continue to move in this direction and part of this will be due to the FDA requiring the use of biomarkers, genetic tests, etc during and after the regultory process. Technology will be developed that will make this possible (e.g. the $1000 genome, molecular diagnostics). As for biologics, I too feel this is an area that will only continue to grow rapidly as many companies are moving in this direction – both to develop new protein therapeutics and new technologies.

Lynne Z

Dear Joanna,

You are asking all of the right questions and have hit upon all of the critical issues. While a strategic alliance can validate the company, it is also a careful balance between the value-add and validation vs need to partner to fund the R&D.

I really want to stress how important it is to develop operating plans/budgets so you understand how much money you need and how that correlates to the value-add milestones over time.This way you can begin to project how much you need to get to the key milesontes such as filing the IND, phase I, etc.

I would also like to mention that sometimes phase II is the place to partner as that is the stage where you have shown signal in man (efficacy) and depending on the type of clinical trial, will probably need a pharma partner to support the costs associated with phase III.

That said look at the deal Alnylam did with Novartis in 2005. That was a technology platform deal which validated RNAi as a therapeutic modality. It had economic terms that allowed for the continued development of Alnylam’s platform while having the potential to put drugs into the Novartis pipeline with flexibilty for each party in how they can share the risk and reward.

Look at the recent deal that was just annouced between Regeneron and Bayer on VEGF. Based on phase I/II data with very creative deal terms that allows the R&D to get funded with Renegeron retaining their US rights, but sharing ex US rights with Bayer.

Bottom line, this is not black and white with respect to timing and economic terms. In today’s market you need to be smart, strategic and creative in developing these deals. That is how you maintain innovation and maximize your potential for revenue.

Lynne Z

Dear Fred,

Thank you for the email. There are several sources of money from the US government such as Project BioShield, DHS, DARPA, NIAID and others which are focused on initiatives in the area of biodefense and development of counter measures for biodefense. These are all separate sources of money with their own budgets and criteria. You can go to the websites and search for solicitations (BAA or Broad Area Announcements) to see the criteria and dates for submitting proposals. You can also schedule visits with individuals in these groups to discuss their interests and how your technology might fit within their programs.

Yes, I often work with emerging companies to develop strategies to obtain these sources of funding. What is key is that you understand the funding sources initiatives and are able to meet their milestones. As a company you need to decide if the strategy is one where the government is your customer (e.g. government procures the technoloogy, therapeutic, device, etc) – and/or – you are able to leverage this money to build out your platform while meeting their milestones (e.g. a portion of the money is budget relieving). I always recommend that if you are pursuing this type of funding you need to do so as a global strategy and apply for multiple opportunities.

It is my understanding that Canadian scientisits can get money from entities such as NIH, DOD, and DARPA and NIH biodefense contracts (e.g. NIAID). Canadian companies cannot get SBIR funding.

Lynne Z

[...] After last month’s general overview session on the business of biotech, this month saw the focus of BioEntrepreneurship narrow down on the subject of market assessment. [...]

I enjoyed the audio presentation. Just keep up the good work!

David