Commercializing biomedical innovations

The present system for commercializing biomedical research remains woefully inefficient and underpowered. Many innovative technologies and products fail to traverse the so-called Valley of Death—the funding and resource gap that currently exists between basic research and clinical development—effectively limiting the number of novel therapies, diagnostics and devices that ultimately reach patients. The Valley of Death is growing wider as investors who have been either burnt by the poor returns of previous life sciences ventures or lured by easier opportunities in other sectors have fled biotech.

This issue of Nature Biotechnology collects several articles that describe alternatives to current pathways for clinical translation of biomedical science. Fernandez, Stein and Lo argue that the increasing complexity and risk of biopharma investing can be managed using techniques developed in the financial industry. Diversified portfolios containing many biomedical projects at different stages (with a total value of $5–$30 billion) could issue debt as well as equity, thereby gaining access to a much larger pool of investment capital, and deploy debt securitization methods to reduce risk. Such megafunds would issue 'research-backed obligations,' whose yields, if not high enough for venture capitalists, should be attractive to large institutional investors such as pension funds. [Perspective, p. 964 ]

Frangioni examines the various factors that conspire to prevent new medical technologies from reaching the market and proposes to circumvent these obstacles through new nonprofit, nonexclusive models. For example, his FLARE Foundation promotes the free dissemination and development of imaging technologies; the only obligation of recipients is to give feedback on their experiences with the technology to a publicly accessible database. [Commentary, p. 928 ] This model could be particularly useful in making innovative technologies accessible to under-resourced countries that can rarely afford products produced by the existing academic-industry complex.

Ledley offers a different perspective on the disappointing trajectory of the biotech industry. His analysis of three product classes—gene therapies, oligonucleotide drugs and monoclonal antibodies—highlights the importance of properly matching business models to the evolutionary stage of the technology. [Commentary, p. 937 ] It is instructive that large tranches of venture investment in new biotechnologies often occur very early in the process of technology maturation—perhaps too early, leading many of the first wave of enterprises to fail before products reach the market.

Another way to bypass conventional pathways to commercialization takes advantage of universities' increasing interest in translational research. Christini discusses how the university's traditional role—acquiring intellectual property rights to work done within its walls and licensing the technologies to outside companies—is being supplemented with programs designed to inject university funds into early stages of clinical development. [Commentary, p. 933 ] Given that so many of the traditional venture capital investors now demand clinical data before investing, these types of university funds will be very important for bridging early discoveries into assets that can be licensed into companies.

In a related piece, Schachter describes the evolution of academia-pharma partnerships. In contrast to the more formulaic relationships of the past, recent initiatives are more collaborative, flexible and proactive, and seek to make the most of the resources that each partner brings to the table. [Feature, p. 944 ] Pharmaceutical companies are also embracing corporate venturing to the extent that these funds are now often leading funding rounds—their strategic ties to their parent corporations and expertise in drug development proving invaluable for the management of early-stage enterprises. [Building a Business, p. 911 ]

All in all, it is clear that we are in the midst of a period of tremendous upheaval in the business models used to commercialize biomedical research. Not only must Bayh-Dole be critically appraised [Patents, p. 953 ], but also a great deal of 'out of the box' experimentation will be needed to identify the ways of finding the best talent and making the most efficient use of capital to translate academic discoveries from around the globe into the biomedical products of tomorrow. [Editorial, p. 897 ] KA & AM

Patent roundup

Arlene Weintraub describes several new initiatives underway to pool IP from academic institutions. [News, p, 901].

Arti Rai & Bhaven Sampat highlight the problem of under-reporting of federal funding in academic biomedical patents and how greater attention to this problem may throw light on obstructive practices in licensing and intellectual property deployment. [Patent Article, p. 953 ].

Recent patents in biomaterials. [Patent Table, p. 957 ]

Next month in Nature Biotechnology

  • Focus on Sequencing

  • Insulators for predictable transgene expression

  • Screening identifies synergistic anti-HIV drugs

  • A genetically encoded reporter for electron microscopy

Written by Kathy Aschheim & Andrew Marshall