Thursday, May 28, 2015

Uncertain Health in an Insecure World – 42

“Innovation Conflation”

The word innovation has long lost its cachet in business parlance. Ubiquitous, over-hyped and jargonized, innovation may well be beyond hope of meaningful use retrieval.

We have previously examined the importance of health terminology clarity in “Definition-itis” (see post #14). Now more than ever, a clear definitional framework is essential to advancing the life sciences innovation ecosystem.

In this vein, and as emphasized by Harvard’s Business Innovations in Global Health Care program, there are three distinguishable innovation domains – scientific, entrepreneurial and business. What isn’t as obvious is the Achilles heel of each.

Whether basic or applied, peer-reviewed research is foundational to robust scientific discovery and continuing knowledge advancement. However, irreproducibility is pervasive in the pre-clinical life sciences research literature. Inability to replicate or verify published research findings is negatively impacting the development of novel therapeutics. Having largely divested from internal R&D efforts, big pharma relies heavily on published studies as the basis for investing in innovative diagnostics or therapeutics. But the high failure rates of translation from bench-to-bedside can be traced to flaws in the research process that cause irreproducibility. In 2013, the Global Biological Standards Institute has proposed best practices to improve scientific reproducibility.

Products of research flood the intellectual property pipeline, offering entrepreneurial opportunities for commercialization through a process of idea de-risking potentially leading to viable Newco creation. Entrepreneurs embrace risk, ideally timing their investment decisions to prototype deliveries and minimum viable product (MVP) milestones. Their value proposition is usually financial – equity, ROI and market share growth – occasionally with a nod to corporate social responsibility. But for every innovative idea that spawns a Newco, there are a thousand "fail fast" commercialization busts.

The uncoordinated explosion of big data collection & analytics from genomics and other data-intensive life sciences compounds the irreproducibility problem, and adds complexity to Newco. investment timing.

Business innovation has been extensively studied and much maligned in the Harvard Business Review, Wall Street Journal, Forbes,, etc. The term “disruptive innovation” was originally coined in 1997 by Harvard Business School professor Clay Christensen in his excellent book The Innovator’s Dilemma. Back then, it was a really smart idea… both disruptive and innovative! The fact that it’s become faddish since isn’t Clay’s fault. As opposed to more mundane “sustaining innovations”, the healthcare sector could surely benefit from a Silicon Valley “twice as fast, half as expensive” disruptive mindset.

Biotech pharma companies sit squarely in the red-hot messy center of these three innovation domains. Its market growth leaders, companies like Regeneron, continuously analyze and refine the factors that predict the success of innovative therapeutics. Regeneron’s mantra is, “driven by science, and motivated by patients”. The big pharma sector has been challenged by patent expiration, regulatory hurdles and reduced productivity; the emerging powerhouses of the biotech pharma are facing business hyper-competitiveness. In the end, as the bigger bubbles below show, biological drugs (B) appear to have outstripped small molecule drugs (A).

Both big pharma and biotech pharma face the same key innovation challenge – differentiating novel biological mechanism(s) underpinning first-in-class drugs from best-in-class properties of improved follow-on drugs. Historical market studies demonstrate that it is better for business to launch first-in-class drugs instead of best-in-class drugs which have a more limited time window of business benefit. Of interest, first-to-patent does not predict first- or best-in-class drugs.

Amid this scientific, entrepreneurial and business complexity, the F.D.A. is the gatekeeper for first-to-patent new drugs entering the massive U.S. marketplace. The F.D.A. decides what new drug applications (N.D.A.) meet criteria for approved use in man based on drug safety and “substantial evidence” of efficacy in clinical trials. Since the 1980’s, the F.D.A. has expanded the capacity to expedite N.D.A. approvals based on less rigorous data in circumstances of great clinical need:

1983 – allowed expedited orphan drug approval for rare diseases
1988 – created fast track approval in response to the AIDS epidemic
1992 – established an accelerated approval pathway allowing surrogate endpoints                                            for using investigational drugs in a different way
2012 – designated a breakthrough therapy when preliminary evidence suggests                                                 substantial improvement over existing therapies

Fifty-six percent (56%) of the 312 new molecular entities (N.M.E.) approved between 2002 and 2013 benefitted from F.D.A. expediting in either clinical development or regulatory review. The number of NME’s benefitting from more than one F.D.A. program increased from <20% in 1987 to >40% in 2013, partly due to an increase in “specialty drugs” designed to treat smaller subsets of a disease in non-rare patient populations. European compassionate use drugs qualify for F.D.A .fast-track status, reducing the average drug approval timeline from ten to four years.
Presumably, this progressive F.D.A. process change, approved by the U.S. Congress, incentivizes pharma to continue risking long-haul capital in search of the next >$1 billion annual sales blockbuster, and that is good for The Economy.

What is unknown is how much longer entrepreneurial dollars will seek out the solid science behind new biotech drugs when there is likely a faster ROI to be found in the med-tech & high-tech innovation sectors. But with Regeneron-Sanofi projected to sell $4.4 billion worth of cholesterol lowering Praluent, it is hard not to be bullish!

We in the Square understand that new ideas really can’t just equal the best the status quo has to offer… But too often, that's the conflation of what's called innovation.

No comments:

Post a Comment