Monday, May 14, 2007

$100 million and the price of drug discovery

Can biotechs build businesses around discovery research?

It's a subject IN VIVO tackled last November, in Roger Longman's article "The $100 Million IND." While the answer is, of course, that it depends--on a variety of factors--the $100 million benchmark has gained both credibility (among biotechs) and perhaps not a little notoriety (at their pharma counterparts).

Over the weekend the NJ's Star Ledger took a look at biotech's 9-figure ambition, and noted the upward progress of the price of discovery: essentially, you've come a long way, baby.

(We certainly did not.)

It should be noted that the $100 million figure is extrapolated from Infinity Pharmaceuticals' cost-based analysis of drug discovery, a method Infinity's Jeff Tong talked at length about at our recent Pharmaceutical Strategic Outlook meeting in New York.

The upshot is this: top tier IND-stage biotech assets are fetching the kinds of prices that should allow those biotechs that are very good at discovery research--Infinity and its ilk--to build profitable businesses without resorting to highly dilutive equity fundraising or attempting to move downstream into later-stage development and commercialization -- seen by most investors and management teams as a requirement for any successful biotech and a high costly aspect of dealmaking for the pharmas whose infrastructure the biotechs feel forced to duplicate.

Indeed, in an article in the upcoming IN VIVO, Alnylam Pharmaceuticals CEO John Maraganore argues that biotechs could be willing to give up their ambitions for development and commercial infrastructure in return for a bigger chunk of royalties -- say 20%.

Whether the reason for these increased valuations is an increased recognition of INDs' worth, desperation at Big Pharma exploited by savvy biotechs, or a simple case of supply and demand doesn't really matter. It seems the $100 million IND is here to stay.

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