The Post JP Morgan/Biotech Showcase Outlook

The New Burden of Proof: Platform, Concept and Relevance

Extended biotech bear markets bring similar challenges: the cost and availability of capital become asynchronous with long product development timelines inherent in the business. As such, all bear markets produce casualties among those companies that were well along to the end of their cash runway when the flow of funds dried up. The restructurings and bankruptcies we are seeing in the current market are thus nothing new.

Nevertheless, one characteristic of the current bear market differs markedly from all those proceeding it: the longstanding “social contract” between companies and investors has been ruptured. This understanding was rooted in two fundamental assumptions; stage of development directly and positively correlates with value, and the generation of positive clinical data simultaneously de-risks both the program and the enterprise, and hence, reduces cost of capital. But in today’s market it is common for companies to see market caps eviscerated for what would been deemed an almost guaranteed positive share price catalyst in prior days: the release of unequivocally positive trial results. As a result, the anticipated milestone-linked financing event becomes either impossible or “toxic.” Oncology drug developers, especially those pursing opportunities failing to identify and support an argument for a clearly differentiated Target Product Profile (TPP), have suffered the most.

Ironically the root of this problem may reside with the innovation that is the lifeblood of the industry. Over the course of the past decade, biotech companies have validated six key novel therapeutic platforms (ADCs, Bispecifics, Gene therapy, Antisense, CAR-T and RNAi). The lion’s share of this platform validation has taken place utilizing clinically well validated therapeutic targets, the preponderance of which sit within oncology.

It is hard to fault senior management and boards for choosing to steer clear of the “double risk” resulting from novel platform coupled to novel target. Unfortunately, having validated the platform in the clinic against a validated therapeutic target, too many companies made the decision to push what became their lead program further into development despite the lack of any compelling evidence to assume competitive advantage vs an increasingly lengthy list of programs chasing similar patient populations and indications. One could argue that for many, if not most, of these programs, the burden of establishing proof of platform and concept had been surmounted but the hurdle of achieving Proof of Relevance (PoR) anchored in a clear strategy for producing a differentiated TPP has investors (as well as potential large pharma partners/acquirers) dubious or outright dismissive of the case for ROI to support further development. Indeed, it is worth asking if a significant percentage, if not the majority, of novel platform developers, are spending increasingly expensive and diminishing development dollars on the wrong lead program.

All of this raises a powerful strategic dilemma for C suites and Boards especially at those companies failing to generate value from pushing later in the clinic. Among the questions that sit at the center of a potential strategic overhaul, the following seem the most urgent:

Can a differentiated TPP be built for a program aimed at a now well-validated and crowded therapeutic target?
What are some potential strategies for TPP differentiation when a program is aimed at a validated but crowded target and what are the various risks and trade-offs they entail?
If the case for differentiation does not appear compelling and/or presents unacceptable risks, can/should resources be directed to apply the now proven platform to an earlier stage program against a less well validated target, either an internally sourced or external one?
For novel platform developers with a not yet clinically validated platform: should double platform target risk be considered? How can this risk be managed/mitigated?