Prof. Andy Whiting, Nevrargenics, responds to the lack of translational funding for the biotech industry, and what more needs to be done to close the gap between drug development and clinical trials, to ultimately address the urgent need for novel treatments for complex diseases.
Key insights:
- The gap in translational funding means that many promising drug candidates fail to progress from the drug development stage to the clinic.
- Allowing increased exposure to early-stage drug development would unlock huge sums to fund vital research and gives investors a chance to make extraordinary returns if they back the right companies.
- Clinical trial design needs rethinking to shorten timeframes and enable drug candidates to ‘fail fast’ as lengthy and complex trials yield the most expenses.
- Rethinking the risk vs. reward ratio for investment and investors, may incentivise capital to be deployed into less certain, but socially valuable, R&D activity.
The recent Budget announced several measures designed to support innovation-led businesses, particularly early-stage companies. I was pleased to share my responses to the approval changes and R&D tax relief in the UK.
I broadly welcomed some of these measures, but there are still systemic, long term challenges facing pharmaceutical and biotech start-ups that have not been addressed either in the recent Budget or by wider government policy.
The UK has a lot to offer life science start-ups: scientific talent, a world-leading regulatory system and a dynamic and varied supply chain for everything from device components to assays and beyond. But there are still significant barriers for many biotech start-ups that prevent them growing into bigger businesses – this is bad for the economy and bad for patients, who fail to benefit from medicines that don’t ever reach the market or even make it early phases of clinical testing.
As you might expect, there are many complex factors affecting the success or otherwise of a biotech business, but for me there is one that stands out – the gap in translational funding.
The problem
Drug development is incredibly expensive and high-risk, which contrasts with the desire of many investors to back proven and advanced stage drug candidates. This is especially true in neurodegeneration where meaningful breakthroughs are rare due to the complexity and difficulty involved in designing and testing solutions to devastating diseases like ALS, FTD, Parkinson’s and Alzheimer’s, as well as the plethora of rare diseases for which patient numbers are less than enticing for long term profitability.
The gap in translational funding – that is, the difficulty in financing the stage between drug design and advanced clinical trials – means that many promising drug candidates fail to progress at pace, or even at all.
It exists because there is an entire portfolio of more predictable investment opportunities out there for increasingly risk-adverse investors, whether they be individuals, institutions or potential pharma partners.
This is a major problem because progress on treating these diseases stalls and cutting-edge research is left languishing in labs, rather than making its way into clinic.
Neurodegeneration is one of the hardest therapeutic areas to tackle but it is also one of the most important because the unmet need is, by the stretch of anyone's imagination, absolutely huge! There are over a billion people suffering from neurodegenerative conditions – most obviously these conditions have a tremendous human cost that impacts on quality of life, but they also present economic challenges and place a major strain on healthcare systems.
Kate Bingham was right when she told the FT that ‘Dementia is a massive, massive swing for the fences, because it’s so tough, but it shouldn’t be so tough that no one ever tries’.
It is vital we make progress in this area, but to do that we need a reassessment of how and where to channel investment.
Increasing capital availability
Investing in life science businesses is akin to the kind of impact investing that is becoming increasingly popular, particularly with green technology. Biotech may be riskier than other sectors, but it is socially important and potentially extremely rewarding given the lack of solutions in market. A well-diversified angel, VC or PE portfolio should have exposure to carefully selected neurodegenerative drug development companies.
Many of Nevrargenics’ investors have joined our journey due to personal or familial experience – they are motivated by helping facilitate progress in the field and by the potential returns it can bring. This is important because pharma business models don’t lend themselves to quick fixes – investors need to be brought in for the long haul and feel part of the journey.
I’m not making the case for huge scale public investment in every pharmaceutical start-up, but there is a problem in that promising, socially valuable companies find it difficult to access translational funding.
This needs fixing.
One way forward could be to change the rules guiding investment strategies for pension funds, for example. Allowing increased exposure to early-stage drug development would unlock huge sums to fund vital research and gives investors a chance to make extraordinary returns if they back the right companies. Tax and financial incentives specifically targeted at biotech and pharma firms could complement this and make a meaningful difference to the ‘investability’ of many companies.
Crucially, clinical trial design needs rethinking to shorten timeframes and enable drug candidates to ‘fail fast’ – lengthy, complex trials are the expensive part of the process for businesses like ours. James O’Shaughnessy’s review into clinical trials in the UK is welcome acknowledgement of the challenges and problems that already exist.
Like every sector, part of the perceived risk in biotech is that investors don’t know which companies to back especially given that many fund managers lack deep scientific expertise. This is where careful due diligence is required to identify which companies have genuinely unique candidates that offer the best chance of success. Experts have a vital role to play in guiding and unlocking investment, by helping non-specialists understand the complexity behind some of the most promising research. This can help de-risk the investment for others who want to join the journey, but feel unable to do so.
Identifying the stars
Navigating specific disease areas can be bewildering. Experts disagree within many fields and so identifying which companies to back can seem an impossible challenge, leading many investors to want to hold off on this translational funding until the likelihood of success becomes more apparent.
But, catch 22 – efficacy can’t be demonstrated until funding has been secured to advance trials! In our case, we have demonstrated this to investors by highlighting the dual-acting nature of our molecules, and their ability to target genomic and non-genomic pathways. Our lead drug candidate, NEVR0645, is being taken through preclinical development and is focused on the three N’s – neuroprotection, neuroplasticity and neurorepair. This forms the USP of our offering and helps it stand out from what has gone before in neurodegenerative drug development.
Ultimately, we need to shake up the risk vs. reward ratio for investment and investors, so that we effectively incentivise capital to be deployed into less certain, but socially valuable, research and development activity. By widening the pool of potential investment in biotech for translational funding, and by targeting that funding at the most promising, game-changing and disease modifying, novel opportunities, we can accelerate what is needed most in drug development: complex, novel solutions for complex diseases.
It makes commercial sense but it’s also an ethical imperative. The translational funding puzzle needs solving, and fast!