May 18, 2010
Building from a new idea to a leading pharmaceutical firm.
Soon after the beginning of the Better World @ MIT conference, I was already floored by the expertise of the speakers and the sheer scope and audacity of the ideas being presented. The MIT Enterprise Forum and Executive Producers Peter Zak and Patrick Robinson assembled an impressive array of thought-leaders from MIT and elsewhere, who guided the audience through a rapid-fire tour of cutting-edge ideas and innovations in business, mobile technology, life sciences, and sustainable energy. Barry Greene, President and COO of Alnylam Pharmaceuticals, Inc., presented the business model that has allowed the founders to pounce upon the Nobel Prize winning discovery of RNA interference (RNAi) to form a company that would progress, as the title of his talk indicated, “From MIT to Startup to the NASDAQ.”
Any market presents a number of unique and daunting challenges to entrepreneurs seeking entry, but the obstacles surrounding the pharmaceuticals seem nearly insurmountable to an outsider. Estimations of the cost to take a drug through discovery and development to commercialization range from $800M US1 $1B US2 as high as $1.7B US3 when the cost of failed drugs is taken into account. A drug may fail at any phase of trials, coupling any return on this extraordinary capital investment to the decade or longer timescale of the discovery-to-commercialization process. Faced with such extreme costs and timeframes, even the boldest of entrepreneurs must think twice about attempting to enter this market.
Attendees of the Better World conference were treated to a successful insider’s approach to overcoming these barriers, which should prove instructive to any entrepreneurs considering entry into the pharmaceutical market.
Recruiting Top Scientific Talent: Alnylam has committed to recruiting top scientific talent in their search for RNAi-based therapeutics. Mr. Greene stressed the importance of an active Scientific Advisory Board staffed with world-leading scientists from both academia and industry in a wide range of fields, with recognized names (including Institute Professors Philip Sharp, Nobel Laureate, and Robert Langer, the only active member of all three US academies) in biology, chemistry, and medicine. The extremely high profiles and continued contributions of the Scientific Advisory Board leads to recruitment of only top talent at all levels of the company.
Building Credibility through Scientific Publication: As a result of Alnylam’s commitment to acquiring highly qualified researchers, the company is heavily published in a number of the world’s foremost scientific journals4. This publication record establishes them as leading scientific innovators in the field of RNAi therapeutics, lending them credibility as a relatively young company in the pharmaceutical marketplace; a field in which many of the leading companies trace their origins back to the 1800s.
Product-based research: While strongly supporting scientific research and publication, Alnylam’s research remains focused on product discovery and development. A look at the list of publications4 quickly reveals that the majority are focused on a specific target or delivery channel. While this is not an extremely restrictive focus, as the full range of possibilities for RNAi has yet to be discovered, keeping the company’s R&D priorities strongly directed towards product development maximizes the company’s potential for “first discovery” and allows them to maintain their leading role in RNAi therapeutics.
Establishing an Intellectual Property (IP) estate: Aside from invaluable talent, the success of a biopharmaceutical company relies most heavily on its intellectual property. A great deal has been written in attempts to predict how even the established giants of the pharmaceutical industry will respond to lost revenue from the upcoming expiration of patents on many blockbuster drugs.
The mechanism of RNAi was published in 1998, opening the door to a completely novel and untapped market within the pharmaceutical industry. The founders of Alnylam acted rapidly in the early 2000s to partner with leading researchers and companies to develop an IP portfolio that broadly covers the field of RNAi therapeutics. According to their website, Alnylam believes that their IP protection surrounds their central technology to the point that “more than 50% of all clinical-stage RNAi therapeutics are licensed under Alnylam IP, and more than 75% of sales of RNAi products in the research reagent market are covered under Alnylam IP.”
Strategic Alliances: The incredibly large capital investments and long times to ROI prevent pharmaceutical startups from being able to adequately fund themselves long-term through venture capitalists and angel investors. A startup built around a narrow IP base may find itself unable to fund the extensive development and testing of a new drug, and be forced to merge with an established company with the necessary resources. The foresight to establish a strong, broad IP base has allowed Alnylam to pursue mutually beneficial alliances with a number of pharmaceutical and biotechnology companies, producing hundreds of millions in funding for Alnylam (along with prospects for future revenues from royalties), while providing partnering firms with opportunities to enter the RNAi market.
While there are a host of reasons for optimism about the future of RNAi therapeutics, potential and promise do not necessarily precede success This is especially true in the pharmaceutical field, in which the efficacy and safety of a drug may be unclear until the drug has undergone years of testing. Encouraging strides towards realizing RNAi therapeutics for a wide range of diseases have been made, but it is important to note that Alnylam’s actual pharmaceutical product portfolio is comprised of technologies that are still in the developmental or trial phases. The enthusiasm surrounding RNAi’s potential to transform the pharmaceutical market should be tempered by the fact that only about 11% of drugs approved for human trials are approved by national regulatory agencies.5 In addition, as the value of Alnylam and other companies in the space are tied directly to their intellectual property, one might expect the field to become a hotbed for litigation as RNAi-based therapeutics begin to fulfill their market potential; see the ongoing Max Planck v. Whitehead dispute as a current cautionary example.6
The rise of Alnylam from a startup founded around the novel field of RNAi therapy to a publicly traded firm, with contributions from world-leading researchers and alliances with institutions and corporations at the cutting edge of the pharmaceutical industry, provides an interesting case study for entrepreneurs. In his presentation, Mr. Greene almost managed to make it all sound easy. This brings us back around to my impression of the overarching theme of the Better World conference: ideas with world-changing potential might not be easy to realize, but that won’t stop people from trying.
- Dimasi, J.A. et al., “The price of innovation: new estimates of drug development costs” J. Health Economics, 22(2) (2003):151-185
- Adams CP, Brantner VV (2010) “Spending on New Drug Development” Health Econ. 19: 130–141 (2010)
- “Has the Pharmaceutical Blockbuster Model Gone Bust?” Dec. 12, 2003, Bain and Co. Press Release http://www.bain.com/bainweb/About/press_release_detail.asp?id=14243&menu_url=for_the_media.asp
- Alnylum Publication List: http://www.alnylam.com/Leadership-in-RNAi/Publications.php
- Kola, I., and Landis, J., “Can the pharmaceutical industry reduce attrition rates?” Nature Reviews Drug Discovery, 3 (2004):711-716,
- HsinHao Tsai (NAIP Engineering Research) “The art of duplicity- Max Planck v. Whitehead”: http://naipblog.blogspot.com/2009/07/art-of-duplicity.html