Post #2: The Case for Virtual Drug Development

by Elaine Hamm, PhD, President and CEO, Ascend BioVentures

When I first started working in the startup world, the lean startup concept had just clawed its way out from under the debris of broken dreams and failed companies post the 2000 dot-com crash.  Investors were shy if not paralyzed to invest in companies, forcing entrepreneurs to do more with less. To do this, the concept of “lean” was plucked from the manufacturing world and lauded by serial entrepreneurs Steve Blank, Bob Dorf, Eric Ries and others. Entrepreneurs became scientists and began testing hypotheses about their business and gathering data on their customers and product, and then developing minimally viable products with very little capital.   Co-evolving alongside the lean startup were incubators and accelerators that provided services to these cash-strapped companies including shared physical resources (office, fablab space, equipment, supplies), programing, and sometimes capital.

Yet, quietly humming in the background was a key workhorse for lean startups: telecommuting, virtual teams, and outsourcing.

Tech companies were and are the obvious leaders in the concept of virtual startups.  However, drug development, perhaps more than any other field, lends itself very well to a virtual model. Regardless of indication, drug development is formulaic and the process of preclinical and clinical research quite modular. In fact, it is almost guaranteed that the work you do in one stage will not be the work you do in the next phase.  As such, your team and your lab needs will change as you progress to the next stage (more on this in the next post).

And that is… if you are successful. Which, if you are in the industry, we all know is hard to achieve, with some (depressing) stats reporting that the technical and regulatory success (PTRS) for drug research and development is estimated at 4.1%[1]. For large pharma, failure means whole departments/divisions and even therapeutic indications may go away due to “restructuring” while brand new divisions form as a result of a company-wide “refocusing effort.” 

For brick and mortar companies that means adding new people (and perhaps firing the old) and acquiring new scientific assets and resources. Whether these changes are prompted by success or failure, the result is the same….drug development continues to cost money and the R&D input/output ratio becomes lower. In one study, it was reported that the R&D efficiencies of major research-based pharmaceutical companies were in the range of USD 3.2–32.3 billion (2006–2014) but that the pharmaceutical industry as a whole has failed to meet the rising expectations measuring output of new drugs[2].  Although there are a number of exceptions to this, whether you are a big international company or a small drug company in the Midwest like us, on a whole there is an obvious need to increase R&D efficiencies.    

To address drug development efficiencies, large pharma has looked outward, setting up collaborations with academia, M&As, and even crowdsourcing initiatives.[3]  But how do small, cash-strapped startups keep up with the progress of their science?

Simply put…become virtual.

This concept is not necessarily new either.  Over the past decade, virtual biotech startups make up a significant portion of the biotech world.  In a 2014 WSJ article, it was estimated that “as much as a third of the $4 billion to $5 billion in annual U.S. venture funding for biotech goes to virtual firms” according to an article by Dr. Bruce Booth, partner at Atlas Venture.  With reduced infrastructure and need for scientific resources and facilities, virtual models allow for greater flexibility to pursue drug development without large capital injections.

When I created Ascend, a drug development accelerator company, my original plan was to operate a lab space and an animal facility, have an office, and a team.  And then I developed the budget.  Overhead for this was around 40% of the budget.   That meant most of my funding went to “stuff” and not science.  It also meant that my time would be spent not on building Ascend but on raising more money… to pay for… well…more stuff.  The more we thought about it, the more a semi-virtual model made sense.  Rather than rent out office and lab space, assemble a team, hire HR/accountant, Ascend became a subsidiary of i2E, a company that advises and funds early stage companies.  By leveraging their infrastructure, I could focus on the things I love (science) and they handled the “stuff.”

Ascend’s portfolio companies are diverse in needs as they are in therapeutic indications.  As such, it was far easier to set up each company to operate independently and virtually.  Each company utilizes a variety of CROs and consultants and company management coordinates these efforts in different locations.  No brick and mortar lab.  No corner office with conference rooms, copiers, and steaming pots of coffee (though I could access those through i2E or any number of incubator space if/when we need them).   Rather than spending money on toner and rent, I get to spend money on expertise and great science.

Although there is a lot of wonderful advantages to a virtual model, it can be incredibly challenging too.  It relies on good partnerships and collaborations, creative thinking, and sometimes, a particular personality type.  It also requires strong project management skills, a keen focus on efficiency and planning, and having streamlined access to resources (physical, human, and financial) that fill the gaps in your program.  Our next article will focus on the first of these resources: contract research organizations.

[1] Paul SM, et al. How to improve R&D productivity: the pharmaceutical industry’s grand challenge. Nat Rev Drug Discov. 2010;9:203–214



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