I saw this post Sunday by Seeking Alpha's Jason Chew and thought I would pass it on. Unfortunately (for me), Maureen Martino of Fierce Biotech beat me out of the blocks this morning. However, I thought it was interesting to note that biotech's may be going back to more of a virtual model again in the wake of economic downturn, more limited venture funding, patent cliff pressure at Big Pharma, rising costs of new drug development, etc. This is a model I think of from the late 90's and early part of 2000's -- but one that had drifted into more fully integrated biotechs in the last part of the decade.
Now with new economic and scientific pressures, both biotech's and even Big Pharma itself seems to be dusting the model off and putting it back into play. One example of the latter cited is Lilly's Chorus division founded in 2002. The virtual model relies on many fewer people (lower overhead) and places a premium on the expertise to manage external relationships - especially R&D in CROs. The projects, after reaching proof of concept (POC) are usually sold off to Big Pharma. Or in the case of Big Pharma, move from the "virtual development group" to process development et al when POC is established. The premium is placed on putting as many candidates as possible through the POC process as fast and cheaply as possible.
Lilly's Chorus program claims it can now handle as many as 10 candidates at once with only 24 staff. POC can be reached 1.5 years sooner and at as little as 10% of the cost (eye opening if true or remotely typical). If this type of success is possible, and money remains tight with regard to venture capital or IPOs, it seems certain that the virtual model will again take root. It remains to be seen if it will show sustainable success rates to justify it.
Posted by Bruce Lehr August 16th 2010.