Cell and gene therapies have emerged as ground-breaking advancements in the field of medicine, offering the potential for revolutionary treatments for a wide range of diseases. However, the journey from development to commercialisation of these therapies is not without its challenges and risks.
In this blog, Neelam Panchal, Senior Commercialisation of Research and Investment Manager at the Cell and Gene Therapy Catapult, shares why it is crucial to thoroughly understand the potential challenges and risks from both a founder and investor perspective to improve the chances of long-term success. This is the first in a series of blogs to help academic leaders identify and focus on key considerations when seeking investment to commercialise their advanced therapy concepts.
Founders' Perspective - To win without risk is to triumph without glory
1. The Scientific Risk
The success of cell or gene therapy startups largely hinges on the strength of their underlying science. However, the pathway from promising early-stage research to a marketable product is filled with potential pitfalls. Preclinical and clinical trials may reveal that a product is less effective than hoped or comes with adverse side effects. In other cases, the science may simply fail to translate into a viable product. Many of these complex risks arise due to a confluence of multiple factors. Having a robust stage-gated scientific development plan early on will help enable decision making. An example of this would be to introduce go/no-go decision-making processes into experimental plans at early stages of the project to reduce the risk of expensive late-stage clinical failures. Developing and defining stage-gated processes can also aid with troubleshooting and highlight both internal and external considerations to a given project.
2. Intellectual Property (IP) Risk
Early-stage start-ups depend heavily on their IP to carve out a competitive space and define their value proposition in the given market. The failure to adequately secure patents or understanding freedom to operate (FTO) for pipeline assets may lead to potential erosion of market positioning and competitiveness, resulting in a less attractive investment opportunity. It is important to note that securing IP should not be conflated with FTO in a given space. Development of active ingredients and manufacturing processes require multiple components which will often come with associated IP, therefore having a good understanding of FTO and in-licensing/commercial licensing requirements will support an accurate developmental timeframe and cost calculation. Knowing where potentially blocking IP resides is crucial.
Confidentiality and speed are also critical here, particularly when building upon academic work. The need for publications to secure grant funding to generate more data versus IP protection of existing data is an important balance to achieve when transitioning from academic discovery to commercialisation. At this stage, university technology transfer offices and patent attorneys are an invaluable resource to help guide through this process.
3. Regulatory Risk
Navigating the regulatory landscape is crucial for successful commercialisation of cell and gene therapies. Compliance with country-specific compendial and regulatory requirements is essential to ensure product quality and consistency. Preclinical and clinical data packages must hold up to scrutiny from regulatory bodies such as the FDA, EMA and MHRA. The process is lengthy, costly, and the outcome uncertain; a negative decision or even delays can derail a startup's plans and erode its value. Therefore, gaining basic familiarity with regulatory advice documents and engaging early with relevant regulatory bodies, or other advisors, when seeking guidance through meetings with the innovation office will help to mitigate most hurdles.
4. Manufacturing and Scaling Risk
Manufacturing challenges should be considered by both founders and investors, and the complexity and cost of manufacturing and scaling process is something that needs to be incorporated into the commercialisation plan from conception. Unlike small molecules or antibodies, cell and gene therapies often require highly customised approaches combined with a thorough adoption of industry standards where possible. Challenges can arise anywhere including vector production, process development and development of Chemistry, Manufacturing and Controls (CMC) criteria, all of which can be determined through detailed process diagnostic assessments and engagement with reliable Contract Development and Manufacturing Organisations (CDMOs). Therapy developers should aim to select materials and processes that can be sourced from multiple vendors to ensure a robust supply chain, and attention should also be given to selecting stable starting materials with stability to reduce the risk of interruptions in production.
Investors' Perspective - The biggest risk is not taking any risk
1. Market Risk
One of the biggest risks to capital investors, along with the high costs associated with developing cell and gene therapies, is the failure to reach the market and the limited size of that market. As high costs of developing cell or gene therapy products often necessitate high price points, this can limit clinical and market adoption. As an investor, predicting market dynamics is complex, especially in niche fields where miscalculations can lead to overestimation of market potential. Therefore, as a founder, producing Health Economics and Market Access (HEMA) analysis will allow investors to better understand target patient populations, price potential against standard of care, and market positioning can support and de-risk the therapeutic product from an early stage and demonstrate return on investment.
2. Financial Risk
Cell and gene therapy startups are notorious for the lengthy periods where they consume capital without generating any revenue. Investors are cognisant of this, and the associated cash burn rate, which can be mitigated by developing well-defined and achievable milestones that drive value inflection points. Milestones allow investments to be tranched, lowering the exposure of investors and de-risking the overall investment. Syndication building - e.g., having multiple investors contributing to a single round of investment - can be another way to limit financial risk. Building syndicates lowers the total financial exposure of any individual investor and builds diversity into the source of financing and access to networks of advisors.
3. Expertise Risk
Cell and gene therapy startups often operate at the cutting-edge of science, making it challenging for investors without deep scientific knowledge to fully understand the business. This can result in the inability to thoroughly evaluate a startup's potential and associated risks, leading to misguided investments or even lack of investment. Engagement with specialised VCs in healthcare can ensure that reviewers have the relevant expertise to assess incoming opportunities and provide the right questions and guidance. Investors with deep knowledge of the field are valuable as they will commit to defining a clear path to commercialisation with better understanding of the associated risks and needs of the company. From a founder’s perspective, an emerging biotech with a solid scientific advisory board and board of directors will support the growth and de-risking of the technology at each step.
4. Exit Strategy Risk
Investors typically expect an exit event, such as an initial public offering (IPO) or acquisition, to deliver a return on their investment. However, given the long development and regulatory approval cycles in the biotech industry, it can take many years before such an event occurs, if at all. Market fluctuations can further complicate the timing and success of these events. Strategic alliances with big pharma, investments from Corporate Venture Capital, and knowledge of the path to market are all invaluable resources. Through fostering these networks, it is possible to understand what in-licensing and out-licensing opportunities exist for revenue generation, and how the technology being developed can align with pharma and unmet clinical and market needs.
Working collaboratively to de-risk academic advanced therapy projects
While the cell and gene therapy sector offers exciting opportunities for revolutionary breakthroughs and attractive returns, there are a number of risks for both founders and investors. Comprehensive understanding of these risks, careful planning, patience, and diversification are necessary to navigate this complex and challenging field successfully. By carefully managing these risks, founders and investors can contribute to the growth of the sector, driving forward innovation with the right strategies in place and unlock its full benefits for patients and society.