The Virtues of the Virtual Biotech27 April, 2015
How many people does it take to run a successful biotech company? The traditional model of the biotech company in the glass-fronted building with a sparkling fountain out front and employing a hundred or more scientists working on a long pipeline of assets may be on the way out.
The central investment case for such a model was that a team of that kind, once assembled, could find and develop multiple assets that could be sold to big pharmaceutical companies. The key word was “multiple” because no single asset could justify the vast cash infusion that this type of model demands.
But judging by Janssen Pharmaceuticals’ recent purchase of British Firm XO1 in March, that model, at least in some cases, may be changing.
So how many people does it take to run a successful biotech company? In the case of XO1, it appears that maybe as few as two. Founded in April 2013, XO1 is a virtual, asset-centric drug development company, “staffed” by senior leaders focused on the discovery and development of innovative pharmaceuticals.
What is a Virtual Company?
A virtual biotech company maintains minimal infrastructure (often no offices or labs) by employing partnerships with expert service providers to advance the development of its assets. With proper leadership and management, outsourcing drug development to the most appropriate experts can speed up progress, improve outcomes and reduce costs.
What is an Asset-Centric Company?
The term asset-centric is used to refer to biotech companies developing a single asset. For XO1, the single asset is ichorcumab, an anticoagulant drug that prevents heart attacks and strokes without causing bleeding. For the biotech venture capitalist this means that rather than seeding biotech companies with promising teams and pipelines, they are investing in a single asset.
The new model has garnered attention as venture capitalists strive to improve returns in a notoriously risky sector. Investors are realizing that the most efficient way to deploy cash in the biotech industry may be to invest in a small team that is devoted to a single asset and is willing to outsource.
While X01 did have a conventional board of directors, every aspect of the company—from accounting to drug manufacturing—was contracted out, resulting in only two full-time employees.
The approach also accelerates the investment life cycle; investors typically hold single-asset businesses for an average of around 4-1/2 years, or roughly half the industry average.
The proliferation of external service providers means it has become a lot easier to create a virtual drug company. But challenges remain, particularly when it comes to coordinating and securely sharing sensitive information with multiple contracted parties that are often scattered around the globe.
A virtual data room then becomes an essential tool for fundraising, R&D, clinical trials, establishing effective alliances and sharing intellectual property securely and efficiently with partners, contractors, and other third parties. A good virtual data room allows you to easily share documents and maintain complete control over those documents, while also monitoring user activity and providing powerful reporting tools and a complete audit trail.
A modern virtual data room also allows you to cast a broader net in order to court multiple global partners and provides the ability to stage the disclosure of intellectual property, moving potential licensees through a progressive unveiling of information and viewing rights as licensing deals progress.
Read our white paper to learn more about the Nuts & Bolts of Due Diligence for Biopharma Partnering: