Friday’s WSJ features a brutally – I mean brutally — frank article about the dismal state of biotech financing. There are few revelations (certainly not for those readers of this column who I know follow the space closely), and unfortunately, few patches of sunlight. This clip from Play It Again, Sam pretty much captures the tone.
The crisis in financing is having a chilling effect on biomedical innovation. As discussed in my last column, the main problem in our industry is that the sheer cost of drug development has become almost prohibitively expensive, effectively pricing almost everyone but the largest companies out of the market.
While my Forbes colleague Matt Herper suggests this could represent a disruptive opportunity for ultra-lean start-ups, I don’t think this is true in practice. For a start-up or small company, figuring out how to run trials in an extremely capital-efficient way isn’t a competitive advantage, it’s table stakes – it’s what gives you a shot on goal, or maybe two. Given the intrinsically high likelihood of failure, long-term survival requires the ability to advance a portfolio of products through clinical development, something that typically only fairly large companies can afford to do.
The broader challenge is how can you achieve disruptive innovation in a highly-regulated industry?
One approach is to avoid regulation – this is one of the reasons so many digital health companies are pursuing consumer health – they hope to avoid the regulatory morass that has so dampened progress in the medical products industry. As I’ve noted before, it will be interesting to see how this works out – I’ve see a lot of cutsie apps out there, but not much that seems likely to deliver measurable improvements in patient health (i.e. improvements that would be meet t
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