Getting in on the Ground Floor

By Marie Shields, Editor

Can't find the drug discovery technologies you are looking for? Then make your own. Or at least, form a company that does. Reid Leonard of Merck & Co. and David Steinberg of Enlight Biosciences tell EHM how they went about it.

Developing technologies that are of use to the biopharma industry

“The pharma industry has proven to be uniquely good at certain things ... but innovation hasn't necessarily been one of them”
-David Steinberg of Enlight Biosciences

You’re a big pharma company, and you’re feeling frustrated about the lack of enabling platform technologies to support the initial stages of drug discovery. What do you do? Get together with two of your competitors and form a company aimed at bringing these technologies to life? That’s exactly what Merck, Pfizer and Eli Lilly did, with the help of PureTech Ventures. NGP speaks to Reid Leonard of Merck & Co., and David Steinberg, CEO of the resulting company, Enlight Biosciences.

According to Reid Leonard, Executive Director of Licensing for Merck & Co., the purpose of the venture is to support the development of enabling technologies that pharmaceutical companies can use to support their internal efforts for drug discovery development and clinical decision-making.

“There is a lack of venture capital being devoted to the development of ‘tool’ companies needed in order to create these technologies. Some technologies are dying on the vine for lack of capital. The concept for Enlight was to bring together the institutions that will be the ultimate customers, and therefore have a stake in the future of this space, to determine which precompetitive foundational technologies we would like to see, that we could then apply to internal programs.”

David Steinberg, CEO of Enlight and partner at PureTech Ventures, points out the formation of Enlight followed a slightly different path than normal. “Usually we start by identifying areas of unmet need in life sciences medicine bring in top-tier academic luminaries and key opinion leaders to form a founding scientific advisory board of a company with us, and with that group we identify opportunities for innovation and existing technological approaches.

“With Enlight, we decided to work directly with the pharmaceutical industry so that the groups that were most in need of those platforms and enabling technologies could work with us from the beginning in developing them. The idea was to bring the two parties, PureTech and the pharma industry, together. On PureTech’s side, we had the deal flow and the ability to get these companies started, and on the pharma industry side there was the unmet need around novel enabling technologies. We would then work together directly rather than relying on external venture communities to fund these technologies.”

The notion of precompetitive technology is an interesting one, because it enables companies to work together at a point before any conflicting commercial interests arise. As Leonard explains, the aim with Enlight is to identify broad areas in need of better tools to support what would ultimately be proprietary work conducted by each individual user. He compares it to the development of information technologies, in which computer processing power and the growth of distributed computing and the Internet has facilitated the individual business objectives of users.

“We’re trying to support the same sort of foundational technologies,” he says. “But unlike something broad like information technology, which is used across many industries, we’re particularly interested in enabling the development of technologies that would be of use to the biopharmaceutical industry, hence our decision to go in as partners with Enlight.”

Sharing the pie

Steinberg points out that the model of needing to put a lot in to get a lot out isn’t as appealing as it used to be, even though potentially the ROI could be the same. Enlight’s aim is to get around that by working directly with its pharmaceutical industry partners, so that it doesn’t have to rely on financial investors to fund the technologies.

“The reason this works is that you’ve created an additional source of value beyond just the financial upside, which is the strategic value to pharma companies. Now it’s no longer a zero sum game. Instead of having one financial pie and fighting over every dollar, you have two pies: the strategic pie and the financial pie.

“PureTech, as entrepreneurs, are obviously more motivated by the financial pie on a near term level, and the pharma companies are much more motivated by the strategic impact that these new technologies will make in their organizations. The two sides can carve up the two pies in a way that everyone wins, and we’re not facing the same limitations that we would be if it was purely a financial endeavor.”

Leonard, in turn, points out the practical benefits of the partnership. “We would define success as the creation of a platform technology, preferably a commercial instrument or perhaps a service company, that could provide a particular technological solution that would allow us to gain access to a tool that would otherwise not be available or would be available only much later.

“It’s easier to describe in terms of specific types of technologies, for example, technologies for the discovery and validation of biomarkers. The biopharma industry is investing significantly in the use of biomarkers to help us understand whether candidate treatments in development are actually working through the desired mechanisms and having the intended effects on the targets prior to our ability to assess whether those interventions are ultimately altering the course of a disease.”

Leonard points out that currently there are many approaches to discovering and validating biomarkers, but these are still a collection of available technologies from nucleic acid technologies and proteomics that are essentially being repurposed and applied to the task of specific biomarker development. He says there is a sense that somewhere in the entrepreneurial imagination of academic scientists exists an efficient platform that could be useful for the development of a set of biomarkers for a particular indication.

“The analogy that I like to use is the measurement of gene expression. In the old days, all we could do was a single-gene PCR. Now, we use high-density array technologies. We’re looking for those sorts of transformational technologies that will be useful to everyone, but the proprietary interest in these technologies will come from the way in which we apply them to our internal programs.”

Making the choice

The responsibility for identifying potential projects rests with the Enlight board and their scientific advisory board. Leonard explains that part of the attraction for Merck in the arrangement is that the Enlight team will focus on networking with academic centers.

“Enlight is matching our aspirations against what they see coming out of the universities. They develop a detailed proposal around a particular company or a project that they would like to initiate, identifying the investigators, working out the intellectual property situation, and determining who else they would need to involve. They may need to identify assets from several universities and bring them all together.

“We’re seeing a fairly well-developed proposal by the time it comes to us for comment, and then the individual investors in Enlight have a vote in what we do.”

From Steinberg’s perspective, the criteria for choosing a project are: number one, providing impact for the pharma partners; and number two, the ability to be transformational in the long haul. “We don’t want to just make an existing screening technology a little bit faster or make an existing safety testing protocol a little bit cheaper,” he says. “That means having a big impact on the percentage of drugs that fail once they get to the clinic by, for example, having a dramatically improved prediction mechanism. Or it could mean enabling whole new classes of drugs through delivery strategies that aren’t available now, to open up pipelines, rescue failed compounds and open up whole new R&D strategies, because you now know you can deliver something that you never would have been able to deliver before.

“Number three is that we want to make sure that while the technologies are transformational in the long run, there’s a near term impact with our pharma partners as well. For example, Anchor, our imaging company, will have small animal tabletop instruments available in 2009, so that’s the near term impact; but the long term transformational element of that is the clinical application from the devices that we’ll be bringing online in the years following that. It’s the idea of quick hits and big ideas and making sure both of those things are there. “

Leonard stresses that the type of projects Enlight is looking to develop fall outside of Merck’s core business. “Although we’re a big technology user, we’re not in the business of developing technology per se, with a few specific exceptions. We’re not scanning the academic community for these types of enabling technologies with the same degree of focus we put into searching the academic landscape for potential new therapeutic opportunities.”

Focus areas  

There are three main areas on which Enlight is expected to focus in the near term. The first is novel biomedical imaging technologies, which would ideally supplement the existing imaging technologies to provide for additional noninvasive methods of tracking drug action and identifying patients who are candidates for particular therapy.

The second area is biomarkers. Enlight will not necessarily aim to develop specific biomarkers for a particular development program; the pharma partners instead hope to identify technologies that can be turned into a product or a company that would then enable them to use that technology.

The third area is identifying technologies that will allow the industry to work with biologic therapies in the same way that it can work with small molecule therapies today. These would include delivery technologies for biologics, such as protein engineering and alternative expression systems.

According to Leonard, one of the key benefits of being a partner in Enlight is that partners get access to the technologies as they’re being developed. “For example, if a project takes off at Enlight with the goal of producing a new instrument, then the participating partners will have access to that technology during its development phase and will have input into the final design. We will in some capacity serve as beta testers.”

“Ideally there is some benefit of membership conferred to us. It’s not as though we have to wait until everything is done. We do hope to get a jumpstart on testing the feasibility of some of these technologies through our participation in Enlight.”

But Leonard points out as well that it is an explicit goal of Enlight to commercialize these technologies. The company may choose to develop an instrument to the point where an existing medical device or medical instrumentation company may take it up. In other instances, it may decide to form a company to provide a specific service to the industry. This is where the Enlight model differs from a traditional consortium approach.

“There have certainly been examples of industry consortia in which companies have pooled assets, or at least intellectual input, to help facilitate the development of a technology. In contrast, Enlight has the specific purpose of running a business. Enlight does aspire to be a profit-making enterprise, and what we’re hoping is this business model approach will increase the probability of success of some of these projects, because they will have to stand on their own merit as a business proposition.”

Steinberg explains that as each new spinout company is formed, at the time of formation the pharma partners each have the opportunity to either support it financially or not. “If they do support it financially they get all kinds of rights including, most importantly, early influence on how specifically the technology is developed. Take the example of our imaging company Andro; there are a million different ways we could go with respect to everything from design elements like animal handling to application development and what are the first applications for which it’s optimized and everything in between.

“For the pharmas to be involved with that from the very beginning is important, because then we can develop it in such a way that’s incredibly useful to them right away. Those that choose to invest also get ongoing access during the time we’re developing it, i.e. alpha and beta testing, regular input and updates to develop the process. Then they have the possibility of special access rights for a period of time after launch and guaranteed ongoing access rights once it’s launched commercially.”

Industry challenges

This joint venture suggests that the industry is looking at novel ways to develop innovative technologies and bringing new medicines to patients. What does this tell us about the challenges that the industry is currently facing?

“One thing that struck me after this was initially announced in mid-July,” says Steinberg, “was the magnitude and the positive tenure of the response from the popular press, the life science press and other pharmaceutical companies. It has struck a chord with a lot of people because there is a big gap in pharma R&D in terms of its efficiency and how productive it is, because everyone quotes the statistic that the number of new drug approvals is going down and the amount spent in R&D from pharma is going up dramatically, and shouldn’t those be moving in the same direction? What’s wrong? What’s broken?

“Everyone recognizes there’s a problem. We’re spending more and more money for fewer and fewer successful drug launches. The amount of risk that you undertake with each new development program is incredibly high. You’ve literally got billions on the line, and it could easily fail, and it will very likely fail at any given compound. I think the whole industry recognizes that there have to be some novel approaches tried, and the pharma industry has tried everything from their own internal incubators to option funds and different ways of doing venture. The problem with many of the internal programs is that pharma companies aren’t set up to manage innovation in the same way that entrepreneurs are, so that’s where those programs fall down.”

“The biopharmaceutical industry understands there is a limit on what any one organization is capable of pursuing on its own,” Leonard adds. “We all have varying strengths and areas of focus, and the days where a major pharmaceutical company, like Merck, would choose to rely entirely on its internal innovation engine have long passed. The general model in industry now is moving much more aggressively toward partnerships.”

Enlight serves as an example of a broadening of the concept of partnership. Traditionally partnerships were centered on a specific product. A pharma and a biotech company partnered to complete the development and commercialization of a molecule that was developed by the biotech company.

“We’ve seen a broadening of that concept to earlier-stage partnerships, many of which Merck has formed in the past few years, in which we enter into a research-based collaboration with a biotech company with the specific goal of jointly discovering molecules to take into development. I see Merck’s participation in Enlight as moving one step earlier in the value-creation chain of attempting to fertilize the landscape for the development of tools that will enable all of our business, whether it be projects of our own, or projects in which we’re collaborating with others.”

Steinberg points out that with external programs, pharmaceutical companies are too far removed, so they can’t control or get access to the technologies at the right times, and there are flaws with the different kinds of systems that currently exist. “Pharma companies are still looking for a way to facilitate the development of novel approaches to improving R&D productivity in a way they can both have enough influence to make sure it’s right, while still not being required to do the work and the development all internally because that’s not what they’re good at. They’re good at developing drugs. Enlight is designed to fill that void and that’s why it struck a chord.

“When we look back in 10 years are we going say Enlight transformed pharmaceutical R&D? I don’t know. I hope so, or I hope we can say it played an important role in helping various other things get started. I don’t know what it’s going to look like, but I do think there’s a broad recognition that this is a big problem and the industry needs to be creative about how to approach it, Enlight is one way of at least starting to think about how to do that.”

Future plans

What does the future hold for the pharmaceutical industry? Does the formation of Enlight point to the way forward? Steinberg certainly thinks so. “It would not surprise me if a lot of the industry ended up like that in the future, because if a small startup biotech gets something into phase II for $25 million and a pharma takes $200 million to get that same compound, eventually something has to break.

“On the other hand, there are things that pharmas can uniquely do well. Only certain companies have the scale to run huge clinical trials, or have a 2000 or 3000 person sales force. With almost no exceptions, very few biotechs are ever going to be able to do that themselves, so there may be a natural kind of bifurcation where some pharmaceutical companies become commercial entities and aren’t innovating at all.

“Some companies will probably figure it out through mechanisms like Enlight and other creative internal mechanisms and external approaches and those will be considered the real innovators. You could easily see it going that way because the pharma industry has proven to be uniquely good at certain things, but R&D isn’t really one of them.”

Leonard has seen increased attention being paid by the pharma industry and the biotech community to actively engage with academic inventors and entrepreneurs in a way that is more directed and more focused than in the past. “For the past decade, the traditional model for many interactions between pharma and academia has centered around essentially unrestricted grants or sponsored research agreements that primarily support ongoing work from the academic investigator in areas that were chosen essentially by the academic investigator.”

“There’s a shift occurring on both sides toward a greater effort to identify opportunities for industry and academia to work together on areas in which the project focus is determined by the industrial partner. There’s a greater level of engagement between the companies and academia around the specific work plan and much more thought going into what constitutes a successful outcome. That’s an area in which the academic mission and the industrial mission have to find common ground.”

“There’s still a lot of inefficiency in the way information and scientific discoveries progress through that interface, and that’s an area where industry and academia can work together more productively.”

Reid Leonard is Executive Director, External Research and Licensing for the Merck Research Laboratories. His role is to identify partnering opportunities that fit with Merck’s strategic research and development goals across all therapeutic and technology areas. This is an outreach function to complement Merck’s existing worldwide licensing and collaborative research activities.

David Steinberg has worked in the biopharmaceuticals industry for over 13 years. As a member of PureTech, Mr. Steinberg has been on the founding teams of Enlight Biosciences and Endra Inc. as founding CEO. Previously, he served as Chief Business Officer of portfolio company Follica, Inc., and VP of Operations for portfolio companies Satori Pharmaceuticals and Cellicon Biotechnologies.