For biotech companies, the valley of death describes the difficult path from initial discovery to FDA approval and commercialization. It's a treacherous journey—one that even promising innovations often don't complete. Adequate funding, regulatory hurdles and the immense complexity of the biotech landscape are among the never-ending challenges faced by early stage biotechs. In this episode we talk with two biotech executives about what it’s like to struggle and survive in this rough-and-tumble industry.
For biotech companies, the valley of death describes the difficult path from initial discovery to FDA approval and commercialization. It's a treacherous journey—one that even promising innovations often don't complete. Adequate funding, regulatory hurdles and the immense complexity of the biotech landscape are among the never-ending challenges faced by early stage biotechs. In this episode we talk with two biotech executives about what it’s like to struggle and survive in this rough-and-tumble industry.
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Speaker 1 (00:06):
Development can take as long as 20 years, and cost more than $1 billion. Like a relay race, drug development has several stages and requires a team effort, often involving the government, universities, and pharmaceutical companies to reach the finish line.
Speaker 2 (00:23):
Without money there, they couldn't find a cure. They've got to find a cure. We're not far away from it, we can taste it, we can touch it, but it's just not there yet.
Rachel King (00:35):
"We're waiting for a cure." This is a statement so many of us have heard, or perhaps uttered ourselves. And our hope is well-founded, the pace of medical innovation is breathtaking. Every day new discoveries are made that have the potential to vastly improve our health and cure disease.
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But what does it take to bring a promising discovery fro the research lab to the market? And do all promising discoveries become treatments or cures? Today we talk with two biotech leaders who have hands on knowledge about the challenges and triumphs of translating groundbreaking scientific ideas into life-saving treatments and therapies.
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I'm Rachel King, and you are listening to I Am BIO.
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There's a term we use in the biotech industry, called the Valley of Death, which sounds daunting. That's because it is. The term describes the difficult path that biotech companies must take from initial discovery to FDA approval on the marketplace. It's a treacherous journey, one that even promising innovations often don't complete.
(01:54):
Adequate funding, regulatory hurdles, and the immense complexity of the biotech landscape are among the never ending challenges faced by early stage biotechs.
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Out first guest today is Daphne Zohar, who is a member of BIO's Emerging Companies Section board, and co-chair of the Strategy and Policy Committee. Daphne is the founder and CEO of PureTech, which began with a $100,000 investment, and is now listed on NASDAQ and the London Stock Exchange. Daphne is the co-host of her own podcast, called Biotech Hangout.
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I'm excited to have this conversation with Daphne, because she has traveled the arduous road of drug development, and can walk us through the peaks and valleys.
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Hello, Daphne. Thanks so much for joining us today.
Daphne Zohar (02:40):
Thanks, Rachel, for having me on the, on the program.
Rachel King (02:42):
Sure. Uh, before we dive into a discussion about the difficulties in bringing a treatment or therapy to the market, can you share a little background about yourself?
Daphne Zohar (02:51):
Sure. Well, I'm the founder and CEO of PureTech. And I founded PureTech with the mission of bringing new medicines to patients with devastating diseases by advancing breakthrough science from academic institutions. I'm proud to say that at PureTech we've now take forward 27 new therapeutics and therapeutic candidates, of which two have been approved by the FDA, and a third is filing for FDA approval later this month.
Rachel King (03:14):
Wow, that's an incredible record. Congratulations.
Daphne Zohar (03:17):
Thank you.
Rachel King (03:18):
So we know that every biotech or pharmaceutical company has their own story about the challenges of navigating the so called Valley of Death. I- in fact, I've been through it myself (laughs). Um, and with all of the experience that you have with the drug candidates that you've mentioned, can you explain for our listeners what we mean by this in the biotech business?
Daphne Zohar (03:36):
Sure. The term Valley of Death is used to describe the transition from a breakthrough discovery, usually after many years of NIH funded basic research, to an actual development candidate in clinical trials. And only one out of 5,000 to 10,000, uh, biotech innovation make it from academic to commercialization.
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So you think about this Valley of Death, entrepreneurs like me and you are like Sherpas, guiding these technologies across this treacherous landscape to the other side of the valley. In order to get through, you need to be able to do many things with limited resources, such as attracting people to the team, and raising enough funding to conduct key experiments and activities that reduce the risk and clarify the value for future investors.
Rachel King (04:23):
I love that image of the biotech entrepreneur as Sherpa.
Daphne Zohar (04:26):
Yes.
Rachel King (04:27):
Uh, you described a moment ago the many therapies that you've brought and are bringing forward, including the two that now have FDA approval. And I understand that one of the things that you pioneered in doing this is the so called hub and spoke model. Can you tell us a little bit about how that works? And how that relates to trying to get things through this so called Valley of Death?
Daphne Zohar (04:47):
Well, when we first formed PureTech we had very limited resources. As you pointed out, we started with a $100,000 cheque from an angel investor. As a result of that, we needed to partner with other investors to advance our programs. And we found that it was easier to do that by putting the intellectual property for the new medicine we developed into subsidiaries or founded entities.
(05:09):
Uh, after developing enough of a track record as a team, we were able to raise money on the parent company level. But that took time, and we had to prove ourselves, which meant that initially we were very resource constrained. In some ways that may have been very good, because it forced us to be relentless about prioritizing and advancing only the programs with the highest probability of success. And as a result of that, I think, to some extent, our clinical success rate is about six times higher than the industry average.
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One of the advantages of our model is that it reduces our reliance on the capital markets. So we've now generated about $800 million ourselves, from the sale of equity in these entities, and royalties and partnership revenues. Such that we haven't had to raise money from the, the capital markets in over six years.
Rachel King (05:57):
Yeah. That is a really interesting model actually, and impressive that you've been able to raise so much money. As I think about the current state of the capital markets, I'm sure that you've been glad actually not to have to rely on those, particularly in the past year or two when it's been so challenging.
Daphne Zohar (06:11):
It has been really challenging for the industry at large.
Rachel King (06:14):
It would be really interesting actually if you talk about this model that you've developed with the various kind of sub-entities from the main company. Uh, if you could talk through the example of maybe a specific drug candidate? You know, how you brought it forward, how you brought it through those challenging periods up to the point of commercialization. Can you give us an example, good, bad, and ugly (laughs)?
Daphne Zohar (06:34):
Sure. So let me give you an example that is a huge success story today, but almost didn't happen. And that is the KarXT program, which is filing for FDA approval this month. And would be the first new mechanism for treating schizophrenia in, in over 50 years, if it's approved.
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So one of the components of KarXT, xanomeline, was shown to be highly effective for the treatment of psychosis and other symptoms of schizophrenia, but it was sitting on a shelf at Eli Lilly due to GI tolerability issues that they and other pharma companies could not overcome with traditional chemistry approaches.
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Members of our team at PureTech came up with an innovation that enabled us to retain the efficacy of xanomeline in the CNS, while reducing the tolerability issues in the rest of the body. Despite our confidence in this approach, we initially couldn't find funding for the project, because we had not yet shown that the approach could work in humans.
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In fact, after years of success in blockbuster drugs like Prozac, big pharma companies had really abandoned psychiatric drug innovation, and many of their big drugs had gone off patent. And also CNS is very risky, because often animal data doesn't transfer to humans. So this was, despite some really positive data signals in human studies, xanomeline seemed destined for the Valley of Death, given both its GI tolerability issues and the state of the market.
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Being entrepreneurs, we found a way to get the funding by cobbling together small amounts from individual angel investors, and also receiving a grant from the Wellcome Trust. And this funding essentially saved the program from the Valley of Death.
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Once we got that initial proof of concept data in humans, all the same investors that had previously not been interested were very, very interested. And we quickly raised a big series A and B round, IPO'd the company within a few months. And this was after years of slogging away.
(08:29):
Fast-forward, and Karuna has now had three successful registration enabling studies, with really stellar data, that is differentiated from existing drugs both on efficacy and also on safety. And this could change the lives of millions of people living with schizophrenia.
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And so it was really tough in the early days, but I'm glad we persevered.
Rachel King (08:47):
Wow, that's great. What a great story. What a great story. I'm sure you've also had other examples where compounds did not make it through the so called Valley of Death. Can you give us an example of something that, that didn't make it? And what were you hoping that that drug would've potentially achieved for patients?
Daphne Zohar (09:02):
Yeah. I can speak more generally to the industry, in saying that the financial calculus means that only the most financially attractive programs are gonna be able to attract the funding to advance. And that's really too bad, because often we don't know the full benefit of a new medicine until it gets advanced to clinical trials.
(09:19):
So many promising ideas just die, they never get advanced by Sherpas (laughs), because we have to focus on the programs that have the greatest chance of success. Those choices meant that some new medicines weren't advanced by us and by others. And as I mentioned before, there's thousands that don't get developed for every one that does.
Rachel King (09:35):
Mm-hmm. Um, and a few moments ago you mentioned how important it is to have a healthy ecosystem in order to enable this really risky and expensive drug development to take place. Uh, can you talk a little bit about what you think that policymakers and regulators can do to foster that good environment for drug development?
Daphne Zohar (09:53):
Yes. So I think there's basically two broad categories. The first is to ensure that we don't kill the innovative ecosystem that creates new medicines. We're small businesses that create jobs and are developing medicines that can change people's lives. So the first thing regulators can do is not mess things up.
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For example, FTC shouldn't be blocking mergers and acquisitions. M&A is the lifeblood of the industry, it's a way that talent and cash get recycled to create the next generation of projects, and it fuels the biotech capital markets.
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Second, patents are necessary for investors to get comfortable. So if we remove or weaken patents, nobodies gonna invest in these programs, and they won't get advanced.
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And then the third in, within that category of not messing things up is we have to enable there to be enough time to recoup the huge investment. So we should be looking to reduce out of pocket costs by pushing back on the middlemen who make out of pocket costs higher, not by crushing the small businesses that create new medicines.
(10:52):
So outside of not messing things up, any incentives that make the biotech capital markets more robust, or make it easier to develop drugs for underserved diseases, are welcome.
Rachel King (11:01):
Yeah. And I certainly agree with you, that incentives matter. I think there were some excellent examples.
(11:06):
Well, Daphne, I wanna thank you for this conversation. It's been really a pleasure to speak with you. And thank you for your perseverance, and for all the work that you're doing to bring new treatments to patients who need them. We really appreciate it.
Daphne Zohar (11:16):
Yeah. Well, thank you so much for having me on. And thanks for all the work that BIO is doing, it's some excellent work in helping the biotech innovation ecosystems. Thank you.
Rachel King (11:25):
When we come back from a break, I'll talk with another biotech pioneer who has her own unique perspective on the daunting, yet rewarding, drug development journey.
(11:53):
You may be hearing a lot about pharmacy benefit managers, or PBMs. PBMs started in order to create savings that could be passed onto patients. But without transparency and accountability, PBMs have lost their way, and patients are losing out as a result.
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Right now Congress is trying to increase transparency and accountability for all pharmacy benefit managers. Please visit BIO.org/PBM to tell your elected officials that you support PBM reform.
(12:35):
Our next guest today is Nancy Simonian, the CEO of a company called Syros Pharmaceuticals. Nancy is a member of Bio's Emerging Companies Section board, and of our Health Section board. She has extensive experience taking drug candidates through the approval process. We're very excited to hear her stories and perspective.
(12:55):
Hi, Nancy. It's great to see you again. Thanks so much for joining us today.
Nancy Simonian (12:59):
Hey, Rachel. I'm really excited to be here with you today.
Rachel King (13:02):
Can you share a little bit of your background with our listeners to start off?
Nancy Simonian (13:05):
Sure. So I was trained as a physician. I've been working in biotech for nearly 30 years. I've had the wonderful great opportunity and honor to work on multiple drugs in the cancer, neurology and inflammatory disease space, that have all made a big difference in the lives of patients with serious diseases.
Rachel King (13:24):
Yeah. I'm sure that's been very satisfying, getting so many drugs through the approval process.
Nancy Simonian (13:29):
Yes, definitely. In our industry we're so fortunate to be able to every day work on things that can make a big impact for patients.
Rachel King (13:36):
Well, so let's dig into Syros Pharmaceuticals a bit. And why don't you tell us how you ended up working there, and what the company is currently working on?
Nancy Simonian (13:44):
Sure. So I was leading, uh, clinical development medical activities as the chief medical officer at Millennium. And decided a few years after Millennium was acquired by Takeda that I wanted to devote kind of the next phase of my career to treating disease in a different way.
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So we now we're developing the tools and technologies to understand that 98% of the genome, and working with some VCs and some scientific founders, I started Syros with the goal to use those insights into developing kind of a new class of drugs.
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And we started as a pure discovery stage company. And I'm very excited today that based on that work, we are now in late stage clinical development, with a program that arose from those early discoveries that we made at the company.
Rachel King (14:33):
So we've been talking today about the so called Valley of Death. And I wonder how you would describe that in your own experience?
Nancy Simonian (14:39):
Yeah. So one of my most distinct memories of the Valley of Death was actually when we were at Millennium. And I came on board kind of lead up all of their medical activities, and we had a drug in phase one, two development that was showing early promise in multiple myeloma.
(14:56):
And at the time, we were spending a large amount of money on discovery and earlier stage things, and we all knew that what was most important for patients is we had to get Velcade through registration studies into commercialization, 'cause that was what was really in the best interests of patients, and we could see a line of sight there. But we also knew that it was gonna take a tremendous amount of capital, and much more so than you would have for an early stage program.
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And I think it's pretty common across our industry with sort of pre-revenue biotech companies that are kind of going forward with their first product towards commercialization, that in order to fulfill your promise to bring these medicines forward to patients you have to increase capital on these later stage products, which puts a huge amount of pressure on the earlier stage research.
(15:47):
But at the end of the day, I think it comes down to you gotta do what's right by bringing important medicines to patients. And sometimes that means that you have to make some difficult choices in terms of what you can or can't pursue at that time, in order to achieve your mission and your kind of commitment to your patients.
Rachel King (16:04):
So we've talked a bit about the financing, but we've also touched on how the regulatory environment can also be very challenging. I wonder if you think one or the other of those is more challenging? Or, or if they're equally difficult, the regulatory landscape or the search for funding?
Nancy Simonian (16:17):
I would say we're definitely in a challenging time in both spheres. I would say right now with the overall kinda macro environment, I think the funding, I think, is more challenging. At least in the space that we're working in at Syros, which is on developing drugs in the oncology space.
(16:37):
And I continue to believe that there's a lot of good support for the large unmet medical need and the importance of bringing drugs as quickly as possible through to patients.
(16:47):
I think right now the funding situation for companies is very challenging, but I continue to kinda hold hope that these things come in cycles, and that good ideas over time will continue, and good teams will continue to get funded.
Rachel King (17:01):
Yeah. So you've mentioned the patients several times, and I'm curious to hear a little bit more about how patient perspectives would influence your approach. Do you expressly take patient perspectives into account when you make decisions about drug development? And if so, how? How do patient perspectives play into your approach to drug development?
Nancy Simonian (17:19):
Yeah. I think they absolutely do. And I'll just kind of use the example of our developmentive tamibarotene, which is our phase three program that's in higher risk patients with MDS, and also in a phase two in AML.
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In the higher risk MDS patient population, we know that these are patients that are generally outpatients. They tend to be in their, you know, 70s. And what's really important to them is not only something that's gonna keep their disease under control, but they wanna have a good quality of life.
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They wanna be able to go on their trips, and enjoy their friends, and go on their cruises, and not be beholden to the, the clinic in a way that doesn't give them the ability to live the way they want to. And that was a very significant factor as we thought about, you know, uh, development of tamibarotene, and differentiation of tamibarotene from other therapies that might be in development.
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The patient perspective on, and the physician perspective on having something that was an oral drug and that was well tolerated, I think was a very significant factor in our belief that a drug like this could make a big difference. And also that r- resulted in our thinking about capital allocation to such an asset.
Rachel King (18:37):
Yeah. And it's certainly motivating also, I mean, to see the patients who you could actually be helping.
Nancy Simonian (18:41):
Yes, definitely.
Rachel King (18:42):
You also mentioned the challenges of capital allocation as you make these decisions, and we talked a bit about the role of patient perspectives. But what are some of the other things that you think about when you're making those capital allocation decisions, those prioritization decisions which are so challenging?
Nancy Simonian (18:56):
One of the most challenging things you do, I mean, our company started as a platform company and we were working in lots of different areas, or we had the opportunity to work in a lot of different areas. And so how you choose what you work on and where you allocate your capital is one of the most important decisions that you make.
(19:14):
And I think what you have to do is both look kind of ahead and sort of think a little bit about, "Well, where is the future going?" Because by the time you're working on something early, and by the time it gets to market, like, where do you think the landscape is going? And how can you keep that in mind as you think about which areas that you work in?
(19:32):
If you have multiple programs in the clinic and you're thinking about, "How do I allocate capital?" I think it comes down to continually evaluating what is the unmet medical need? What is the competition like? And how likely is there to be a game changer on the way towards your development of a drug?
(19:50):
I think very importantly is the conviction in the biology. I continue to believe one of the biggest reasons for our still low probability of success overall in drug development, which as you know is, you know, less than 10% or 12%, it's still incredibly low, is that we still do not have a great understanding of the biology behind human disease.
Rachel King (20:12):
You've also mentioned just how challenging the external environment in general can be at different times. And I know both you and I have worked in the industry long enough that we've seen some good times and we've seen some times that are not so good (laughs).
(20:23):
So as you know, the Inflation Reduction Act passed recently. And one of the things that we've been particularly concerned about at BIO is the provision that effectively disincentivises the development of small molecule drugs, as compared to biologics, because the exclusivity period for biologics is longer before the drug price negotiation kicks in. It's 13 years for biologics versus nine years for the small molecules.
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Can you share with us a bit about how this law could impact your decision making at Syros?
Nancy Simonian (20:55):
Yeah. So first, let me just sort of start with what's a small molecule and what's a biologic?
(21:01):
So small molecule drugs are typically kinda chemically synthesized compounds that are kind of very small in, in weight. And they usually are taken orally in the form of a pill. Biologics are large, complex molecules. They can be proteins, antibodies, nucleic assays, they could be cell therapy. And they are usually administered through an injection or an infusion.
(21:25):
You know, at the end of the day for patient it's really just important... they wanna get the best drug (laughs) available to treat their disease. And I think this IRA differentially treating small molecule drugs, which, you know, in some ways are... They're oral, so they're more convenient for patients, they're easier to make so they're lower cost of goods. Disincentivizing those over the IV administered, more complex, more costly drugs makes no sense. It shouldn't be that it matters what the form of the product or the medicine to patients.
(21:59):
And this has an impact on people are thinking about investing in small molecules versus biologics. And I think that's not a good thing for patients. And so I think overall the Inflation Reduction Act is having a perverse incentive to favor biologic drugs over small molecules.
Rachel King (22:17):
Well, thank you. Thank you, Nancy. And thank you for sharing your thoughts on the IRA as well as on drug development, the patient perspective, and the many, many topics that we've touched on.
Nancy Simonian (22:26):
Thanks to you, Rachel, and BIO. I think we're in this amazing time right now, I kinda view it as the century for biology and revolution in biology, and the ability to make big impacts on patients. It's incredibly exciting.
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At the same time, we're facing a lot of hurdles from the capital markets, and the regulatory, and the reimbursement environment. And I think all the things that BIO is doing is so important to ensure that we continue to kind of realize these breakthroughs that we're making, and will continue to make, to, to make a big difference for patients.
Rachel King (23:03):
The biotech industry has made tremendous strides over the last two decades, developing medicines and therapies that offer new hope to patients. Drug companies' basic research, coupled with regulatory requirements, ensure that these advancements are safe and effective when they hit the market. But the Valley of Death remains a frustrating reality that often keeps worthy innovations from reaching patients who need them.
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To help bridge this gap, this week BIO is hosting the BIO Investor Forum. The forum brings early stage companies together with investors and potential partners who may be able to help them navigate the Valley of Death. The companies will have an opportunity to showcase their research and drug pipelines. You never know, a partnership could be born that makes the next miracle treatment possible.
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I want to thank Daphne and Nancy for walking us through their own challenges, and sharing with us why it's worth the effort. Their commitment to advancing medicines that address unmet needs is nothing short of inspiring.
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And thank you all for listening. Make sure to subscribe, rate and/or review this podcast. And follow us on Twitter, Facebook, and Instagram @iambiotech. And subscribe to Good Day BIO at BIO.org/GoodDay.
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This episode was developed by Executive Producer Theresa Brady, and Producers Lynne Finnerty and Kourtney Gastinell. It was engineered and mixed by Jay Goodman, with theme music created by Luke Smith and Sam Brady.