I went to hear Dr. Atul Butte speak at the SF Health 2.0 chapter meeting last week.  He gave a great talk on the accumulation of big data in healthcare and what could be accomplished with the wealth of information.

One of his main pitches – there aren’t enough people/companies working on healthcare problems.  He argued that academic research on life sciences-related problems wasn’t enough.  Instead, the identifications of new drug targets and new diagnostics created from the vast repositories of big data must come from start-up companies.  At one point, I am pretty sure he exclaimed that he would be disappointed if every student in his lab did not start up a company.

Is this the answer?  Can the eco-system support so many different companies? I am not arguing with the underlying premise that there is a need for translating academic research into more concrete product development and healthcare solutions.  But does each idea or potential direction merit a company?

I suppose it depends on how you look at a start-up and its strategy.  If the idea is to become a full-fledged commercial entity selling drugs, diagnostic services and the like, the “every idea into a company” has its challenges.  Either you look at it as survival of the fittest, or it’s hard to imagine having so many companies each with a narrow sliver of the product field. If instead, the start-ups are just the spark to get the idea transitioned into the commercial world with the end-game being acquisitions and mergers, then the large spray of start-ups has some merit.

So that leads to my next question – should companies formed with these different end-goals in mind work with different strategies?  For example, with regard to patent strategy, a company looking towards eventual acquisition should consider shaping its IP portfolio for a fit with its eventual partner.  This may include a consideration on the breadth of claims to file, as well as which countries should be key for filings.

A concrete example:  An early stage start-up has a lead therapeutic with several indications.  As patent costs mount and budget becomes tight, there are choices to be made.

(1) File US only or in a very small handful of countries for each of the pending patent applications; or

(2) whittle down the applications to the molecule and the most promising indication and file more globally with this focused set; or

(3) spend more resources to cover all the pending and potential IP and have less money for other R&D directions.

For a partnering or acquisition strategy, a US-only portfolio may have limited attraction.  Lack of rights in key markets for a therapeutic can severely limit the return on investment. The second choice, a focus on limited indications could be beneficial if it is appropriately targeted the potential partner’s/acquirer’s interests.

For a go-all-the-way strategy that intends to develop a lasting company around the lead therapeutic, there are added complexities.  Reducing the scope of the IP has pluses and minuses.  On the positive side, it brings focus not only to the IP and its costs, but also to the R&D, regulatory and commercial strategies that the IP supports.  On the downside, this choice can put a lot of eggs in one basket and limit the potential to partner if the option becomes attractive to the start-up sometime in the future.  The third choice also comes with tradeoffs.  The most notable is the big bet on this first lead with a lot of IP spend up front to maintain a broad portfolio.

Is there a best choice?  Probably, but not the same for everyone.  Syncing the IP strategy with the short and long-term business goals, the timing for funding rounds, the potential for partnerships and/or acquisitions of programs/leads, regulatory plans, the state of competition and issues such as risk tolerance may all feed into the decision.  In considering all of these factors, creative solutions will likely emerge that may favor one of the options or even present a more attractive alternative.

Back to the original question – should every academic research idea turn into a company?  I would say no.  A company is a huge expenditure of resources.  It shouldn’t be the only way to go from research focus to product development. What are the other options?  I’ll leave that for a future blog.