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The Reality of Virtual Pharmaceutical Companies

The Reality of Virtual Pharmaceutical Companies

By Dr Stephen Naylor and Dr Kirkwood A. Pritchard Jr

We discuss the oxymoronic proposition of a Virtual Pharmaceutical Company (VPC) and the typical adopted business model, as well as provide examples of such companies currently trying to undertake this adventurous task.

The vagaries and complexities of bringing a therapeutic drug to market through the Drug Discovery and Development (DDD) process are well known and described.

Any company that undertakes such a time-consuming, financially-burdensome, risk-laden task must have access to a myriad of experienced and professional help. The depth and breadth of expertise required includes broad business knowledge, accounting, legal, intellectual property tactics and strategy, scientific discovery, animal models, toxicology, specific disease-domain understanding, regulatory, clinical trials, manufacturing, marketing, sales and distribution skills. Thus, the demands of a modern pharmaceutical company are taxing, and require a cornucopia of employees, as found in medium-to-large pharmaceutical companies.

It would appear counterintuitive that a Virtual Pharmaceutical Company (VPC) could succeed in carrying out such a daunting set of inter-connected responsibilities. The current VPC model requires a small number of experienced core management/advisors/board members to run the company and execute on the production of a therapeutic drug in a specific disease indication. This is achieved by developing an efficient and delineated strategic out-sourcing and partnering plan. Most, if not all, of the major business operations associated with the DDD process need to be considered.

How much does it cost to bring a therapeutic drug to market? The oft-cited capitalised cost is quoted at $2.87 Billion (1)! However, a subsequent study has claimed that “...this analysis lacks transparency and independent replication”, and is a gross overestimation (2).

Prasad and Mailankody analysed US Securities and Exchange Commission filings for 10 cancer drugs, and determined the median capitalised cost (7%) of developing a cancer drug was $757 million. Another study by Paul and colleagues estimated that the capitalised cost (11%) was $1.78 billion. This latter composite figure consisted of ~38% for discovery (target discovery through lead optimisation), ~8% was required for preclinical studies and ~51% was due to all Phase I-III clinical trials (3).

These significant Drug Discovery and Development (DDD) costs necessitate that each large pharmaceutical company must launch two to three New Molecular Entities/New Therapeutic Biologics (NMEs/NTBs) per year to “...achieve their growth objectives based on product innovation” (4). Yet in 2018 only three companies, Pfizer (four NMEs approved by FDA) AstraZeneca (two NMEs) and Eli Lilly (two NMEs), accomplished such a goal (5)....

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