Dr David Cavalla

1
Incubating Novel Projects for Partnering in
Pharmaceutical RD An Extended Pharmaceutical
Enterprise Approach
Dr David Cavalla Arachnova Limited St Johns
Innovation Centre Cambridge CB4 0WS
2
Incubating projects for partnership

• Setting the scene the virtual pharmaceutical
  company
• Inter-company relationships to improve RD
  efficiency
• Contracts, collaborations and licenses
• Arachnovas achievements

3
Phases of Pharmaceutical RD
Preclin. Dev.
Phase I
Phase III
Phase II
Discovery
Idea
Market
4
The Players
Large Pharma
Platform Technology Biotechs
Product Biotechs
CROs
Academia
Discovery
Development
Marketing
5
Virtuality meaning

• Product development without using in-house
  laboratories or bench scientists

6
Virtual pharmaceutical RD is

• Focused on products rather than technology
• Risky
• Costly and lengthy to profitability
• If successful, offering a high return to
  investors
• A strategy widely adopted in part throughout the
  biotechnology sector

7
Advantages and disadvantages

• Advantages
• Reduction in fixed costs (traded against
  increased variable costs)
• Better allocation of resources in a project with
  variable demand
• Access to specific technology, expertise or
  skills either
• not present internally or
• cheaper than internal alternative or
• quicker than internal alternative
• Flexibility in disengagement from unsuccessful
  research greater objectivity in making that
  decision
• Better management of risk

• Disadvantages
• Loss of control
• Difficulty of co-ordination and management
• Increase in variable costs, traded against
  reduced fixed costs
• Differing cultures of external party
• Time taken to agree contracts
• Difficulties in agreeing ownership/split of
  intellectual property rights
• Instability in case external party becomes
  financially insolvent, merges or is acquired

8
Time advantages for outsourced development work
Source Barnett International Benchmarking Group
9
Incubating projects for partnership

• Setting the scene the virtual pharmaceutical
  company
• Inter-company relationships to improve RD
  efficiency
• Contracts, collaborations and licenses
• Arachnovas achievements

10
What RD gap?

• New product introductions

11
Relevance of small companies to pharmaceutical RD

• Jurgen Drews
• (Speaking about the past 15 years of the
  pharmaceutical industry)
• Virtually all the new discoveries and
  inventions, which are about to reshape drug
  discovery, came from the outside, from academia
  and from science-driven small companies.
• Quo vadis, Biotech? (Part 1) Drug Discovery Today
  2000, 5547-553

12
Products in development 19952002
Ian Lloyd, Scrip Magazine February 2003, 6061
13
Incubating projects for partnership

• Setting the scene the virtual pharmaceutical
  company
• Inter-company relationships to improve RD
  efficiency
• Contracts, collaborations and licenses
• Arachnovas achievements

14
Pharmaceutical RD is not Lego

• Virtual model implies RD can be built from
  pre-constructed components, linked by contractual
  relationships
• Contractual outsourcing can be complemented by
  external sourcing of
• intellectual property, through licensing
• expertise, through collaborations
• The extended enterprise is defined as a "dynamic,
  networked organisation"

15
Inter-relationships the Extended Pharmaceutical
Enterprise
Platform Technology Biotechs
Product Biotechs
Academia
16
Differentiating characteristics

• Contracts
• Requirement access to resources not available or
  not sufficient internally
• Payment based on work done
• Optimum stage of establishment development, and
  to a lesser but increasing extent, discovery
• Reliance on external partner medium
• Aim completion of defined piece of
  (developmental) work

17
Differentiating characteristics

• Collaborations
• Requirement access to technology for improved
  research productivity
• Payment based on value of product development,
  plus success-related milestones royalties
• Optimum stage of establishment discovery
• Reliance on external partner low
• Aim integration of external technology into
  intramural discovery

18
Differentiating characteristics

• Licenses
• Requirement access to products (or occasionally
  technology) for enhancing development pipeline
• Payment based on time allocated plus possible
  access fee, and success-related milestones low
  royalties
• Optimum stage of establishment development
• Reliance on external partner high
• Aimcommercialisation of external
  technology/product

19
Technology aggregator companies

• Entrepreneurial product development companies
• Off-balance sheet methods of enhancing RD
  productivity for pharma companies
• Add value to developmental opportunities
• Examples Apothogen, Pozen, DevcoPharma, PPD
  Virtual, The Medicines Company, PharmaBio
  Development (Quintiles), Arachnova
• Key USP expertise in outsourced development
  (people) and money

20
Incubating projects for partnership

• Setting the scene the virtual pharmaceutical
  company
• Inter-company relationships to improve RD
  efficiency
• Contracts, collaborations and licenses
• Arachnovas achievements

21
Arachnova projects phase of RD
Preclinical
Phase I
Phase III
Phase II
Idea
Market
Target
Clinical Proof of Principle
Outlicense
greatest value enhancement section of RD
22
Arachnovas approach

• VC-backed virtual RD based pharma company with a
  portfolio of novel projects being incubated for
  future partnership
• Projects based on therapeutic switching (novel
  uses for existing drugs)

23
Virtual company

• Core of senior managers create, identify,
  initiate and control development of projects
• Outsourcing of R D operations including
  preclinical, clinical, regulatory, chemistry,
  pharmacy and quality
• Research studies generally conducted in
  universities and development studies at contract
  research houses worldwide

24
Arachnova the company

• Founded 1998
• Highly experienced industry professionals
• Core group
• Ad hoc project development team
• Funded by European VC group with extensive
  experience in pharmaceuticals

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Therapeutic switching advantages

• Can make use of an existing data package
• Lower risk of adverse toxicity and side effects
• New use patents obtainable

• Lower cost development
• Greater chance of success
• Equally protectable products

an attractive strategy for small companies,
making good headway with limited resources
26
Arachnova proprietary projects
27
Outsourcing

• Key to operations
• Research
• Focussed collaborations with academic groups or
  CROs in UK (various centres), Switzerland,
  France, Belgium, Spain US often preclinical
  Proof of Concept studies
• Development
• CRO selection aided by Technology WebTM
  (http//www.arachnova.com/search)

28
Araderm (AA10006) from CNS to anti-inflammatory

• Widely used CNS drug
• Activity at steroidal concentrations in a
  gold-standard model of dermatitis
• Substantial worldwide, granted patent estate
• Being developed as a topical formulation for
  dermatitis
• Complete preclinical dossier, skin permeation
  data, Phase I
• Phase IIa completed in atopic dermatitis 49
  reduction in mean SCORAD (Scoring Atopic
  Dermatitis) total score after a one month
  treatment period compared with a 31 reduction
  with placebo.

29
Araderm (AA10006) outsourced RD
Red consultant Blue industrial
collaborator Green academic collaborator
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Arachnovas major achievements

• Dermatitis (AA10006, Araderm)
• Product development over preclinical formulation,
  Phase I, Phase II.
• Outsourced approach
• Outlicensing discussions at term stage
• Incontinence (AA10020)
• Identified secondary use of cardiovascular
  compound
• Set up collaborated to jointly develop to PoP
  (i.v. route)
• Successfully outlicensed for partner to complete
  development from oral PoP
• MCI-225
• Identified selection of uses (AA10021, AA10025,
  AA10026 etc.)
• Approached Mitsubishi and negotiated access to
  data package in return for license rights
  following clinical studies

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Conclusions

• Modern pharmaceutical industry composed of
  multiple components
• academia
• biotechnology sector
• CROs
• large pharma
• Inter-relationships between these components
  involves contracts, collaborations and licenses
  the Extended Pharmaceutical Enterprise
• Arachnova has used all three forms of
  relationship to build an advanced, diverse
  portfolio of development stage projects designed
  for commercial partnering