Healthcare spotlight: Drug discovery and development

Dr. Henning Steinhagen is a senior executive with a 20-year track record in the Pharma, Biotech, CRO/CDMO industries and venture capital. His experience spans multiple therapeutic areas and all phases of research and early development. He recently spoke at a dinner hosted by Inflexion on developments in the drug discovery space and how private equity can help these companies to grow. 

What are the challenges in drug discovery and development?

The biggest challenge remains to identify drugs that truly improve patients’ lives and clinical outcomes. Many drugs look brilliant in a preclinical setting but still fail due to a lack of translation. Precision medicines that are based on human genetics are definitely a way forward to de-risk and increase the odds.

The starting point for discovery and development is thus to find the right target or biology you want to modify. Some say the low-hanging fruit has been harvested and that’s true to an extent, but there are exciting areas remaining as well as new fascinating ‘biologies’ coming up to interrogate. Selecting a genetically validated target is important as it will improve prospects for success.

As a next step you need the right starting point – these can be classic small molecules, peptides, RNA-based therapeutics, conjugates or biologics for example. Whatever you chose needs to be optimised and selected based on a critical and unique cascade of assays. Apart from testing on the recombinant target, primary human based tissues, stem-cell related systems and genetically modified models are playing a more and more important role.

Once the right leads are identified, relentless execution and fast optimisation cycles are key for success, especially in competitive areas. There are many partnering companies (for example CROs, CDMOs) out there and it is important to create a collaborative spirit and trust together with the internal team in order to succeed.

Once you have identified an IND candidate, you need to come up with a winning and intelligent clinical strategy. Current strategies often involve a ‘focussed-to-broad’ approach to gain a first rapid approval in a rare and genetically well-defined disorder followed by broadening the patient population and expanding the indication.

Summarising, precision or personalised medicine approaches are definitely a promising way forward as they are de-risked and based on a focussed and genetically validated path. Together with the right biomarker strategy and ideally a companion diagnostics, truly differentiated breakthrough drugs can be identified.

What role can private equity play in this space?

Obviously PE firms should focus on investing in high quality providers that serve growing markets. These can be for example ‘hidden technology champions’ with significant growth potential that can be further developed and expanded. Of course technology-based firms need to be differentiated with a high entry barrier and durable competitive advantage. The right strategy is key in order to win in a defined market segment.  Specialist advisers can definitely help with PE diligence, but it is also important to build-up a critical understanding and expertise within the private equity firm in order to convince partners, for example in a competitive bidding and M&A process.

Can technology play a role in supporting discovery and development?

There are several emerging technologies that can help you with the identification and validation of targets. These include for example genetically modified human cellular systems or organoids, human specimen biobanks and various technologies such as single cell RNA sequencing, and Omics-based technologies.

When it comes to finding the right modality, there are new screening technologies and structural elucidation techniques available that can help with visualisation and idea generation. These include novel virtual screening algorithms as well as breakthrough experimental technologies. Cryo EM for example is growing in this space as it gives you structural guidance in drug discovery directed to non-crystallizable targets.

What sort of providers are in most demand?

Companies that truly help to solve problems and support the ‘customer journey’ will be in most demand from biotech or pharma seeking help on their journeys to find novel breakthrough targets and drugs. It is not only about the tech they can bring but especially about the way that the firms collaborate with customers. Preferred technology providers can interpret outcomes and provide true value for their customers. This ‘customer centric mindset’ including elements of consultancy and project management is key for any successful CRO and CDMOs in order to become the winner of the future.