How Are Virtual Biotechs Altering The R&D Landscape?

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

The term “virtual biotech” carries with it a certain revolutionary flair. Indeed, as Kent Pryor, COO of ZZ Biotech, describes, the virtual biotech represents a drastic shift in the biotech industry, and as such has a different approach to tackling the challenges of drug R&D.

“Back in the 90’s, venture capitalists didn’t want to invest unless companies had a plan and a platform, and they wanted to build themselves up, go public, and be a growing entity,” Pryor says. Now, “It’s not generally the case that people are looking to start companies to build them up into the next Genentech or Amgen. It costs less to fund a bunch of one-trick ponies than to start a single company that is going to have a lot of different programs and try to build itself up into something else,” Pryor adds.

What does this mean for a small virtual biotech in the R&D space? If you cut away the basic research and the dream of becoming a long-term company, you’re left with a business that is perfectly fine with — and indeed planning — not to be around in 10 to 20 years. It all comes down to establishing a highly focused R&D goal. Once that’s accomplished, Pryor says you can pick up and do the same thing elsewhere.

R&D Challenges In The Virtual Biotech Age

“If you have a company with a relatively narrow focus, just working on pushing one or two drugs forward, then you don’t need the overhead of having a chemistry lab and biology lab. These assets are important if you’re carrying out drug discovery or if you’re trying to build a pipeline,” argues Pryor. However, for the virtual biotech, energy that might traditionally be spent on building a pipeline is put toward establishing effective communication to ensure that the company and its providers are moving together in the established scientific direction.

Honing communication skills is no new task for pharma, as demonstrated by the number of companies launching initiatives to break down barriers between departments and employees. Take for instance AstraZeneca’s investment in a glass lab or GSK’s smart work space to get employees out from behind cubicle walls and work more closely together. A great number of these initiatives are launched to encourage innovation, especially in drug research.

But when it comes to a virtual biotech which has few employees, it’s less about “getting this really interesting group of people together to have aha moments to come up with a whole new direction to move the scientific program,” says Pryor. For ZZ Biotech in particular, the company was formed to garner investor support for the development of a drug for one or two indications — a task which is heavily supported by outsourcing to contractors and consultants.

In this case, the ultimate challenge is creating solutions — both technological and otherwise — to streamline communications between the involved parties. Pryor emphasizes the need for regular teleconferences and cloud storage, along with audits. “I have an acting director of quality who is a consultant for us, and he and I will go out and do audits for all these different outside laboratories,” Pryor explains. “This process does result in more expenses and travel, which takes my time away from doing other things. But that’s part of what goes into running a virtual company.” Doing so, however, heightens the possibility of a sale to Big Pharma and can be particularly beneficial to Big Pharma as well.  

“If Big Pharma was to do all this early or middle stage development, it would be very expensive — they have a lot of overhead,” says Pryor. “Once we've not only developed the drug but showed that it works and we are in a Phase 1 critical study showing its safety in humans, well, we’ve taken away some of the risk that the drug is going to fail.”

Why Choose The Virtual Approach?

While establishing a system of communication may be one of the biggest challenges to keeping R&D streamlined in a virtual biotech, the business model does have its perks. Obviously, there is minimal overhead, seeing as there are no offices and laboratories to maintain. “Rather than trying to maintain a quality department that maintains GLP facilities for everything, it makes more sense for us to pay for that expertise as an add-on to the cost of running the study at a site that is set up and maintained on an ongoing basis,” Pryor states.

There’s also no need to manage a group of full-time employees. For a small company like ZZ Biotech, the need might arise to carry out some type of experiment, says Pryor. However, as this is not a regular occurrence, there is no need to keep someone on staff full time to perform these duties. From a management perspective, this enables the company to get its work done without having to produce “busy work” for an employee, which, in a scientific laboratory setting, is an expensive undertaking.

For instance, ZZ Biotech is going to be manufacturing more GMP drug product for clinical trials later this year. “For the last three years, we have only been doing stability studies on a drug we manufactured a long time ago. Our acting director of quality has overseen that, but it hasn’t taken much of his time or our money,” Pryor noted. With this new manufacturing campaign gearing up, the company will be using more of that consultant’s time, and they will add that into the total manufacturing costs instead of carrying an employee as part of general company overhead.

“Our CMO will assign a project manager for the manufacturing campaign, and we will use some of the cloud-based collaboration and data sharing tools we have to help streamline communications. Outsourcing doesn’t let us stop providing oversight, but we do end up delegating more to third parties,” added Pryor.

Pryor will be speaking more in-depth about the role outsourcing is playing in the biotech space at the upcoming Outsourced Pharma West conference in San Diego. He is particularly excited to participate in the upcoming conference because “even large companies outsource some aspects of their business, and more and more virtual companies like ZZ Biotech are outsourcing the majority of their operations. I’m looking forward to discussing outsourcing strategies with the other panelists and attendees and learning about what is working for everyone else. I’m hoping to take some good ideas back home with me to continue to streamline my company’s operations and allow us to keep virtually growing around our small internal core.”

Life Science Leader recently published a story about corporate culture, the foundation of which can arguably be a leading factor in the success of a larger company — even more so than the drugs in the pipeline. ZZ Biotech’s reliance on two full-time employees and the fact it doesn’t plan to be around in 10 years are factors that certainly set the virtual biotech apart from the other models of pharma R&D in the industry. But when it comes down to it, the company’s recognition of its lack of permanence is just as important for an evolving industry as establishing a strong corporate culture is when the end goal is longevity. Health needs and pipeline needs are constantly changing. Efficiency and cost-effectiveness are king and will continue to be reigning concerns for the pharma industry. As Pryor emphasizes, “Putting together a very small team that can handle the reins of pulling together the different outside groups needed to do the early and middle stages of drug development builds a lot of value into the program that Big Pharma is willing to pay for.”