In search of the new: now pharma cosies up to academe

When the pharmaceuticals giant Merck set up a large R&D lab across the street from Harvard Medical School in 2004, the local research community at first was bemused by such a brazen move. But they quickly became nonplussed. Soon, it became commonplace to see large pharmaceutical and biotechnology companies moving close to major universities to tap the latest research and potential employees.

Now, Biogen Idec and Pfizer have gone a step further by setting up their own incubators. Biogen Idec set its up next door to its main building in Cambridge, Massachusetts, to be home to selected entrepreneurial academic scientists and startup companies. Biogen Idec Innovation Incubator (bi3) welcomed its first occupant in mid-December, a company called Escoublac that is based on the discovery of a new link between bone biology and metabolism made at Columbia University Medical Center.

Around the same time, the Pfizer Incubator opened its doors in La Jolla, California. While Biogen Idec is looking for potential new compounds to add to its pipeline, The Pfizer Incubator is focused more on platform technologies for new drug candidate identification.

A new approach?

Some industry observers say the incubators may signal a new approach to bridging the gap between university research and biotech and pharmaceutical drug discovery.

“There’s a growing funding gap,” said Rainer Fuchs, Executive Director of bi3. “When a researcher has an interesting molecule it’s hard to get funding. Many venture capitalists are becoming more conservative and thinking further down to the clinical phase.”

Another benefit for companies and researchers in the incubators is the proximity to corporate scientists who are experienced in moving drug candidates from the discovery phase, through  to clinical development and testing, and then manoeuvering through regulatory and approval processes.

“What appealed to me about bi3 was the access to Biogen Idec’s scientists,” Gerard Karsenty, founder of Escoublac and professor of Genetics & Development at Columbia University Medical Center in New York, said when his company became bi3’s first occupant. “The ability to tap into [Biogen’s] drug discovery and development expertise increases our collective chances of turning a promising discovery into therapies that actually help patients.”

Karsenty’s research uncovered the role of the hormone osteocalcin in regulating insulin and fat storage in the body. His goal in forming Escoublac is to explore whether the discovery can be translated into new treatments for metabolic diseases such as Type II diabetes and obesity.  

Both Biogen Idec and Pfizer also have venture capital arms that invest in promising new compounds or technologies compatible with their parent companies’ business plans. What the incubators add, both say, are financial resources to advance prototypes or to convert a research compound into a development candidate that can quickly enter the clinic. To do this academic scientists need facilities such as lab and office space with access to the corporation and its in-house experts, as well as administrative support.

Beyond academia

“For each company’s founder, it’s an opportunity to advance the science beyond what the academic environment allows,” says Fuchs. “For us, it’s an opportunity to get involved in innovative and exciting science that complements our internal R&D efforts and potentially adds product candidates to our pipeline.”

Bi3 looks for lead-stage molecules that are three to four years away from the point of a formal Investigational New Drug Application (IND) to the US Food and Drug Administration (FDA) for permission to carry out a clinical trial. Biogen is prepared to put up to $10 million in, but typically expects to spend an average of $6 million over two to three years.

In return it gets some stock in the start-up, with an option to buy the company or license the technology later. Typically, b3i will take less than 50 percent of the startup, so the founder has a higher amount of equity than if he or she went through a venture capitalist, Fuchs said. “We don’t see this as a replacement to a traditional venture capital approach.”

Getting in early

Some companies are better suited for venture capital funding. Bi3 is more interested in working closely with early stage ideas that fit Biogen Idec’s development plans. “We want to work with a founder who wants to work with someone like us – whose primary goal is to get a drug to market,” notes Fuchs. Venture capitalists on the other hand are interested in getting a start up to the next round of financing, and ultimately to an exit strategy such as going public. And most venture capitalists are not prepared to go to the time and expense of doing due diligence to invest small amounts of money in small startups.

Susan Luchine, professor of microbiology at the University of Massachusetts, Amherst, who recently started venture capital-backed SunEthanol Inc., a clean energy company that uses microbes to help produce alternative fuel, said, “That’s a fantastic business plan for Biogen Idec and Columbia. It’s hard to find incubators. The hardest thing for SunEthanol was to establish a working space and equipped lab.” She said a university would see this as a pathway to commercialise its technologies.

Michael Naughton, head of the physics department at Boston College, who cofounded Solasta Corp., a venture-funded maker of nanoscale elements for solar cells agrees, “I think it’s great. I’d love to see it happen [more].” Naughton ruefully described how he spent a whole, exhausting summer meeting with venture capitalists before finding the right partner.

This is part one of a two-part series. Next week the second part looks at how incubated start-ups tap into the corporate expertise of their foster parents.