The use of digital technologies is transforming business as usual in industries ranging from aviation to retail to telecommunications. But other sectors—including the pharmaceutical industry—have been slower to embrace the potential of digital technology.
Given that pharma companies depend on innovation, science, and research and development, it may seem counterintuitive that they lag behind the digital curve. In McKinsey’s ongoing survey to measure companies’ “Digital Quotient,” the pharmaceutical industry ranks in the bottom third of industries measured. But consider the context: pharma is characterized by long, capital-intensive product-development cycles, and considerable technical and regulatory uncertainty. As a result, there is a degree of risk aversion.
A new breed of biotechnology firms, unencumbered by the accumulated practices and systems of large traditional ones, are pioneering impressive new digital capabilities. In the process, they are nudging the industry as a whole in this direction. This could significantly boost R&D productivity, benefiting both pharmaceutical companies and the patients they serve.
The emergence of biomolecular platforms
In recent years, a number of biotechnology companies have applied genetic-information-driven technologies to form “biomolecular platforms” (exhibit). These platforms intervene at different points in the information chain (often referred to as “the central dogma of biology”) to modify biomolecular processes at the source of various diseases. In that respect, they have a software-like nature, that allows for the ready design of multiple new therapies by a single platform, that provides the instructions to modify the hardware of molecular biology, that in turn addresses disease.
Biomedical platforms have already yielded new treatments—spanning various DNA-, RNA- and cell-based therapies—with broad potential applications. Many of these new interventions offer a glimmer of hope for treating life-threatening diseases that have so far proved impervious to conventional approaches, such as small molecules or monoclonal antibodies.
Indeed, several such therapies have already received regulatory approval: of particular note are the US Food and Drug Administration’s (FDA) recent green lights for Kymriah and Yescarta. These are chimeric-antigen-receptor therapies (CAR-T) for certain aggressive hematological malignancies. Similar CAR-T therapies are advancing rapidly. Luxturna, which treats a rare form of inherited vision loss, recently became the first FDA-approved DNA gene therapy. In addition, several antisense drugs have also been approved. These examples account for only a small number of the biomolecular-platform-derived therapies that are working their way through the pipeline and rapidly approaching the market.
Biotech companies have raised significant amounts of capital to advance biomolecular platforms and their associated development programs. According to our analysis of data from BioCentury, a biotechnology review, at least five have each raised more than $1 billion in capital. Fundraising has accelerated rapidly over the past five years; all told, as of the end of 2017, 100 companies have raised at least $13 billion over the past several years to discover and develop biomolecular platforms.
Biotech companies are typically formed around their unique insights into the underlying disease biology for a single disease or a related cluster of diseases. For these companies, the nature of drug discovery and development remains mostly unaltered from the recent past. Many have adapted by focusing on specialty-disease areas where few treatments exist; this allows them to make use of expedited development and regulatory pathways that could lead to reduced timelines and costs and increased probability of success.
Biotech companies with a biomolecular platform are forging a different path, in which the platform itself is the source of value creation. They start by building the platform and designing a set of experiments to demonstrate the viability of the platform as a therapeutic modality. For instance, they may test whether the platform can be used to deliver vaccines. Then they identify a range of diseases across various therapeutic areas or clusters of related underlying biology that the modality could address, and prioritize drug discovery and development across those diseases (see sidebar, “Interview: How Moderna uses its digital capabilities to power its mRNA platform”).
Biomolecular-platform companies therefore typically have a variety of different therapies in development. There is still correlated risk across drugs that are discovered and developed with the same genetic-information-driven platform. But the variety of modalities, and the ability to sequence development of drugs targeting different biological pathways, provides a more balanced risk-adjusted portfolio.
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Companies that take this approach usually adopt a staged development process, which starts by selecting a disease for which the clinical end-point is established and straightforward to test. Once proof of concept has been validated, the platform then allows more-rapid and lower-risk development of therapies for other diseases. The careful selection of initial diseases can mitigate biology risks in certain related clusters of diseases with similar underlying etiology. This de-risking allows companies to stage their investments, then scale them up to address a broad range of therapeutic areas. The approach is being applied across a range of biomolecular platforms, from DNA-based gene therapies to CAR-T therapies to emerging microbiome platforms.
The corollary of the versatility of these biomolecular platforms is the need to make significant investments and to scale up rapidly. This is difficult for three reasons. First, even before the specific disease targets are identified, significant up-front investment is required to establish the platform. Second, companies must take steps to protect their intellectual property and other proprietary investments. Third, running multiple clinical programs at the same time calls for efficient and scalable operational processes and a flexible operating model that allows for rapid resource allocation.
Digital as a source of value creation for biomolecular platforms
The combination of genetic-information-driven technologies and an innovative approach to R&D positions biomolecular-platform companies to transform their research enterprises by taking advantage of digital opportunities. It doesn’t hurt that many of them have been formed in the past decade—and so lack the built-in brakes that can slow down bigger firms. These young companies are coming of age as “digital natives.”
A number of characteristics make digital an integral part of the business model of biomolecular-platform companies. In fact, digital can help all along the value chain.
- Drug discovery:
- Digital techniques can accelerate the progression from initial concept to drug candidate.
- Optimizing drug design through the use of algorithms and advanced analytics may improve the chances of success.
- Automation enhances repeatability and speed.
- Digital technologies can be used to automate the production of clinical trial-grade material.
- The ability to apply learning and data from other pipeline assets produced by the same platform may reduce the burden of data collection and obviate the need for certain steps in the development process, such as toxicology and preclinical safety.
- Clinical development:
- Well-designed experiments in one or a small number of diseases can inform and reduce risks across a broad range of diseases. For example, experiments with microbiome-based therapies are being designed to guide entry into a broader range of diseases.
- Many diseases have significant unmet needs, such as certain types of cancer or rare diseases, which enable the use of expedited development and regulatory paths and accelerates the approval process for new drugs.
- Digitization can help to reduce the number of ingredients and process steps.
- Optimizing product design and manufacturing may improve downstream yields as well as biological effects, such as sequence optimization for RNA products and transcription levels for DNA gene therapies.
That is the potential. In practice, there are few examples of companies using digital effectively all along the value chain. This may be a lost opportunity. We have found that areas where digital is not applied tend to become bottlenecks, delaying scale-up and depressing value creation. This also may be a factor in the recent burst of M&A activity. Larger companies sense a potential to add value by infusing expertise and capabilities to help accelerate the scale-up and apply their digital capabilities to the platform.
Digital technologies enable the fast, replicable, and systematic application of the underlying biomolecular-platform technology to a broad range of diseases. And the potential is growing, as more and more companies—including traditional biotech and pharmaceutical firms—are beginning to develop biomedical platforms. As the benefits of digital prove themselves, both biotech pioneers and larger pharma companies are increasingly positioning themselves to capture the potential of their biomolecular platforms. In so doing, we expect that this will be a major impetus to help the pharmaceutical industry close the digital gap relative to other industries. In the meantime, biomolecular-platform companies have demonstrated the value that digital can deliver.