COVID-19 has placed the healthcare sector front and centre in all our minds. The development of a vaccine in record time was truly remarkable, showing what can be achieved when great minds and innovative technology come together. Once the 'poor cousin', the biotech sector is coming into its own and is now at a key inflection point. Record funding and the entry of a 'new breed' of players, thanks to the wonders of AI and computer power, is driving considerable transformation, especially in drug discovery. What does this mean for the existing players, particularly traditional pharma? How can they compete with this new breed?
The past 18 months has shown us how a virus with a diameter of just 110 nanometres can stop the world in its tracks and impact our daily lives. I studied virology in the 1990s because I was fascinated by HIV, a virus that can integrate its genetic information into the human genome using its own enzyme. Through this integration, the virus hides from the immune system. It is a remarkable, efficient engineering process. So far, a vaccine or cure for HIV remain elusive, but fortunately, therapeutics are available. It took about two years to identify what causes AIDS in the early 1980s, and another four years to release the first drug. Biotech was in its infancy back then and pharma stepped up to the task.
This time, during the COVID-19 pandemic, biotech has taken charge, and molecular engineering and computer sciences have moved to the forefront. Progress was made in weeks vs. years. This is science at its best - and that is what the future of biotech has in store for us.
The biotech industry is all about efficiency; focusing on transforming the drug discovery process, by tapping into biology, engineering and computer sciences. These three disciplines, when working in unison, will continue to have wide-ranging ramifications for the healthcare sector and other industries over the next decade and beyond.
Challenges will arise and hesitation will persist, but if history is any guide, they will gradually be overcome, with humanity the chief beneficiary.
“I think the biggest innovations of the 21st century
will be at the intersection of biology and technology.
A new era is beginning.”
Steve Jobs (2011)1
New therapeutic modalities are successfully challenging the status quo
In the late 1970s, Genetic Engineering Technologies - Genentech, a San Francisco-based biotech, set out to commercialise genetic engineering, a technology that was rapidly being adopted in research labs. The idea of making therapeutics in bacteria or cells was frowned upon by many, as it challenged the status quo, which in this case, was the small molecule pill, chemically synthesised by machines and sold in the primary care market. Despite all the hesitation, Genentech persisted. Fast-forward to today and genomics and molecular engineering are at the core of the biotech and pharmaceutical industry. In April this year, the United States Food and Drug Administration (FDA) approved the 100th monoclonal antibody, a therapeutic modality that had its debut in 1986.
These gentlemen were responsible for the first cloning of insulin for Genentech.
Source: Sally Smith Hughes, "Genentech – The Beginnings of Biotech”, The University of Chicago Press, April 2013.
The increase in diversity of therapeutic modalities has been a key theme over the past decade, and given molecular engineering advances, more expansion is expected, helping us to pair the right modality with the ideal drug target. Most recently, despite many naysayers, messenger RNA (mRNA) was added to the therapeutic armamentarium. Again, it showed how hard work, persistence, solid funding and exceptional teams can overcome negativity and resistance. On numerous occasions, a new approach is greeted with great hesitation, but that is what science is about - testing a hypothesis, not reinventing an already validated concept.
It is not just therapeutic modalities that have seen great advances; our understanding of the molecular profile of diseases has progressed immensely as well. We are big believers in precision medicine and are confident that neurology will similarly follow oncology’s targeted therapy pathway. Oncology once had chemotherapy as its only weapon at its disposal. Today, we can classify cancer by its molecular profile rather than its location and treat it accordingly.
Neurological diseases are complex and they take years to manifest clinical symptoms. There are genes that when mutated can cause, or put you at risk of developing, neurodegenerative diseases. In the case of Alzheimer’s disease, there are 35 known genetic associations and many are linked to the brain’s immune system, while in the case of Parkinson’s disease, there are over 95. The ability to identify and develop a targeted drug for each mutated gene is not beyond the realms of possibility in the future. We are already seeing success in this space.
In the coming decade, the speed of scientific progress will accelerate. With the standard of care for many diseases improving, disease prevention will take centre stage and biology will play a role in sectors outside of healthcare. It will not be without challenges, but nothing is in this industry. It is about embracing the unknown and carefully and factually considering “what if it works?”.
Biotech is reaching a key inflection point
There is no doubt in our minds that the biotech industry is at a key juncture in its short history. Today, the two worlds of biology and technology are colliding. Both had a key moment in the 1950s. James Watson and Francis Crick provided us with the chemical structure of our genetic code; while Claude Shannon and Alan Turing gave us computer code. As Walter Isaacson wrote in his recent book “The Code Breaker”:
“Now we have entered a third and even more momentous era, a life science revolution.
Children who study digital coding will be joined by those who study genetic code.”
There is a mindset shift occurring in the biotech industry that is driven by the convergence between biotech, engineering and technology. This shift is particularly interesting in the drug development industry. Pharma is no longer the epitome of drug development; it is biotech that offers very attractive alternative business models.
Over the past 10 years, the drug discovery process has been changing, partly due to advanced drug discovery tools, but also due to a significant increase in funding. In 2020, biotech funding soared to a new record high of around US$90 billion, up c.60% from the previous annual record of US$55 billion (see Fig. 1). 2021 is also shaping up to be another strong year, with funding reaching US$54 billion for the year to date as at July (+2% year-on-year vs. 2020).3
Fig. 1: Biotech Funding Reached Record Highs in 2020
Source: FactSet Research Systems, Jefferies LLC
The funding environment for biotech companies has changed immensely. The idea that pharma companies represent one of a few funding options for biotechs is history. Today, there are several dedicated healthcare funds, various cross-over funds and tech-oriented funds that have expanded the funding universe. With the understanding that this can be a long and sometimes 'bumpy' journey, companies will often only seek those investors/funds who have a similar long-term horizon.
The calibre of management teams has also changed. Many teams are no longer novices, they have runs on the board and often know the pitfalls of large organisations. Different business models are emerging and many senior executives are leaving big pharma/biotech companies and joining biotechs.
Drug discovery is undergoing a huge transformation
The most significant change, however, is occurring in drug discovery itself. Developing new drugs is a lengthy process, starting with target and lead drug identification, moving to clinical trials and finally, commercial manufacturing. It takes years and considerable investment. This longstanding, traditional process is, however, being challenged as new discovery and drug engineering tools, automation and machine learning come together. Today, scientists, thanks to advances in computer power, can collect more data than ever before, and analysing the data is cheaper than it has ever been. Over the past 10 years, new biotechs have emerged that are taking advantage of these computer advances and challenging different stages of the drug development and manufacturing process. The aim is to make it more efficient, reduce time and ultimately save significant money.
It all starts with a specific target (e.g. a protein) and the notion that it plays a significant role in causing a disease. Initially, literature review along with experimental validation occur to confirm the importance of the target. This is followed by understanding the composition of the target better and deciphering how a drug can best interfere with the pathological activity of the target. Drug engineers will then get together and design leads that will be tested in screens to determine if they have the desired effect. The engineers also have to consider how the drug will ‘distribute’ in humans.
A lot of analysis has to occur, which is ideal for machine learning and artificial intelligence (AI). Yes, AI is a buzzword these days, but companies are really making incredible progress in drug discovery using this approach. They have focused on combining a myriad of externally sourced datasets with their own datasets generated in their laboratories. This new breed of companies employs a combination of computer and data scientists, as well as ‘drug hunters’ and 'drug engineers'. These companies have managed to bring together different skillsets and merge cultures – which is a tremendous achievement.
UK company Exscientia is one such example of this new breed of biotech company. Their AI-driven approach (see below) can save years of drug discovery, while also generating more precise leads and chemical structures that often would not have been considered.