One hallmark of our industry is the incredible risks faced in bringing a new product to market.  New technologies bring risks of not performing the way we’d like.  Clinical and regulatory risks can delay or prevent approval.  Commercial and market risks may limit success with physicians, patients and customers.  All of this leads to huge financial risks for investors along the way, and we have seen this scenario play out repeatedly here in the local area in disappointing results for companies like Therion, Vion, and Acusphere. 

A new model is taking shape that helps manage these risks by increasing a company’s flexibility and lowering the cost of commercializing a new product.  While the specific structure varies, we see three components of this much more virtual model becoming apparent:

• Intense focus on a specific program
• Minimal fixed infrastructure
• Small core employee base

Lilly’s acquisition last week of tiny Alnara Pharmaceuticals illustrates the power of this emerging model.  After licensing the product rights from the Cystic Fibrosis (CF) Foundation in the wake of the collapse of Altus, Alnara utilized a very small core of just 21 employees to complete the NDA submission for liprotamase in just over a year.  Larger numbers of contract resources were engaged for many labor-intensive activities, such as validation and authoring, which are short-term and non-repetitive in nature.  Other outside service providers were utilized in place of building internal infrastructure for capabilities such as manufacturing and analytical testing.  This extremely lean and flexible operating model made it much more possible to build a Phase III company from scratch, adjust quickly to circumstances impacting the submission, and structure a deal offering an attractive return on the $35M reportedly spent to date.

Granted, Alnara had several aspects working in its favor.  Clinical trials for liprotamase had already been completed by Altus.  Also several of Alnara’s key executives were already very familiar with the product and the market from their previous work at Altus, including CEO Alexey Margolin, Chief Business Officer Bob Gallotto, and Vice President of Technical Operations, Hugh Wight. 

However, submission is certainly not approval, and it remains to be seen whether or not liprotamase ultimately makes it to market.  If it does, the product has the potential to be a game-changer for patients suffering from CF-related pancreatic insufficiency, and potentially for other indications as well.  It would also provide proof-of-concept for cross-linking proteins into an oral dosage form.  Both of which can translate into lower risks and substantial longer-term returns for Lilly. 

Congratulations to the entire Alnara team!

Todd Applebaum

Tags: Business Strategy, News Analysis

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