A New Generation of Drug Therapies Requires New Business Strategies

Speaker A: Welcome to Insight Exchange, presented by LEK Consulting, a global strategy consultancy that helps business leaders seize competitive advantage and amplify growth. Insight Exchange is our forum dedicated to the free, open and unbiased exchange of the insights and ideas that are driving business into the future. We exchange insights with the brightest minds of the day, the most daring innovators, and the doers who are right now rebuilding the world around us.

Speaker B: Welcome to another episode of the podcast focused on the transformative shift advanced therapeutic modalities are having on the life sciences industry, impacting everything from early research and development, drug discovery, drug development, manufacturing, and all the way through to commercialization of novel therapeutics. I'm Alex Vadas. I've been with LEK for over two decades. I focused my career within life sciences, tools, technologies and precision medicine. And I'm joined by my fellow managing directors, Jeff Holder and Adam Siebert. Would you mind introducing yourselves, please?

Speaker C: Thanks, Alex. My name is Adam Siebert, as you mentioned. I'm a managing Director, uh, with Lek. I've been with the firm over 10 years. Uh, spend all my time within the life science tools and biopharma manufacturing and supply chain space. Everything from thinking about how these drugs are made both internally as well as with external partners.

Speaker D: Thanks, Alex. Excited to be here. I'm Jeff Holder, managing director, based out of the San Francisco office with LEK Consulting. So, scientist by training, I spend all of my time thinking about tools and services in the discovery and manufacturing of advanced therapies. So, uh, looking forward to the conversation.

Speaker B: Thank you, Jeff and Adam, why don't we start by talking about what are advanced therapeutic modalities and what is exciting about them and what's different about them. And why are we even having this conversation today?

Speaker C: Sure. So I could take that one. We at LEK think of advanced therapeutic modalities into three main buckets. Engineered cell therapies, gene therapies, and then the third one of nucleic acid therapies. As we think about engineered cell therapies, the genetic engineering happens to a cell outside of a patient, and then those engineered cells are administered back into the patient. And that is the therapeutic modality with gene therapy. The main difference is that the engineering actually happens within a patient's body. There's not as much complexity in terms of, uh, you know, collecting material from the patient. And then nucleic acid therapies are very, very different. Uh, it's actually made more from a chemical way, um, and is really brought to the forefront through the COVID vaccines, uh, in terms of using mRNA but there are also other sub segments called antisense oligonucleotides and RNA interference that alters the expression of proteins within the body. These are really interesting and compelling in terms of clinical outcomes for patients, uh, particularly within cell therapies and gene therapies. They have the uh, possibility to be curative, which is a fundamental uh, uh, change from how many of these very very sick patients have been managed previously. The nucleic acid therapies are a bit different uh, from the cell and gene therapies insofar as they enable diseases and drug targets that were previously thought to be undruggable and to now be druggable and potentially treated due to the different pathways that they can be impacted. So the net result of this is a very interesting ability to not only potentially cure patients, but then also for those that uh, uh, for other diseases to actually be able to treat uh, previously untreatable diseases.

Speaker B: Thanks Adam. Maybe you guys can talk also a little bit about what is so different about advanced therapeutic modalities compared to more traditional drugs that we may think of, including small molecule pills or even other biologic drugs like monoclonal antibodies.

Speaker D: Yeah, that's a really great question Alex. So when we think about the advanced therapy space compared to traditional biologics like antibodies or small molecules, there's a number of design features or modality features that are, that are significantly different. So uh, their advanced therapies are designed, they're modular, they can be personalized, they're more complex and because of all these features they tend to scale out in terms of their manufacturing. So let's, let's go through those characteristics one by one and talk a little bit more about what we mean. So uh, designed. What we mean here is that while traditional drugs are discovered through a highly iterative process with screening millions of compounds, years of optimization in the laboratory with synthetic chemistry, uh, advanced uh, therapies are more designed. That means that components around their active drug mechanism can actually be configured against a known target. So for example, if we're trying to treat a genetic disease, uh, where a uh, gene is dysfunctional in the patient, we know that gene, we know uh, it's sequenced. So we can design uh, a gene of interest or payload for one of these genetic medicines uh, around that sequence. So, so they're designed that this dramatically accelerates discovery stage research compared to uh, the traditional process for small molecules and uh, other antibodies. The second feature is modularity. So when we talk about being modular, what we mean here is that components of the advanced therapy of the drug itself are interchangeable. So a single design can be modified to serve a range of different functions. So uh, we just talked about that genetic payload, uh, that can be designed against the target. Well if we can swap that out, if we have a uh, delivery mechanism and we can keep conserve that delivery mechanism, but swap out the payload, that's an example of modularity. So that lets us uh, uh, evolve uh, and change out known components that work for new components to make new drugs based off this modularity. So a good example of that is updating the sequence for the MRNA vaccines as new variants of COVID uh, 19 uh, came out into the market. The uh, third characteristic is personalization or the ability to be personalized. Uh, and here we just mean specific to an individual patient. So in these instances either a uh, patient's own cells might be used to make the drug as the starting material. So if I, uh, for car t therapies, for example, which is a common class of advanced therapy, a patient's own cells are taken out of their body and go into the drug manufacturing process. So it's very personalized and individualized drug to that patient. Alternatively, therapy can be designed against patient specific set of biomarkers, for example. So we could look at a cancer patient, we can assess their tumor, we can find some diagnostic markers on the tumor that we can target. We could make personalized cancer vaccines that are uh, specific to that patient's tumor, for example. So uh, that's what we mean by personalization. Adam, do you want to talk a little bit more about the other factors about complexity and scale out and how that impacts manufacturing?

Speaker C: Sure. Thanks Jeff. Um, so as we think about the complexity, the advanced therapeutic modalities, we're no longer talking about a single molecule that's going to be used. It's often thinking about multiple components that come together to form a more complete therapy. So Jeff mentioned before about payloads and delivery vehicles. As we think about the MRNA vaccine as an example, it had the MRNA sequence. So that's the payload that was inserted into it was encapsulated into a delivery vehicle, uh, called a lipid nanoparticle. Each one of those components needs to be made separately via different processes that are intricately complex. Uh, the other thing that I would say is as we think about the gene therapies and cell therapies, they are being made in biological systems which is quite different from the small molecules that are the traditional therapies. But then in addition to that they're also made, each individual batch is its own unique Process that starts from the beginning. And so we are no longer relying on what are called, uh, cell banks that are, already have everything they need. And it's just growing up the cells. Now you need to reinsert the genetic engineering materials into the cells each time, which adds to the complexity as well as to the cost of doing this for every single batch. The other piece of uh, the complexity that Jeff alluded to was for, specifically for autologous, uh, cell therapies, where we are using a patient's own cells to make the therapy. And so the patient then will need to go and get their cells collected. Those cells would need to be prepared, sent to a manufacturing facility where they're then engineered, uh, over uh, the period of a couple of weeks and then sent back to the treatment center where it can be infused back into the patient. So all in all, it's not just a manufacturing complexity, but then there's also the path, patient coordination and logistics complexity that comes into view as we think about these cell and gene therapies. As we think about the fifth area that is different between the advanced therapies and the more traditional therapies is on, uh, what we call the scale out. So thinking about traditional therapeutics, as the demand for material increases, meaning that as more and more patients are being treated using the same therapy, the bioreactor in which these products are made increases in size. So you go from using a 100 liter bioreactor to a 1000 or even in the case of really large monoclonal antibodies, 20,000 liter bioreactors. But with the case of uh, autologous cell therapies and even gene therapies, the model shifts to being a scale out, which, which means that the size of the bioreactor doesn't change, you just add more bioreactors to the process. And this has some pretty serious implications when we think about the number of people that are required to make, uh, enough doses for the patients, as well as the amount of facility, space and infrastructure that's necessary to house the additional bioreactors. Uh, this is something that has come into focus a bit more over the past coming years as the demand for these products has increased. And needing to find the right people to actually make these is really coming to the forefront as a critical need within this space. The last point I would say is, uh, for the scale out that also drives this is in terms of batch failures. Uh, so right now cell and gene therapies is still emerging as a technology and as a result there is a fairly high rate of batch failures. Where what you're making does not necessarily comply with uh, the thresholds that need to be met to be released and used to treat patients. And when we think about cell and gene therapies, the value of the critical inputs that uh are being used to make it, the value of that is so high that manufacturers do not want to risk having a batch so large that the value that they would have to pay if the batch fails is really uh, uh, a detriment to them. And so they restrict the size of the batches in order to protect themselves on the downside risk, uh, which again drives more of the scale out, uh, uh, model for uh, gene therapies as we think about it.

Speaker B: Thank you Jeff and Adam. These advanced therapeutic modalities are absolutely different and thank you for describing those differences. Can you talk a little bit about how you see that impacting the industry, uh, particularly pharma, uh, when we think about the implications for everything from discovery to development through to manufacturing and commercialization of these therapies.

Speaker D: Sure Alex, that's a really pertinent question as we're seeing the paradigm shift that these advanced therapies are driving really play out in real time day. The uh, first element of that paradigm shift is really around timeline and risk management, uh, for R and D of novel therapeutics. So what effectively the therapies do is they shift the timeline and, and the risk downstream from discovery. So uh, because we can design these drugs against known targets and there's modular components and there's kind of less searching around in the dark screening like there is for traditional small molecules, discovery is shorter and uh has uh, a higher probability of success in all likelihood to get to the clinic and to start using these drugs in clinical trials. So what happens is the risk shifts downstream from discovery and so does the timeline. The discovery timeline truncates and the risk shifts downstream more toward manufacturing and uh, commercialization. So one of the key implications of this is this shift in timeline is that we can go from idea to clinic, uh in months, sometimes uh, not years, as is traditionally been the case with drug discovery. So I'm a chemist by training, worked in small molecule drug discovery. Some of those programs you'd be four or five, six years easily, uh, in discovery and lead optimization preclinical, sometimes as long as a decade before you can get into patients. Whereas here we're seeing developers looking to go sometimes, you know, idea to Clinic in 18, 24 months. We did a survey recently where uh, we asked MRNA developers what they were expecting for timeline from discovery to Filing an ind which is the document you need to file to enter clinical trials. The plurality of our responses was 18 to 24 months. So much faster towards the time from idea to clinic. The regulators are also supporting this. I actually heard Peter Marks uh, from the FDA speak. He mentioned that there's, they're piloting uh, what they call a start program which is uh, where they're looking to effectively take the concept of engagement with the regulators that we had during operational warp speed during the COVID pandemic and apply it to uh, rare disease genetic therapies. So genetic medicine is targeting super rare diseases. So they're piloting that kind of much more close engagement with the agency from a regulatory standpoint which will also be key to truncating that kind of time uh to clinic and time to market. So exciting developments in terms of the shift in timeline and the speed uh for the advanced therapy space. And there's other tools that are helping drive this. Uh, we hear a lot about artificial intelligence, AI, machine learning, silico tools and computer models. Uh, these tools are also playing a role here and, and helping to accelerate discovery even further by uh, providing some of the optimization and iteration in silico or on a computer versus in the wet lab. So the uh, combination of the innate characteristics of the advanced therapies, the regulatory environment and certainly uh, tailwinds from the COVID years and these advanced uh, tools outside of the wet lab really driving a uh, truncation timeline, going fast and shifting that risk downstream for discovery. The second impact that I'll talk about is the importance of manufacturing and supply chain for clinical and commercial success. Historically manufacturing was a little bit of a given in these modalities that are more mature. So monoclonal antibodies we've been making for 30 years. Small molecule chemistry, uh, been a uh, well studied science for over 100 years. So we're able to make those drugs very reliably on scale economically, uh, at reasonable cost of goods. So that manufacturing is rarely critical to your strategy for a traditional drug. But in the advanced therapy space that's different because of the complexity, because of the scale out dynamics that Adam was talking about. For many of the modalities, manufacturing and supply chain considerations are critical to clinical and commercial success. And being able to manufacture efficiently and rapidly and consistently can really be a differentiator. A good case in point on that was uh, in the car T space and some of the early treatments in the car t space. The company Kite has a, has a program called yes, Carta and then Novartis has a drug called Kymriah. These were both looking, uh, running trials in earlier lines of therapy, uh, for oncology. And uh, though they have the same mechanism, uh, you would expect them to have a very similar clinical outcome. But uh, Kite demonstrated clinical benefit over standard of care where Novartis Kymriah did not. And again, because both drugs leverage the same approach, it was very surprising that the outcome was different. And one of the significant contributing factors was determined to be the total, what they call vein to vein time. So the time needed to go from taking a patient cells to making the CAR T therapy to reintroducing the CAR T cells. Uh, during that clinical trial, uh, Kite's process delivered the CAR T cells and I think it was about 25 days on average where it was almost double that nearly over 50 days for Novartis. So during that time the patients in the Novartis trial were waiting. Their health continued to deteriorate as they were quite sick. And as a result the therapy didn't deliver as impactful a result due, uh, to that extended waiting time. So with those delays you saw not only a change in the clinical trial output, but certainly from uh, from a preference shared from a market standpoint too. The Novartis drug has a reputation as being less reliable, longer to manufacture. So physicians will often pick the competitor which is perceived to have a more reliable supply. So, um, manufacturing and supply chain as critical, important success factors for both clinical and commercial success. It's another major change for the advanced therapies. Uh, Adam, I think you had some thoughts you wanted to add on to that dynamic.

Speaker C: Yeah, and it's more moving towards the commercial. Right. As we talked about earlier, many of these advanced therapeutic modalities are curative. And so there is uh, more of an emphasis or importance to getting to market quickly than first. Right. Because now you're going to be essentially treating the addressable patient population. And over time the opportunity for these very expensive to develop therapies and expensive to manufacture therapies, the opportunity for them and revenue potential will decrease. And so it really puts the emphasis on getting through development quickly. And historically we have seen that. And currently right now we have a lot of the more, uh, advanced or further development therapies and even the commercial ones that are using processes that are making the most out of the first generation technologies and tools in order so that way those therapies could get to market first. As a result of that, the process is not industrialized and it's not efficient. And increasingly we are seeing companies that are Looking to update the process so that way they can make it more efficient and lower the cogs. But then even more so, we are seeing new tools that are being developed that will greatly update the efficiencies of these processes. And now we're seeing more sophisticated biopharma companies, as well as more sophisticated investors starting to look under the hood to understand what is the process that is being used to make these drugs. And maybe we need to get to a more industrialized process sooner. While it may slow us down by a little bit at first, it will result in a more efficient and cost effective process once we get to market. We are starting to see a little bit of a shift in terms of that, thinking that sometimes it may be better to slow down a little bit and make a more efficient process. So that way the opportunity and the profitability of these advanced therapeutic modalities increases once we get to market. One of the big kind of unknowns, uh, at this point is as we think about moving to other diseases, will a cell therapy or a gene therapy be reimbursed at the same rate as a cellar gene therapy that is being used to treat disease that is lethal for small children? Right. Or for cancer patients? Right. The dynamics shift a bit when we start thinking about the reimbursement. And as a result, the cogs becomes a much more important consideration for, uh, these advanced therapeutic modalities and the biopharma companies that are developing them.

Speaker B: Jeff and Adam, beyond pharma, who are being impacted meaningfully by advanced therapeutic modalities, could you talk a little bit about how the, these therapies may impact other parts of the life sciences ecosystem, particularly around tools companies or critical input providers or CROs and CDMOs who may be manufacturing products for pharma?

Speaker C: Great question, Alex. So on the CDMO side of things, we are seeing a lot of partnerships with CDMOs trying to explore novel platforms and technologies that would enable more efficient production of material for their clients. But the big differentiator right now is really having the people that have the experience that can take a product from process development, which is very, very early stage for an asset, all the way through clinical development and into commercial manufacturing. At this point, there's very few companies and CDMOs that have this experience. And you know, those that do are really starting to see, uh, the fruits of that experience and they're seen as kind of the go to, uh, CDMOs in that space. There are a lot of new entrants, Right. That are trying to participate and trying to provide customers with an edge when it comes to the manufacturing process. Um, we're starting to see them come up. I think part of the challenge that they're having right now is really attracting the customers into their facilities. The if you build it, they will come uh, mentality is one that is being put to the test right now. Uh, and it's really CDMO is trying to show that they are differentiated both from a technological perspective but then in capacity perspective, but mainly from a people perspective is a key uh, part of the CDMO mindset at this point in time. Jeff, what do you think about tools?

Speaker D: So the tools opportunity for advanced therapies is interesting because it's one of the more attractive growth markets in terms of the rate of the pipeline scaling and the uh, ability to potentially access a commercial end market. So a large scaled end market by uh, providing consumables or reagents or even equipment, uh, into that uh, end market. So it produces a path to scale in a new space where there's a demand for new fit for purpose tools that we didn't need before these advanced therapies came uh, through the pipeline. So one of the shifts that we're seeing now is that this first wave of advanced therapies is validated. We're seeing the subsequent wave of fit for purpose tools being developed and coming to market to support these. That first wave of selling cheat therapies which was really industrialized on academic benchtop bootstrap processes and now finally starting to develop some fit for purpose tools uh, around that space. So that's one dynamic. Uh, the other dynamic is this idea of getting locked in as a supplier for a commercial product if uh, you're a critical supplier written into the dossier and the regulatory filings. So uh, it's very sticky relationship uh, from a, from a customer standpoint for these tools suppliers. So it's attractive both from the scale of the market opportunity as well as the, the stickiness of the relationship for these commercial therapies and supporting these commercial therapies. Uh, so, so kind of being first in class in, in an area uh, where you have the first uh, GMP or good manufacturing practice grade uh offering is it's been a really popular growth story uh over, over several segments of the reagent market, the critical input market. In the last five to seven years we've seen companies like uh, Aldevaron around uh, plasmid DNA, things like PolyPlus, around transfection reagents that really cornered a market early in terms of being the first GMP grade supplier and seeding the pipeline with their offerings and able to grow with that pipeline. And as the pipeline matured and drove a number of commercial products, they too grew along with the customer into these commercial scale opportunities. Uh, ah, so a question going forward that I have is really uh, are there going to be ways as we continue to look to bend the cost curve on the advanced therapies? Are there going to be opportunities for really innovative offerings that could uniquely enable a workflow or offer very fundamental unique advantages such as dramatically simplifying something or reducing cogs in a step change fashion? Is there a way to kind of jump the line instead of starting in preclinical and growing slowly, slowly, slowly through phase one, two, three, uh, with a product to actually get to the point where you can uh, kind of jump the line and a cost curve on a uh, uh, phase two or phase three program or potentially even a commercial program that's in flight, uh would see enough value in doing the comparability studies and amending the filings because of the uh, advantage that this enabling tool or reagent would potentially offer. So setting time in the tool space and uh, certainly an active area of research to continue to stay on top of the next generation of offerings as the uh, pipeline is not static and the types of tools and technologies that are going to be needed for the next wave of cell and gene therapies and nucleic acid therapies are probably not the same tools that would have been fit for purpose for the first wave. So we'll see where it goes and it'll be an exciting time to keep our eyes on the tools market.

Speaker C: I agree there Jeff. I think also thinking about the tools and how that evolves over time, one of the things that we haven't talked about yet is the evolution of the pipeline. Right. So cell therapies historically have been used in hematological malignancies and cancers. Right. The CD19 car T is the prime example of that. And as cell therapies move beyond those diseases and move into solid tumors or move into non oncology indications and use potentially different cell types, are there new tools or new processes that need to be put in place that to actually harness the therapeutic and clinical benefit from these products is a key question, uh, that I think we're going to just going to need to follow over the coming months and you know, even up to you know, two, three years out just to see kind of how this transcends.

Speaker B: Thank you Jeff and Adam for sharing your perspectives on the advanced therapeutic modalities and their impact on Life Sciences. I encourage anybody who's interested in having a further discussion to please reach out to lek, and we're happy to talk to you about how and what this could mean for your business. Thanks again.

Speaker A: Thank you, our listeners, for joining us today at the Insight Exchange presented by LEK Consulting. Links to resources mentioned in this podcast can be found in the show Notes. Please subscribe or follow for future episodes wherever you listen to your podcasts. Also, we encourage you to submit your suggestions for future insights online@lek.com.