Late last year, members of Oliver Wyman's Health and Life Sciences practice held a virtual roundtable on the topic of cell and gene therapy (CGT) that included over 18 senior business leaders within pharma and biotech.
Cell and gene therapies hold tremendous promise for patients and health systems globally. And 2021 was a transformative year, one in which upwards of seven or eight new therapies were on track to receive regulatory approval in the US and Europe, according to the Alliance for Regenerative Medicine, which noted that there are also more than 2,600 trials taking place worldwide.
The potential for long-term growth is attracting a new wave of investment. More than $14 billion was pumped into the sector in the first half of the year, ARM reported, including 20 initial public offerings. We are now seeing new entrants aspiring to be longer term players with ambitions to deliver transformative medicines to patients.
The development of the underlying technology platforms is progressing at rapid pace and it is essential that the accompanying business models required to create, deliver, and capture value from CGT, match the scale and pace of that transformation. However, it is important to recognize that the challenges associated with the CGT business models vary depending on the therapeutic modality and disease area being targeted. For gene augmentation therapies that are focused on ultra-rare/rare disorders, there is a question of commercial viability of the model given the small number of incident patients, some of whom may be treated in the trial itself. For cell therapies targeting cancer, the prevalent and incident pool of patients is much larger than for rare diseases but the need to customize, iterate and re-dose patients based on their tumor profiles presents a very different approach to research and development. Specifically, for autologous cell therapies, there is a complex process that wraps around the delivery of the cell therapy itself and often requires biopharma companies to develop endto- end services and help build the infrastructure and capabilities needed to deliver these to patients in a safe and effective manner.
“It is incredible the amount of capital that is flowing into the space, companies like mine are now investing in building our own internal capabilities to manufacture, commercialize, and bring these products to the market. Almost all emerging companies either have their own or are investing in their own manufacturing capabilities, we could have never imagined for this to be the case a few decades ago.”
EVOLUTION OR REVOLUTION?
Analyzing the need for business model change requires an investigation into the underlying component parts. Fundamentally, business models consist of three interdependent components.
WHAT value is CREATED ― The customer value proposition
In the pharma model, value creation stems from delivering novel therapies that improve on standard of care treatments on parameters such as efficacy, safety and patient quality of life, wherein the understanding of value is largely established in clinical trials prior to launch of the therapy. While CGT is undoubtedly unique in the nature of the product, historically industry has often developed new technologies and learnt how to optimize and scale them. A parallel of interest drawn here are the monoclonal antibodies. It took nearly three decades for the scientific innovation in MAb to translate into clinical success. However, today, this technology is used across different therapy areas with extreme success in delivering patient outcomes. In fact, the two-year span between 2015 and 2017 accounted for 50% of MAb approvals until 2018. Advances in genetic sequencing, unlocking phage display, and humanizing the sequences were key steppingstones that improved manufacturing quality, product profile, and enabled scale across a wide range of therapeutic areas. Genentech emerged as a pioneer in the space with a strong scientific foothold, willingness to take risk, creativity, and extensive collaborations across both academia and industry. Even though there are a range of scientific, technical, and manufacturing challenges that need to be overcome for CGTs, as illustrated by the monoclonal antibody example, pharma has the most experience in adapting this component of the business model.
HOW value is CAPTURED ― The profit formula
The core pharma model for revenue streams is driven by a price per pill/ dose approach even though there has been an increased use of outcomes/ value linked contracting. The efficacy of traditional products has typically been demonstrated in large clinical trials, but in the CGT setting, it is not feasible to run trials for a long enough duration to provide certainty on durability of effect. In addition, CGTs have come to the market with prices ranging from $500,000 to $2.1 million (US) per dose which drive greater scrutiny on the value at launch as well as provide affordability challenges for payers. These challenges are likely to get exacerbated with the future volume of launches. Enabling patient access to such therapies at a price that recognizes the transformative benefit of such therapies will be critical for developers in the CGT space to succeed, and for the business model to be sustainable. Success will be measured by generating outcomes in the real world as opposed to product uptake. In these situations, the traditional model of fee-for-product would become obsolete. This is a significant shift from the core of the pharma business as it stands today, translating into re-defining existing approaches (e.g. portfolio opportunity assessments) and building more sophisticated internal systems and platforms (e.g., financial risk management).
HOW value is DELIVERED ― The key resources and capabilities
"A question that industry today needs to answer is what business are we in? My personal perspective is that Industry needs to be focused on delivering patient outcomes and not get to caught up in the technology itself."
The current pharma model has strong legacy, expertise and internal infrastructure to
commercialise medicines and over time industry has shifted focus successfully (e.g. primary care to speciality care). However, CGT developers with launch experience have reflected on the need to do things differently and rethink their go-to market models. Primarily, this has meant a high-touch model with early activation and close collaboration with key external stakeholders to prepare the system, with a greater focus on patient and provider engagement, leading up to launch and post launch follow-up. In addition, this has implied the need for companies to re-define their operating model from early in clinical development (e.g. early activation of cross-functional teams) through to launch execution (e.g. GLocal models), at both the Global and Country level. In the case of autologous cell therapies, capabilities such as the supply chain readiness have become mission critical to delivering the value.
For any innovation to be revolutionary, it needs to be scalable. Cell and gene therapy is no different. Currently, CGTs are used as last line treatments and the challenges discussed above have been contained to a small number of patients and point solutions are being developed to address these. Scaling CGT to create and capture value across a range of therapeutic areas will require building the capabilities and infrastructure at a systems level. Companies need to carefully consider how they can start to mitigate any capability and resource gaps and rethink their engagement model with health systems, policy makers and payers.
A FINAL THOUGHT
Gradual shifts can in some ways, be more difficult to manage than more radical shifts.
With radical shifts companies can see their extinction ahead of them, but gradual shifts can sometimes give a false sense of time to action. Cell and gene therapy developers need to proactively address the change in core elements of the business model, with focus on how value is delivered and how value is captured as these will present the biggest challenges and drive commercial success. The capabilities that have been peripheral to the current pharma model will become central, and will need a strategic and focussed approach to build on.
“For the industry to stay relevant, we need to ask ourselves the question of how we are making patients’ lives better? And be somewhat agnostic to how we do that. We get in trouble when we define ourselves by what we are doing rather than why we are doing it. This will be at the core of if we are successful in tackling the CGT challenge.”
• Liu. 2014. The history of monoclonal antibody development ― Progress, remaining
challenges and future innovations
• Sirbu et al. 2021. A new era for monoclonal antibodies with applications in neurology