Goldman Sachs Plans New Funding For Research
4 CommentsBy Ed Silverman // December 3rd, 2008 // 7:08 am
Goldman Sachs is in talks to provide hundreds of millions of dollars of funding to a large drugmaker, in what appears to be an attempt to create a new business model that will see financing shifting towards co-development of specific meds, The Financial Times reports.
Jon Symonds, managing director at the investment bank in London and former finance director at AstraZeneca, says a first deal to create a new hybrid model of R&D should be finalized early next year and reflected the desire for even large drugmakers with strong sales on existing drugs to seek funding for future development, according to the FT.
The Goldman Sachs model would form a “research pool” into which drugmakers would place a range of experimental drugs in a single therapeutic area in early-stage phase 1 and 2 trials, where their staff would work alongside external experts including scientists, chemists and clinical research organizations. The hope is to create more flexible, transparent and cheaper drug development, freed from large bureaucracies and heavy overheads, while sharing risks with outside partners.
He explains the model would potentially allow competing drugmakers working on similar drugs and duplicating research areas to pool resources. “If we deliver one, there is huge appetite because capital is in pretty short supply,” he says.
The move, which he says does not involve AstraZeneca, comes in response to fast-rising costs and growing difficulties in bringing innovative new drugs through regulatory approval into healthcare systems, as existing meds go off-patent, encounter generic legal challenges and face pricing pressure.
Symonds says big drugmakers are “trapped in their pipelines” by substantial commitments to costly late-stage clinical trials, with only limited funds for earlier stage medicines. “There is a genuine shortage of capital.” But investors are reluctant to endorse new rounds of capital raising, after disappointing returns from previous rounds of research on experimental drugs that failed.
harpy
So does this mean they’re going from buying start-ups to starting start-ups?
brian connelly
This sounds like a Symphony Capital, or clinical stage,financing vehicle geared to larger drug development and marketing organizations. This is likely a good private equity investment model that will enable pharma to co-develop with a financial partner versus an industry competitor and, thereby, address industry’s trend toward a shared-risk development strategy. However, this does not address the capital drought at its earliest and severest stage: Translating fundamental drug research with potential compelling drug targets into drug development candidates that can be taken into clinical development.
Already referred to as the “Valley of Death”, the ongoing credit crunch, shedding of non-core clinical stage programs by pharma, and the precipitous decline in valuations of publicly listed biotechs with clinical-stage assets, has made financing of so-called translational development virtually impossible. Where then will the next generation clinical stage assets be derived?
I applaud Goldman’s innovation but, if we are to feed the development pipeline with new and improved drug development candidates, we need the best and brightest financial minds like Goldman to focus on innovative strategies that foster and promote drug development at its earliest stages.
Mark Chalek
We are very interested in exploring how those of us with expertise in target discovery and validation, pathways, and utilizing relevant animal models of disease for proof-of-concept studies, can assist in developing these innovative “bench-to-bedside” accelerators.
Mark Chalek
Accelerating discoveries to the bedside will require including the best academic researchers with knowledge of the molecular mechanism of diseases, including pathways and targets of interest, along with relevant animal models of disease. The bankers should find out who the best collaborators are and make sure they have a seat at the table.