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Advice for investors

This blog is a summary of Chapter 6 of the Advanced Therapies Investment Report 2017 produced by Phacilitate & Biotech and Money. The report aims to equip investors with the basic knowledge required to understand the risks of investing in cell and gene-based technologies through contextualised and empirical experience, valuable insight from a series of leading industry stakeholders, and market research and analysis. You can get the full detailed report here.

Technology platforms offer a lower risk business strategy than therapeutic products and can be more broadly applicable, but are limited in absolute revenue potential by their dependency on partnerships. Investing in advanced therapies implicates a diverse risk profile with complexities and nuance behind their individual resolve. Investors must be equipped with sufficient technical understanding of not only the products themselves but any associated needs to realise value. Understanding clinical data is crucial to assessing the value of a therapy, including both safety and efficacy profiles. While ATMPs are generally safer than small molecules in phase I trials, there are serious risks and these should be fully understood and addressed. Novel strategies for safety risk management in CAR-Ts are the installation of activating and/or suicide-inducing control switches to control the product’s in vivo function. Clinical trials should be designed with strategic insight to both maximise their chance of success and facilitate market access.

P&R concerns should inform clinical trial design and market access strategies, where comprehensive endpoints and follow-up periods should be expanded and extended to formally and validly capture the full value of a product. A strong P&R strategy encourages market access, but implementation and adoption must be supported by ensuring the product is simple to use and therefore easily implemented into clinical practice with minimal disruption to standard operating procedure. Market access also requires engagement with the patient and physician communities. Competitive risk is substantially mitigated where a product is first to market, especially in orphan indications.

Manufacturing in advanced therapies is currently subject to high levels of risk; scalable (including automated) manufacturing solutions must be implemented early in development to mitigate the need for demanding comparability studies, which in turn requires deep understanding of the product and its mechanism of action. Virtual model manufacturing is widely used. Supply chain solutions should be de-risked through informed design, comprehensive tracking and traceability, and cryopreservation or other shelf life extension solutions implemented where necessary. Regulatory bodies globally have taken unprecedented steps to assist the development of advanced therapies and demonstrate flexibility and support in their outlook; this can be best leveraged through early and ongoing engagement by technology developers.

Major biopharmaceutical companies are expressing increasing interest in advanced therapies, generally through collaboration and co-development type agreements, although the recent history of several major and minor acquisitions of both late but also early and very early stage biotechs holds good promise for expedited exit options or partnering agreements with large pharmaceutical organisations. The increasing shift of ‘big pharma’ from small molecules to biologics and advanced therapies should not be overlooked when making investment decisions.

In publicly markets, small cap companies have great potential for returns as demonstrated by several success stories, while advanced therapies are perceived as less susceptible to political disincentives in pharmaceuticals trading. Raw materials companies and platform companies have seen particular success. Several barriers exist to attracting limited partnership (LP) investment in VC funds but these can be overcome through informed and strategic decisionmaking. Despite a global drop in value in the pharma, medical and biotech sector at the start of 2017, the advanced therapy subsector has seen a series of large deals, acquisitions and IPOs. The sector remains attractive for investors, with a new generation of companies building on previous failures and successes to build investable and robust platforms and portfolios. However, investors should be careful and selective as successes to date have been concentrated to a minority of cases.

Potential of technology platform vs product

Technology platforms are fundamentally different from therapeutic products themselves as they provide a scientifically original means by which a portfolio of candidates can be developed, or otherwise break down the host of commercialisation barriers into more manageable partitions. Common business models associated with platform companies are lower-risk than those aiming to bring products to the market, as candidates developed from a technology platform can be out-licensed for external development for a more achievable financial realisation of value than attempting to bring each product to market. ‘Horizontal’ and ‘vertical’ business strategies generally do not combine well for two reasons: investors perceive a multiplication of business risk, and partners perceive potential competition from the company's internal product development efforts. Additionally, these two routes require different teams, financing models and strategies. A successful platform is widely applicable to multiple projects without requiring large upfront capital investments to suit each purpose. Platform companies can maintain their competitive advantage by focusing resources on maintaining the technological lead rather than on advancing high-risk product candidates. Platform companies are limited in their revenue potential by the availability of interested partners with no or limited potential for direct market sales.

Major risk factors when investing in advanced therapies and recommendations to their mitigation

Product functionality and evidence

The most fundamental analysis that must be undertaken when considering an investment is that of whether the product functions as intended, the degree to which this function can be performed, and the validity and extent of evidence behind these claims. For a therapeutic technology the investor must understand proof-of-concept rationale, assess data quality, and understand the implications of this evidence in the context of downstream clinical and commercial needs. 


ATMPs are generally safer compared to small molecules at the same developmental stage in part because many are based on human cell types found naturally in the body, and cell-based technologies very rarely fail in phase I trials. Despite this, serious risks do remain that require attention. Strategies to mitigate safety risks are technology type-dependent, but include intelligent product design, extensive preclinical testing and development, and taking precautionary steps to compensate for potential future safety concerns by removing or inactivating the product.

Clinical trial design

Optimal clinical trial design provides a real opportunity to de-risk development and market access and is predominantly solvable through informed strategy design alone. Early trials can maximise their chance of success by excluding patients least likely to recover, while latestage trials should expand inclusion criteria to maximise market potential. Recruitment 82 limitations are a leading cause of clinical trial failure and this risk should be considered particularly when designing early stage trials with more restricted inclusion criteria, mitigated by expanding inclusion criteria and/or opening additional trial sites.

Pricing and reimbursement

P&R presents a moderate level of uncertainty in achieving ROI on ATMP investments, and optimal solutions can be relatively opaque at a time when few products have achieved commercial success. Highly efficacious products demand a high pricing point relevant to their value, and products aiming to deliver curative results could demand unprecedentedly high prices that payers may struggle to afford, even when cost-effectiveness is validated. Crucial to mitigating this risk is comprehensively understanding the health economics behind the disease, and its treatment by standard of care, competitors, and the drug candidate itself.

Market access

Market access depends heavily on pricing and cost-effectiveness, but the disparate treatment mode of many advanced therapies to small molecules, biologics, and other treatments may hinder market penetration. Advanced therapies should be designed to be as simple and userfriendly as possible to encourage a healthy perception of the product amongst clinician communities. Therapies which are excessively complex to use risk deviation from the intended protocol, which can jeopardise efficacy, ultimately threatening the reputation and 83 success of the developer. Where necessary, advanced therapies should be provided with instructional documentation, training, and/or limited to specific clinical sites.

Mitigating competition

The ATMP industry is relatively young with few products on the market, therefore limiting competition predominantly to indirect treatments. However, this is almost certain to change, particularly in the cellular immuno-oncology sector where a notable number of late-clinical stage products aim to enter the liquid blood cancer (mainly CD19+ ) treatment market over the coming years. Mitigating both indirect and direct competition requires early engagement with horizon-scanning stakeholders, public activity such as publications and press reports to generate attention and awareness from commercial, investor, academic, and clinical stakeholders.

Manufacturing and supply chain

Current manufacturing and supply chain solutions are largely suboptimal and require further technical innovation for their effective and robust management. More so than any other therapeutic technology, advanced therapy supply chains and manufacturing processes are faced by high levels of risk to their robustness, cost efficiency, and scalability. The limitations of up-scaling labour-intensive manufacturing protocols must be considered from concept stage and throughout business plan design, and solutions to their mitigation implemented prior to phase II trials at the latest.


Regulatory authorities across the globe have demonstrated great flexibility, are widely engaged and accessible to the community, and play an active role in enabling and accelerating the advanced therapy sector. Schemes such as PRIME (in the EU) and breakthrough designation (in the US) provide an invaluable opportunity for technology developers to engage directly with, and receive advice from, the EMA and FDA. This support is widely perceived as a major value contribution from the regulatory bodies, supporting and de-risking both clinical development and market access through optimising clinical trial design for market authorisation and P&R negotiations. Regulatory risk has moved down the priority list, and it is now becoming clear that requirements for P&R success may in fact be more demanding than those of regulatory authorisation. Further, the availability of conditional approval mechanisms substantially de-risks ROI and offers expedited cash flow.

Pharmaceutical company strategy and exit potential

The interface between industry stakeholders in the advanced therapy ecosystem is heavily collaborative in character and major pharmaceutical organisations are becoming increasingly engaged through an unusually high number of research alliances, licensing deals, codevelopment agreements, and manufacturing contracts. Most leading pharmaceutical companies have stakes in advanced therapy platforms including gene therapies for blood disorders, cardiology, neurology, and undisclosed indications, and immuno-oncology cell therapies. The demonstrable intent of biopharma stakeholders to engage with increasingly early-stage biotechs presents strategic incentive to invest in technologically promising companies at an early stage, in turn highlighting the need for technical expertise and understanding within the due diligence process. Biopharma companies should also be consulted as part of due diligence to assess their relevance for a potential exit.

Interested in learning more?
Get the full detailed Advanced Therapies Investment Report 2017


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