Strategic Business Pivoting For Cell & Gene Therapy Startups

By I-Wen Chen, Project & Team

The life sciences industry is moving faster than anyone could have predicted. The Nobel prize for CRISPR was awarded in 2020, and today anyone can purchase a basic CRISPR gene editing kit from Amazon for less than $200.

On the pharmaceutical front, cell and gene companies are the new darlings of venture capitalists. According to some reports, growth in cell and gene therapy investment rose from $362 million in 2020 to some $58 billion in 2021 — about one-third of the total of private investment in life sciences. Combine that with the former FDA commissioner’s estimate that by 2025 the agency will be approving 20 or more cell and gene therapies each year, and the market has been flooded with new aspiring companies.

With the help of new regulatory guidelines, manufacturing process improvements, and platforms for secondary sequencing analysis, cell and gene therapy manufacturers are learning to pivot their product offerings to better meet the demands of the market and the expanding quality control regulations as the sector matures.

At the same time, a recent report from STAT News found that nearly one in four life sciences companies that went public in the past several years is trading below its cash position. New rounds of investment are being subject to much greater scrutiny and cash valuations have flattened. This has put life sciences companies in general in a position where they must manage the risk to their cash positions, even as they continue to research and develop new treatments and therapies.

And some markets see erosion in their status as cell and gene therapy leaders. According to some reports, development and trials in the European Union have slowed to a trickle, causing some rethinking of the regulatory landscape to try to regain the region’s leadership standing in advanced therapy medicinal product (ATMP) production. Novel therapy companies will need to address this changing regulatory landscape in their own operations.

The cell and gene therapy market, both domestically and internationally, needs to find an implementing strategy that helps build a pipeline more quickly and effectively. Despite the high level of regulation in the healthcare field, innovation and speed to market are still critical for success. It is essential for life sciences companies to define a strategy, determine the right level of investment, and drive successful execution.

The Lean Startup Cycle For Companies Of Any Size

Although the lean startup cycle has its root in the startup company, it has spread widely through large enterprises in the past decade because of its focus on improving delivery speed and producing businesses and products through customer feedback, iterative development, and rapid testing of ideas.

• Reduce risk. Lean startup helps large life sciences enterprises reduce the risk of developing products that no one wants by getting customers’ feedback and experimental data early and often. This can help them to avoid wasting time and money on products that are not successful.
• Speed up innovation. Lean startup helps large life sciences enterprises innovate faster by allowing them to iterate on ideas quickly and cheaply. This can help them to stay ahead of the competition and bring new products to market more quickly.
• Improve alignment. By getting customer feedback and data early and often, large life sciences enterprises can improve alignment between their products and the needs of their customers.
• Create a culture of experimentation. The lean startup methodology encourages large life sciences enterprises to experiment and learn fast. This can help them to learn from their findings and improve their products over time.

To implement the lean startup cycle, a company’s backlog of research produces what’s known as a minimum viable product (MVP) or a minimum viable solution, tied to a benefit hypothesis.

To prove or disprove that hypothesis, we need data. We then analyze that data to understand whether we should keep investing in R&D in this area or whether we should pivot. If the answer is to pivot, by following the data we can do so more immediately, with less waste. This lowers the risk of investment and allows for exploratory research into the next discovery.

Pivoting means different things depending on the product in question. In some cases, it may mean to stop altogether. This is not uncommon in the pharmaceutical industry. It’s best to “fail fast” on a typical treatment or therapy within a smaller scale of investment, so that researchers can hit the ground running on the next promising approach. The entire lean startup quality process promotes development of new products through experimentation, iterative releases, and fast learning.

When To Pivot

There are a few key signs that a cell and gene company may need to pivot. These include:

• The market is changing. The life sciences industry is constantly changing as new technologies and treatments are developed. If the market for a life sciences company's product or service is changing, the company may need to pivot to stay ahead of the competition.
• The company's goals are changing. Life sciences companies often have long-term goals, such as developing new treatments for diseases or finding cures for diseases. If a life sciences company's goals are changing, the company may need to pivot to align its strategy with its new goals.
• The company's capabilities are changing. Life sciences companies often have access to new technologies or develop new capabilities. If a life sciences company's capabilities are changing, the company may need to pivot to take advantage of those new strengths.

Beyond that, there are four typical types of pivoting, each of which reflects whether what it is we’re producing is in fact something the customer may care about.

The Four Pivots

A good strategy should answer four critical questions about the business:

• Who are the patients and markets?
• What products and solutions do we provide?
• What unique value and resources do we bring to the table?
• How will we extend these in the future?

In the life sciences industry, a pivot is a strategic change in direction. It can be used to address a change in the market, a change in the company's goals, or a change in the company's capabilities.

• The customer segment pivot. In this case, the product may be popular, but not with the anticipated customer population. You see this all the time in conventional pharmaceutical development. A company may produce a medicine with a particular benefit, only to find that it may have greater benefit when used for other purposes by a different category of customer or patient. For example, a company that develops a new drug to treat cancer may find that it is more popular with patients who are also suffering from anxiety than with patients who are only suffering from cancer. Pricing may be affected because the customer segment has shifted.
• The customer need pivot. In this case, the customer or patient may be facing a different problem than was originally understood. The treatment or therapy may not actually meet the predicted need, and the company shifts its plans based on the new information related to the need. For example, a company that develops a new medical device to help patients with mobility issues may find that patients are also interested in using the device to help them with their daily activities, such as cooking and cleaning. In this case, the company would need to pivot its research and development efforts to focus on developing new applications for the device.
• The value capture pivot. This occurs when a company may need to address how it charges for the product, treatment, or therapy. Should this treatment be presented as in vivo or ex vivo, for example? Or, a company that sells cell therapies may find that it can generate more revenue by charging a subscription fee instead of a one-time fee. In this case, the company would need to pivot its business model to a subscription-based model.
• The zoom-in pivot. In this case, we may learn that, of all the possible benefits of a particular treatment or therapy, one aspect (the disease being treated, for example) may have greater traction than all the others. In that case, the best strategy may be to continue to focus on that one aspect as the actual core value.

All of these lean startup considerations in a fledgling company’s business model depend on platforms for data capture to determine whether the information we are capturing has value or not – and if not, whether we can make changes in response to that information or to move on to something else entirely.

It’s essential to have this information as quickly in the process as possible, because pivoting is not free. There is a cost to change. However, pivoting can be a necessary step in the evolution of a company to stay competitive and profitable. By understanding the different types of pivots and when to use them, life sciences companies can increase their chances of success.

At this point, we’re talking about developing a so-called pivoting framework based on analyzing the benefit hypothesis information. It provides a threshold of value that establishes whether you should stop versus pivoting. (In some cases, a pivoting framework also indicates the need to keep funding the thing that may no longer provide the intended or predicted value.)

As noted at the outset of this article, some markets for cell and gene therapy are already in need of a pivot. In a recent commentary, Timothy Hunt, the CEO of the Alliance for Regenerative Medicine, noted that Europe’s complex regulatory and reimbursement structures have led to seven of 23 ATMPs approved in the EU to be withdrawn from the market.

Patients are also losing the early access to experimental therapies that they gain from clinical trials. ARM’s H1 2022 Report shows that the clinical trials pipeline is shrinking in Europe, especially in early-phase trials. According to the report, “Europe accounts for the smallest share of new 2022 H1 trials (11%) and is the only region with a bottom-heavy pipeline.” This decline in clinical trials may result in fewer approvals going forward in Europe.

In this instance, the pivot has as much to do with the pharma industry as a whole in the European Union as it does for any individual company. At the end of April, the EU revised its Pharmaceuticals Legislation. The new regulation aims, among other things, to ensure that EU patients have “timely and equitable access to safe, effective, and affordable medicines” and that EU pharma companies have “an attractive and innovation-friendly environment for research, development, and production of medicines.”

Moving forward, cell and gene companies in the EU can use this pivot in pharmaceutical regulations as a foundation for their own internal pivots to ensure that European patients will have ready and affordable access to ATMPs for the foreseeable future.

Topics related to data capture and analysis are beyond the scope of this article and will be subjects for future articles. In the meantime, cell and gene companies would do well to understand how their business strategies may need to change — whether that change is due to early findings regarding treatments and therapies or changes in the regulatory landscape in which they operate.

About The Author:

I-Wen Chen, SPCT, MBA, is a senior business agility consultant at Project & Team.