For Pharmaceuticals:Find Your Place on the Biotech Maturity Model and Make Better IT Decisions
By John Postle
Discusses information technology challenges faced by biotech companies and outlines a three-stage maturity model designed to allow firms to identify IT needs and better manage IT spending.
As information technology plays an ever-increasing role in drug discovery and development, emerging biotech firms can better manage their IT spending by using a three-stage maturity model to determine their needs now and in the future.
According to the Biotechnology Industry Organization, more than 1,400 U.S. biotech firms account for $68 billion in annual revenue. Yet most of these firms—well over 1,000—have yet to introduce a product to market. They rely on venture capital funding, licensing revenues, and other financial resources to survive while they move from pre-clinical status to Phase 3 human trials. All of these firms operate on tight budgets and can ill-afford to spend vast sums on IT that is not needed in their current stage of drug development or that will have to be replaced later due to poor planning.
An early-stage development firm conducting toxicology studies requires different infrastructure, applications and services than a firm entering or about to conclude Phase 2 or Phase 3 clinical trials. These companies are at completely different stages of maturity.
Consider the early stage or “bio-launch” firm. In most cases it is venture-backed and is still engaged in research and development. It is working toward a major business milestone, submission of an Investigational New Drug (IND) application to the Food and Drug Administration (FDA), which means it may already be engaged in animal toxicology trials and storing those data for later submission.
Aside from its investors, hardly anyone knows about this company. And yet it already needs to manage a basic IT infrastructure, including web, database and email servers, document management and storage systems. With millions of dollars already at stake, it should have a low-cost business continuity plan to survive unforeseen disasters, and it ought to be organizing data to support its future electronic IND submission if it chooses that route—a complex task in itself, even when outsourced. Under its Critical Path Initiative, FDA is encouraging firms to adopt electronic IND, New Drug Application (NDA), and other submissions because they will replace paper-based methods. It behooves firms to learn the new approach, which will result in reduced-costs in the future.
At this point, the company’s most important asset—aside from its scientists—is its intellectual property, so it needs to develop security procedures that address IT systems and business processes. These are just the basics. But how many early stage firms do a good job planning and executing these tasks? In my experience, not many. In most cases, these issues are an afterthought. Many emerging biotechs lack even one fulltime IT professional on staff. Software and servers are plucked off the shelf or bought because someone in the company is familiar with a particular application. Things are done ad hoc. In time, a rudimentary infrastructure gets patched together, but it will never evolve to satisfy FDA regulations when those come seriously into play. That means once the IND is approved, entirely new systems will be needed—a rip and replace project that can be extremely costly and time consuming. The usual objection to doing things right the first time is “it sounds good, but expensive.” Yet even a back-of-the-envelope risk analysis that considers total cost of ownership using simple tools like activity-based costing will show that doing things the right way the first time is usually the least expensive method.
The second stage on the lifecycle is the “bio-growth” firm that has received FDA approval of its IND application and has entered human clinical trials. At this stage many biotechs rely on a multitude of contract partners to assist them through the drug development process, including clinical research organizations (CROs), institutional review boards, offshore clinical trial services, and more. Increasingly, as emerging biotechs complete Phase 1 and enter Phase 2 clinical trials, they engage in complex licensing, joint development and financial relationships with pharmaceutical firms eager to expand their drug pipelines. At this stage, pharma is already starting to put a price tag on the biotech firm, and many considerations come into play. Most important, of course, is the viability of the drug candidate and the willingness of senior scientists to stay on-board. Often overlooked, however, is the young firm’s reliability as a partner and its ability to withstand FDA inspections. Are your IT systems and applications validated, qualified and compliant? Is your drug and patient data really secure? Does your IT environment meet your needs and those of your partners going forward?
This growing firm has all the same needs it did during its pre-clinical days, but now it is managing large amounts of information generated by its third party partners—information that must be reviewed, analyzed, documented and retained using systems that comply with FDA regulations.
At this stage, more robust hardware and software will be needed. The company will need applications to manage and report its drug trials, adverse event reporting and electronic records management will be needed, as will a quality management system. Security will certainly need to be tightened to conform to HIPPA regulations. And if the biotech is partnering with a publicly traded pharmaceutical firm, it may have to comply with Sarbanes-Oxley SAS 70 regulations that govern certain service-provider relationships.
Life in a stage two biotech is certainly more complex than it was in stage one. But if planning was done well during its launch phase, this company won’t need to replace all of its applications or infrastructure. Instead, it can evolve using a straightforward migration plan to blend with and support the new systems and software. Firms that did not plan well early on will have to install new infrastructure, applications, systems and processes at a time when they should be focusing on their new product.
The third and final stage in the emerging biotech maturity model can be thought of as the “bio-ready” phase of the drug development lifecycle. These firms are preparing to make their NDA submission so they can run the drug approval gauntlet. They are ready for more investment money and, perhaps, for a large company to propose an acquisition or other form of collaboration. This emerging firm is engaged in late stage clinical trials and must comply with a growing number of FDA regulations. It will need all the same systems that it did in its two previous incarnations, and more. With good capacity planning in the early stages, that should be no problem. The infrastructure and applications environment will scale to meet their needs without wasted expenditure. At this stage, the company may need systems and services it didn’t require in its youth, including a sales force automation application and an enterprise resource management (ERP) system to manage financial, logistical, and manufacturing operations.
In years past, many biotechs with marketable drugs or promising drug candidates raised capital through an initial public offering to further build their business. The IPO track remains healthy for some firms—last year 20 U.S. biotechs raised $944 million according to Ernst & Young in their annual Global Biotechnology Report. But, as the report noted, mergers and acquisitions of both public and private companies raised $18 billion last year. Moreover, private companies enjoyed much higher M&A valuations than IPO investors were willing to pay.
Pharmaceutical firms are looking for biotech partners and acquisitions because they need to fill their drug pipelines. Biotechs that can reduce business and regulatory risk to pharma have a much better chance of finding the support they need to continue growing their business. Certainly, no pharmaceutical firm wants to be associated with a failed FDA audit or find that its young partner is unable to comply with SAS 70 regulations.
If you are managing a biotech at any stage on the drug development lifecycle, a good way to address your IT strategy and the needs of your partners is to figure out where your firm fits on this three-step maturity model, and plan from there. It can help you make better technical and financial decisions now and in the future.John Postle (firstname.lastname@example.org) is a Director of the Life Sciences Practice at Court Square Data Group, Inc., a strategic consulting firm providing IT solutions for companies in transition. Court Square’s Good Systems Practice services are based on the most stringent quality management methodologies, and are optimized for FDA-regulated environments. The company has offices in Massachusetts, Connecticut, New Jersey and Indiana.