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Vivek Ramaswamy’s Plans

I last wrote about Vivek Ramaswamy in the context of his first company (Axovant). That one went public on the hopes for a retread Alzheimer’s drug to work out in Phase III, and if that sounds a little iffy to you, then join a fairly large club. Alzheimer’s is truly the approach-avoidance conflict writ large: from one perspective you have a massive, ever-expanding patient population in wealthy industrialized countries, almost totally unserved by existing therapies and willing to pay handsomely for something that really works. From the other perspective you have a slow-moving disease that’s very difficult to diagnose well, in a heterogeneous patient population that tends to show several comorbidities, giving you a corresponding need for large trial enrollments, but with no good animal models to guide you to the clinic and a clinical success rate that’s basically 0.0%. It’s a high-voltage standoff.

You would never know, to read a lot of Ramaswamy’s press coverage (here’s a recent profile from TechCrunch) that the Axovant drug works through a mechanism that has failed twice in Alzheimer’s clinical trials so far. It has an extremely low chance of working this time, too – if there’s some convincing reason why this latest attempt should succeed where the others have failed, I haven’t heard it. So the risk/reward behind Axovant’s IPO makes no sense to me at all. But that hasn’t slowed the man down: his company Myovant had a big ol’ IPO back in the fall, built on a former Takeda candidate for uterine fibroids. Here’s the latest addition. According to that profile piece, Ramaswamy is building a whole portfolio of companies based on compounds like this:

The idea, explains Ramaswamy, is to create individual companies around each drug or small groupings of candidates that Roivant acquires, then install the scientists who developed the drugs and provide them with big rewards if the drugs prove useful. If the drugs don’t pan out, Roivant will  find another place for the scientists — potentially at another company under its umbrella.

Fine; I like not firing people. You wouldn’t know from such articles, though, that there have been (and are) other companies which have been formed around the idea of taking pharma cast-offs and getting them through the clinic (larger companies already try to monetize what they can in their portfolio by partnering or outlicensing, of course). The Medicines Company is one such dealmaker, acquiring and partnering late-stage compounds and trying to get them approved. Outside of the for-profit business model, there are a number of initiatives trying to repurpose or revive older compounds for new diseases.No one so far has been able to take over the world doing this. There are not, unfortunately, many big piles of such candidates sitting around. Most of the shelved compounds were shelved because (a) they did not work, and/or (b) they showed toxicity. You’re going to have to figure a way around those problems before you go back into humans, and that’s not easy. There are a few drugs that have been dropped for business reasons, or were lost or mishandled during a merger or the like, but I don’t think that there are enough of those to make a Ramaswamy drug empire.

From that same profile, I found this to be a bit odd-sounding:

Whether the scheme will work longer term isn’t clear, but it’s easy to appreciate why people like Seely and Shih were drawn to Ramaswamy’s vision. At traditional, top-down pharmaceutical companies, scientists aren’t typically rewarded when a drug they’ve developed becomes a blockbuster, and failed drugs often translate into job cuts.

“It sounds vanilla, but I can’t overstate the importance of re-aligning R&D personnel,” says Ramaswamy of his decentralized approach. “A lot of what you see in conventional pharma R&D is, because [scientists’] jobs are on the line if their projects fail, in many instances, clinical studies aren’t designed to get the answer but instead not get the answer. There’s a kick-the-can mentality.” By addressing that incentive misalignment, he insists, “we’ve stacked the odds in our favor.”

OK, let’s take these one by one. I have seen nothing about just how these new companies are going to reward people if the drug makes it to market. I will also note that people do actually have incentives at other drug companies to get things to market – it sounds stupid to have to say this, but that second paragraph seems to make it necessary. I have no idea what Ramaswamy is talking about when he says that clinical trials are designed to “not get the answer”, and I would welcome some clarification. The only kick-the-can stuff I see is done by small companies that are trolling for some kind of deal or partnership, and they’re taking a very large risk when they do things that way. Otherwise, there’s simply no point for a company to run a clinical trial that is not directly aimed at their business interests. To paraphrase Samuel Johnson, no one but a blockhead ever went into the clinic except for money. It’s damned expensive, and you want to get the best answer you can get in the shortest time it takes to get it.

So I don’t see the misaligned incentives that Ramaswamy does, and how this stacks the odds in his favor is another question. The proteins, cells, and organs that are being targeted in the patients are impervious to bold statements and applause in the press. They don’t care what your business model is, or how your IPO went. They will do what they do, and what they do most of the time, unfortunately, is not what we want them to. In Alzheimer’s, they let us down pretty near every time. I don’t see anything that Vivek Ramaswamy is doing that will change that.

29 comments on “Vivek Ramaswamy’s Plans”

  1. Dionysius Rex says:

    I think a lot of Phase 2 trials (especially in cancer) are so underpowered that Ramaswamy is partly correct in saying “not get the answer”….for many companies, the “wrong” answer is a death knell, whereas anything even remotely better than placebo/standard of care, even if statistically insignificant, means progression to Phase 3.

    1. Derek Lowe says:

      Those are the examples I was thinking of, and they’re real. But larger companies, of the sort that he’s doing deals with, shouldn’t be running stuff like this.

  2. biotechtoreador says:

    My guess is Vivek is taking a similar approach to rewarding his R&D staff to that taken by Martin Shkreli, that is giving them a share of royalties should drug X be approved (I beleive this was discussed in this forum a few years ago). There are clear limits to this approach in that there’s only so much royalty to give away, which will create some asymmetrical motivations even in the R&D staff. I understand that R&D staff are incented [sic] to produce drugs in most companies, but not to the same degree employees at hedge funds (Vivek’s background) are rewarded for success. As you point out, financially motivating scientists likely affects biological reality very little, and I plan to be short AXON prior to the P3 readout.

    One could argue that LLY’s (hardly a small company) recent adventure into phase 3 with solan was a kick the can exercise—it wasn’t designed to fail (as most silly open label uncontrolled P2 studies little companies do are)—but it was certainly proposed by some R&D leader hoping to keep his/her job a while longer.

    1. bhip says:

      Yup- strongly agree. The statement “The only kick-the-can stuff I see is done by small companies that are trolling for some kind of deal or partnership” misses many instances of can kicking in Big Pharma (p38, TACE, yet another SIP1 agonist or B-amyloid ab) in which the known (side)effects or market position will ensure failure.

      1. RM says:

        It’s also important to separate conscious kick-the-can from unconscious kick-the-can. People can get pretty attached to programs (especially if their jobs are on the line for failure), and can be quite adept at soft-pedaling and self-delusion.

    2. M says:

      I don’t think “trials with a low chance of success” is the same as “designed not to get the answer” in the Ramaswamy quote.

      For one thing, his structure wouldn’t correct those incentives at all–if you get even more rewards when “your” compound makes it you’re certainly going to find new variations on every measurement to see if you can get something out there.

      1. Derek Lowe says:

        A very good point, and exactly what I would expect to see happen as well.

  3. MTK says:

    I’m not sure I’m understanding things properly here.

    By kicking the can I take that to mean that a clinical trial is often designed not to provide a definitive answer but simply to get enough info to progress to the next clinical trial. Even with that, however, candidates often fail. In short, they can’t even clear that lower barrier.

    So now Ramaswamy believes that by getting to the answer they’ll be able to rescue these drugs that failed to get through a lower hurdle? That honestly doesn’t sound logical or am I missing something here?

    Is his model is to fail faster (nothing new there) and have the R&D folks move on to the next thing, but isn’t that the same as what everyone is trying to do? And by incentivizing people even more for the success of a project means that you’re incentivizing against fail faster, right?

    Someone set me straight.

  4. Anon says:

    There’s no kick-the-can stuff at AZ, Merck or Pfizer?

    Really? When I was working at a big pharma I saw this all the time. Add to this he is right, I don’t think pharma incentivizes enough for success. If you don’t believe me look at the difference between annual bonuses and annual saleries for scientists vs. say executives.

    Let’s put it this way, where would you rather discover a blockbuster drug? A big pharma or a small start-up?

    1. Hap says:

      The chances are higher that I’ll keep my job if I help find a blockbuster in Big Pharma – if I find one in a small pharma, chances are I’ll get cashiered to fund the next set of trials. Getting enough equity to get a decent payout from the success is not also terribly certain. Given the amount of data that you can afford to collect (or the incentives of management), is your chance of finding a blockbuster higher at a small pharma than a big pharma?

      It depends what you want and your level of risk tolerance, but payout from a blockbuster seems like a poor reason to choose a startup.

      1. Anon says:

        @ Hap

        “Chances are better I will keep my job in big pharma”

        Unfortunately this statement isn’t in keeping with my personal experience. I know personally four people who have either discovered drugs or clinical candidates. Three are no longer at their respective companies with 2/3 of those being involuntary.

        Let’s be real, at the end of the day it’s all about who can brown nose the best with the decision makers. Generally lab rats who make tons of compounds don’t do that well in that regard.

        As for working at start ups the only reason I see is being a larger part of the process. That’s part a monetary thing and part how much control you get over your ideas.

  5. Magrinho says:

    Axovant is Drug Discovery Theatre with the sole aim of enriching the principals.

    On a related topic – “how to appropriately provide incentives for success in a matrix organization” would be a long thread. We’d all agree but how to implement?

    A) My 2-3 proudest lifetime achievements were pre-clinical efforts that died at various stages in Development due to no shortcomings/no input from my team.

    B) A project I was involved with for 6 months went to P2. I got my name on the patents, etc. but I can’t honestly say my fingerprints were on the drug.

    Who should get the bigger reward, A or B? In other words, who should be valued more highly by the organization?

    1. biotechtoreador says:

      “Who should get the bigger reward, A or B? In other words, who should be valued more highly by the organization?”

      That’s a fair question to which I don’t know there’s a fair answer. B will be valued more highly by the investors who make the whole thing possible.

  6. Chrispy says:

    I’ve definitely seen kick-the-can exercises at both Big Pharma and academia. In Big Pharma, jobs and bonuses are often tied to “progressing” a drug, regardless of what the biology is telling you. But that said, I’ve never seen a clinical trial at a big company designed to fall short of significance. (I agree that small companies often run “safety” studies that are really underpowered efficacy studies designed to sell the company.) In academia, people get awfully attached to the hypothesis that got them their initial grants, so there is a perverse disincentive to believe Truth even when it smacks you in the face. (Lookin’ at you, Peter Duesberg…)

    As for running with Big Pharma’s castoffs, one of the best examples might be Speedel pushing forward with Aliskiren from Novartis. But that was a little murky, with Novartis investing in Speedel and then purchasing the company later on, so it may have just been a way to shield the larger company from the serious safety issues the drug had/has. I actually have no idea — this is just conjecture. Anyone know?

  7. biotech scientist says:

    When I read this yesterday, I immediately thought of Theranos. Not the same exact situation, but hype sure smells like it. It isn’t as “groundbreaking”, but it is close. After all the press releases I have seen in my time. There is a time to say ‘yes’ to having pieces written about you, and my internal clock says at least 1 success.

  8. Dr NP says:

    cubist acquired cubicin from eli lilly…it was shelved….it went on to sell more than 500 million dollar per year…..many phase 2 trials are lame duck designed to move to phase 3…these phase 2 trials are many time done in geographies where data manipulation is relatively easy…last time i checked pharma scientists are no way getting incentives like google employees…. reward does magic…increases efficiency and priorities like nothing else…you getting wrong derek…0% success rate in AZ…ya that’s what we had before aeroplane started flying..don’t be so pessimistic….

  9. Another guy named Dan says:

    Sounds like another application for Hollywood accounting. Set up an LLC or limited partnership for each drug, have parent pharma “lend” it the money to conduct trials, and pass out a few shares in the special-purpose vehicle to the researchers. Of course, if the drug does hit, all of the profits get eaten up in “fees” and interest owed by the SPV to the parent, so everybody gets rich while the drug remains unprofitable on an accounting basis.

  10. Anon says:

    A bit off topic, but I don’t understand how investors go for this business model. He can only run an effective clinical trial if they raise money through an IPO. The stock price is only going to increase upon successful clinical news, which is years away (it will go down as founders cash out – axovant down >40%). As an investor why not buy 2x the stock for the same price a year after the IPO? However, if everyone did this there would be no IPO and thus no clinical trial. Therefore, the initial investors fund the clinical trial, but minimize their potential gains. I am not an investor though, so I must be missing something.

  11. Barry says:

    Daptomycin (Cubicin) is one example of a drug that a small company brought profitably to market when a big company shelved it. Gleevec had been shelved when Ciba abandoned PDGFr as a cancer target, but proved to be a $billion/yr property when Pazdur/FDA compelled them(Novartis) to develop it (for CML). But I don’t see a lot more such examples on the shelf. More likely, many drugs that could be very efficacious against pre-cancerous states have failed in Clinical trials against advanced cancers that had acquired many mutations.
    Some of these could be life-saving and profitable, but will only move forward if/when our FDA recognizes these pre-cancerous states as ‘diseases’.

    1. zero says:

      Interesting. An example: cervical dysplasia is a precancerous state and often treated as a disease up to and including surgical excision. Are other precancerous states not handled the same way? That seems very foolish…

  12. Anon says:

    Pharma’s drug development scrap heap is just bulging with gold nuggets that have been wrongly thrown out by useless incompetent scientists and are just waiting to be recycled by Vivek the drug prophet.

    Yeah right.

    More like he knows how to polish a turd and sell crap to naive investors before the polish wears off. Well we saw what happened with Valeant – the protagonist makes billions and the investors lose their shirt, while the patients gain nothing. This model has nothing to do with real drug development.

  13. johnnyboy says:

    Ramaswamy, Theranos’ Holmes, Moderna’s Bancel – the key to get investment these days is to master Silicon valley-speak and get chummy with their VCs. The science is secondary at best.

    1. Vivek says:

      Science?

  14. Kling says:

    Desperate times results in simple minded people flocking to the eloquent. The current pharma climate has detached scientific reason from business decisions. Science and BD are drifting apart. When has a pharma executive led BD deal ever been shot down during scientific due diligence? I have not seen it at my pharma. Maybe I am blind.

  15. MTK says:

    I actually think that there are good compounds out there that have been, for a variety of reasons, been tossed aside by Pharma and that can be shepherded to becoming a drug.

    However, IMO, it’s not for the reasons that Ramaswamy states. And there lies the problem with the business model. If you’ve misdiagnosed, you’re going to mistreat.

  16. Me says:

    Plus there’s the other fact you’re all missing:

    The AD trials are set up to fail because they don’t target peroxynitrites…

    1. Anon2 says:

      Do you think peroxynitrites are really involved in AD? I though AB and tau were to blame and AB is produced by secretases, not peroxynitrite.

  17. Anon2 says:

    While incentives are nice, pay usually comes down to market forces. For those of you on the clinical side you will see medical doctors make a ton of money, but not really contribute very much of anything, beyond adding their credential to a protocol. They mostly regurgitate what they can from MSLs. Then the present clinical data to basic scientists and basic science data to clinical folks (so to each party this MD is looked up to as someone who is filling a knowledge gap). The best incentives for early development folks would be a priority class of stock options/shares. However the VCs usually prevent that from happening.

  18. Leo says:

    The real forgotten drugs are compounds that can’t be patented or where patents expired. They might be very useful for treating diseases different from what they were originally used for, but no one has any interest of funding clinical trials for these as there is no money to be made.

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