Financing repurposed drugs for rare diseases: a case study of Unravel Biosciences
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13023_2023_Article_2753.pdf
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Author(s)
Abouarab, Bechara
Bazarian, Christian
Ben Chaouch, Zied
Lo, Andrew W.
Mourenza Gonzalez, Guillermo
Novak, Richard
Vigneault, Frederic
Date Issued
September 12, 2023
Publisher
BioMed Central
Citation
Orphanet Journal of Rare Diseases. 2023 Sep 12;18(1):287
Version
Final published version
Abstract
Abstract
Background
We consider two key challenges that early-stage biotechnology firms face in developing a sustainable financing strategy and a sustainable business model: developing a valuation model for drug compounds, and choosing an appropriate operating model and corporate structure. We use the specific example of Unravel Biosciences—a therapeutics platform company that identifies novel drug targets through off-target mechanisms of existing drugs and then develops optimized new molecules—throughout the paper and explore a specific scenario of drug repurposing for rare genetic diseases.
Results
The first challenge consists of producing a realistic financial valuation of a potential rare disease repurposed drug compound, in this case targeting Rett syndrome. More generally, we develop a framework to value a portfolio of pairwise correlated rare disease compounds in early-stage development and quantify its risk profile. We estimate the probability of a negative return to be
$$80.8\%$$
80.8
%
for a single compound and
$$56.1\%$$
56.1
%
for a portfolio of 8 drugs. The probability of selling the project at a loss decreases from
$$79.2\%$$
79.2
%
(phase 3) for a single compound to
$$55.4\%$$
55.4
%
(phase 3) for the 8-drug portfolio. For the second challenge, we find that the choice of operating model and corporate structure is crucial for early-stage biotech startups and illustrate this point with three concrete examples.
Conclusions
Repurposing existing compounds offers important advantages that could help early-stage biotech startups better align their business and financing issues with their scientific and medical objectives, enter a space that is not occupied by large pharmaceutical companies, and accelerate the validation of their drug development platform.
MIT Department
Sloan School of Management
Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science
Massachusetts Institute of Technology. Computer Science and Artificial Intelligence Laboratory
Sloan School of Management. Laboratory for Financial Engineering
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DOI of Published Version
https://doi.org/10.1186/s13023-023-02753-y
