The chief executive officer of Avalanche Biotechnologies is rounding off a lecture on the economics of drug development that has been tinged with the complex science behind gene therapy. “We’re going through a great era of innovation,” says the MBA with a smile, the words flying out at speed.
His explanation of the genomics era in which genetic sequencing and biomarkers are reshaping healthcare industries has me puzzled and scrambling to keep up. But this is perhaps unsurprising from a Harvard University graduate of biochemical sciences. Thomas has fused a lustrous academic career, in which he earned a PhD in cancer biology and genetics at Stanford, with entrepreneurship.
He co-founded Avalanche Biotechnologies in 2010 while studying for an MBA at Haas School of Business in California. The biopharmaceutical company aims to improve or preserve the sight of people suffering from blinding eye diseases.
The MBA has added value to the venture in numerous and unexpected ways, he says. “You learn so much in business school. Its [so] broad — negotiations, strategy, organizational behaviour — that as a CEO, you continue to draw from [the MBA] over time.”
The scholar says that when it comes to investing in an education, the return is always there.
There are costs to consider, but you get out what you put in. “Investing that time was valuable and time is a very precious resource,” Thomas says, speaking to BusinessBecause on the fringes of an event organized by Oxford’s Saïd Business School.
Since its foundation, Avalanche has raised $70 million in private funding from investors including venture capital firm Venrock and money manager Adage Capital Management.
The venture is capitalizing on the excitement surrounding the biotech industry. Funding last year in the life sciences sector rose to the highest level since 2007, with $8.6 billion invested, according to professional services firm PwC.
Based in Silicon Valley, Avalanche is able to benefit from close proximity to other biotech start-ups, bankers, investors and talent — all the pieces of the ecosystem, says Thomas. “The degree of innovation and entrepreneurship in Silicon Valley is dizzying.”
Avalanche’s success rests on the development of gene therapy — which inserts healthy DNA to repair damaged genes in a patient’s cells — which is a newer category of drugs and can offer breakthrough treatment for often extremely rare genetic diseases.
Genomic science is producing revolutionary new drugs, from a cure for hepatitis-C to immunotherapy treatments.
But gene therapy has not been embraced over the past 20 years. There is only one gene therapy in the world that has been approved by regulators for use, a drug offered by Dutch biotechnology company UniQure, other than locally in China.
Thomas notes that only 11% of new drugs make it from the beginning of the clinical testing phase all the way to drug development — “while the entire R&D expenditures have really soared,” he says.
Avalanche is pinning its hopes on AVA-101, a single sub-retinal injection to provide a safe and effective treatment for wet AMD — age-related macular degeneration, an eye condition that leads to loss of vision. AVA-101 is undergoing a Phase 2a clinical trial, with top-line results expected in mid-2015.
Investors certainly see the potential. Avalanche floated its shares on the Nasdaq last year, the IPO raising around $100 million. Its shares have since risen by about 20%, giving it a current market capitalization of around $996 million.
“Investors want big, bold new platform technologies that are going to bring big new things to market,” says Thomas. There were 82 initial public offerings of biotech companies in 2014, according to Swiss investment bank Credit Suisse, eclipsing the record of 67 set in 2000.
Thomas says that despite the high development costs, there are numerous ways new drugs can deliver value to patients and the healthcare sector.
Patients can live longer— improved mortality — and also they’re healthier, he says, known as improved morbidity. “That’s obviously directly delivering value.”
There are indirect benefits too. “Medicines often reduce visits to the emergency room — those are enormously expensive interactions on the healthcare system,” he says, while also helping patients take less time away from work — lowering the societal cost of illness.
Biotech’s success is the result of new and improved technologies, which allow for more sophisticated diagnoses of diseases. Thomas says this is a natural consequence of biological complexity. “While rare diseases are common, common diseases are becoming rare.”
Beyond gaining approval for new drugs — Avalanche has five candidates in the pipeline — the company may face the challenge of justifying the sky-high price tags that are associated with gene and cell therapies.
There is a growing debate over the cost of drugs, as advances in science combined with the demands of an ageing population place increasing strain on global health systems.
“We all as society, as consumers and patients expect medicines to be safe, effective and high quality,” says Thomas. “That requires a long and expensive development process. [But] despite their high cost, drugs can actually save healthcare expense and deliver a lot of value.”
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