Indication Selection for a Platform Company: The Faustian Dilemma

At Locust Walk, we are often tasked with addressing complex strategic business issues for our biopharma clients.  Perhaps one of the most common dilemmas is how best to optimize a given company’s clinical development strategy to maximize value.  Specifically, many biopharma companies face the Faustian dilemma of trying to decide whether to focus on identifying and pursuing a single indication for their platform technology or attempting to demonstrate the full potential of their platform by performing a series of smaller experiments.

In terms of the trade-off I reference, Johann Georg Faust is the protagonist of a classic German legend.  Faust is a scholar who is highly successful yet dissatisfied with his life.  In the story, Faust makes a pact with the Devil in which he exchanges his soul for unlimited knowledge and worldly pleasures.  In idiomatic English language, a Faustian bargain is a deal in which one focuses on present gain without considering the long-term consequences.  It is the equivalent of a “deal with the devil.”

In the case of biopharma companies, the devil may be investors or strategic partners whom the company must seek to please by identifying a single indication on which to focus in order to raise funding.  Given the difficulty of raising money for early-stage biopharma companies, an undeniable challenge all face, management often feels pressured to select one meaty clinical indication around which prospective financiers or strategic partners can build detailed economic models in an attempt to quantify the value of the company.  Compounding the challenges of this strategy is the fact that cash-sensitive investors often seek the fastest and cheapest path to commercialization, often to the detriment of the platform value.

Take, for example, an oncology company that has an immuno-stimulatory technology that is an attractive add-on therapy applicable to treating diverse types of cancer – a popular approach these days.  Given that the same technology has broad potential across numerous tumor types, a significant challenge exists in trying to determine which indication(s) to pick to simultaneously outline a defined timeline and cost to potential approval as well as showcase the value of the platform.  This is particularly daunting for private companies for which access to capital is far less easy.

One potential solution is to take the hybrid approach of selecting one attractive indication to pursue to the point of achieving value-creating milestones while simultaneously advancing one of more pilot trials in tangential indications.  In addition to commercial potential, the indication(s) should be based on scientific rationale and unmet medical need. The goal here is to utilize the smallest amount of cash possible, while advancing numerous shots on goal. Obviously, for this strategy to be successful, one must have a good understanding of which (if any) early clinical milestones are most important for potential investors and partners.

One thing to note that further compounds the challenge of identifying the best strategy is that, very few biopharmaceutical companies can actually boast of multiple successful commercial products that emanate from the same technology platform.  Our own evidence for this is the fact that we, at Locust Walk, are increasingly approached by platform companies which have successfully raised private (and often public) money and are seeking our assistance in identifying complimentary assets to purchase to round out their pipelines.  Rarely (if ever) do these “bolt-on acquisitions have much (if anything) to do with the fundamental technology platform of the acquiring company.

At Locust Walk, we specialize in formulating practical strategies for life sciences companies at all stages development/commercialization.  Most importantly, we believe we are unique in our approach in that we attempt to do so with a “transaction lens” oriented towards helping companies achieve their partnering and/or financing needs.  If we can help you grow your company without “selling your soul,” please contact me at Chris@locustwalk.com.


 Written by Chris Ehrlich