How To Create Pharmaceutical Start-Up

You may have had an idea as a basic scientist or a physician for a product. This could be the basis of a dynamic start-up in pharmaceuticals. Perhaps your initial excitement about the idea faded quickly and you began to realize that it was difficult to actually create such an enterprise.

Scientists and physicians are typically not trained to start-up pharmaceutical companies. It may seem impossible to start your own company when you have a lot of responsibilities such as teaching, research, and patient care. Additional obstacles may be created by the work required to resolve university-related intellectual property or contract issues.

We will be discussing the fundamental steps to start a company that can turn into a functioning pharmaceutical company in the pages ahead. We hope this article helps you to ease your worries as you work towards your goal of helping patients in the future. This article is not intended to be a guideline for starting a pharmaceutical company. It cannot replace the detailed information found in Food and Drug Administration documents.

Is it the right idea?

* Does the medicine work? You may already have an amazing idea for a novel medicine, and you are excited about its potential success. This product may fulfill a personal goal related to financial, professional, or humanitarian rewards.

Be careful. Your excitement can lead to “product blindness.” The facts are brutal: On average, a new, undeveloped medication has only a very low chance of reaching commercialization.2 Further, there are already more than 300 products currently being developed by both large and small pharmaceutical companies in ophthalmology alone. (Internal data, PRN PharmaFarm). Therefore, it is important to assess the potential success of your idea, regardless of how enthusiastic you are.

The best answers should be supported by data, not only opinions. These questions are important to answer in order to create a compelling story about the benefits of your new medicine on a molecular basis.

You should know the answers to all of the Table 1 questions before applying for institutional funding. To answer questions that are beyond your expertise, it may be necessary to consult with other experts. You should ensure that you are legally protected before seeking out other opinions. You can now start discussions with colleagues more safely if you have made confidentiality commitments.

However, despite your close colleagues’ advice, you may need more assistance. You may need to have brief discussions with consultants from the industry or organizations that conduct contract research (CROs), even at an early stage of development. This can help you answer more complex questions. The advice you require will determine the type of consultant to be contacted. ( See Table 2 to see the list of contractor and consultant types.) Many times these people or companies offer a free initial discussion about a new idea or part-time equity work.

* Can you develop it? Answering this question requires a review of regulatory issues. First, identify the indication. Next, identify the exact indication. It may be beneficial to consult a regulatory expert early on.

If your product is not a generic (505j) application, another step is to identify what type of new drug application (or NDA) you will file in order to get approval. A 505b1 route is required for most applications. This is a complete application for a new clinical entity (NCE) and it will be required by most applications. However, there are times when the product’s prior data is available, and this allows you to submit a 505b1 route. This type of application can help you save time and money during your development process.

* Can you sell it? Once you have determined that your medicine is safe and can be used as prescribed, you need to consider whether it can be sold. This assessment requires realistic, critical thinking.

The first question, “potential market size”, is the easiest. It’s the potential number of patients with the selected treatment indication to which you can sell your product. These data are generally accessible via an Internet search. This is where inventors and chief executive officers stop their analysis. But be careful. Don’t assume that your doctor will immediately prescribe a product if it is commercially available. This may not always be true.

Consider the following questions: How much market penetration is your product able to achieve within the current patient population? What level of therapy can the product be used at? These questions will allow you to project the rate at that your product could be prescribed. These questions must be answered with factual data and not only the opinions of close colleagues.

To better understand the need for a new treatment, you can conduct inexpensive analyses by surveying optometrists or ophthalmologists. Cost-effective patient surveys can also be conducted in doctors’ offices, shopping centers, or online. Consider using an inexpensive survey website such as Survey Monkey ( pharmaceutical warehousing). These questions could include delivery route, dosing, willingness to pay out of pocket; perceived clinical need; treatment place; and potential safety concerns. Talking with representatives from large pharma companies’ business development offices can help you gauge future interest in your product.

A SWOT analysis is also important. This involves analyzing the strengths, weaknesses, opportunities, and threats of each product. Include a fair assessment of current competition and why your idea is better. Also, consider the future competition that is based on the current state of development.

Next, ask yourself who will pay. Is this a product that is self-funded or will it be for an indication and price range that requires reimbursement from the government and private sectors? Again, consultants are available to make initial assessments about reimbursement.

Consider what you will do in the event that your primary plan for your treatment indication fails. What are your backup plans for the commercialization of secondary indications?

Legally correct

Even at an early stage, it is crucial to protect your intellectual property and personal assets. These are just a few steps.

* Patent protection. You should contact a reputable, pharma-experienced attorney patent attorney as soon as possible to assist you in filing your initial patent application in the United States. It is possible to file a patent for an affordable fee. Although the patent filing does not create an actual patent, it will protect your invention from being copied by another person. The attorney can also assess your start-up’s freedom to operate within the existing patents and public information (prior arts) for the product, its formula as well as its indication and delivery.4

* Confidentiality. Before you discuss your medication with anyone, it is a good idea to request a confidentiality agreement (or CDA). These templates can be downloaded online and customized to your needs. To verify the quality of a CDA Template, you can send it to a corporate lawyer for review. Discussions about intellectual property can begin once a CDA is signed. Be sure to keep your IP conversations with people you trust. Even a well-written CDA might not guarantee complete confidentiality.

* IncorporationIncorporating early in your development process will help you protect yourself legally and give you a foundation for expanding your business. A corporate attorney is recommended. C-corporations have the advantage of allowing the distribution of many stock types.4It is important to incorporate for contract development. This structure allows investors to fund your company. This helps to protect your personal assets against financial liability in the event of a company going bankrupt.

* The university. Your contract likely states that a university will receive some patent rights for your inventions if you work there. Engage the university’s technology licensing office early in the process to find out if they are willing to grant an exclusive license on favorable terms. Be careful when negotiating the terms of this license. You will be able to attract investors by negotiating with large pharma companies for final licensing. It is a good idea to seek outside counsel who is familiar with these types of deals.

Airtight Organization

* Administrative details. From the beginning, keep detailed records. It is important to organize all aspects of your venture, including contracts, promises, and financial matters. Many of the Microsoft Office products include a variety of inexpensive electronic tools that can be used to organize your business. The software includes many useful templates. Additional pre-formatted shells can be downloaded by doing a quick Internet search. Excel spreadsheets can be used to track and organize development tasks. You can also find free software on the Internet. However, be sure to review privacy rules before you use them.

Online data storage allows for remote access to team members and secure backups of documents. Consider implementing cloud services in your new company. Be sure to review and understand the security policies.

Apart from an administrative assistant and a contractor, other experienced contractors can assist you or your CEO in establishing essential procedures. You might hire an IT expert to assist you in setting up your first setup, troubleshooting technical issues, and keeping you informed of IT advancements. A bookkeeper and accountant can also be hired to set up tax, audit, and accounting-related procedures.

Your success depends on a well-organized development team. A study on success factors in ophthalmic pharma startups was published recently. It found that companies that have been established five years ago or earlier had a higher chance of financial exit (sell or licensure). Although the study was limited to 25 companies, it suggests indirectly that a well-funded and efficient development plan could increase the likelihood of a financial exit (sell or licensure) than those who start the process much later. 5

* Business Plan. Once you’re convinced to have a product that is viable, you can begin to create a business plan. This may seem like a difficult task but it will ensure you have answered basic questions about your product. It prepares you for telling the story of your company to others. There are many business plan templates available online. Table 4 shows the typical organization.

Documents for Funding and Founding

Funding your venture is key to a successful start-up. Funding your venture is the most important aspect of a successful start-up. We recently evaluated CEOs in ophthalmic start-ups.

Your personal funds may be used to fund your startup. You will almost certainly need outside investment to develop and mature your product unless your net worth is less than nine figures. However, you do have equity that can be used to encourage others to develop the new treatment.

Because you might want to retain your ownership of the company, owner’s equity can be a complicated topic. Investors have also worked hard and are looking for an equitable return on what they view as a high-risk venture. You and the investor can work together, but you must disperse equity over time in a responsible manner. You may end up owning a small portion of the entity that you have founded. The equity in a successful business will be worth more and make your financial efforts worthwhile.

There are three rounds of funding a start-up: A, C, and B. This round is commonly known as the “friends & family” round. It may provide initial funding to your venture. It is important to have a detailed budget, even in the early stages, so that you can tell your investors exactly what product you are buying, the stage at which the current round of investment should take the company, as well as the next steps for securing financing.

Your corporate attorney should prepare a founders agreement once you have received initial funding from early investors. This agreement will outline the distribution of stock and the rights and restrictions on founders and stock. This should be a detailed document delineating the relationship among the founders.4 Try to resist the temptation to conduct the deal on a handshake. It will be easier to determine future relationships among founders and keep disputes to a minimum by having a detailed agreement.

Your attorney should also assist the founders in formulating a stock options plan among them to specify how the remaining equity will be distributed to management and employees. This is typically about 20-40 percent of the total potential shares.

Other sources of funding for the A round include private or public grants (state/local and federal funds are available from the Defense Advanced Research Projects Agency, Department of Defense, and Small Business Technology Transfer or Small Business Innovation Research programs), or funding through angel groups. The grant amount may be used to fund the initial expenses. These usually range from $100,000 to $1,000,000. The A round funding can be used to fund IP creation and maintenance, consultant payments, lead product identification, preclinical efficacy, non-GLP (Good Laboratory Practice), pharmacology and toxicology studies; as well as an initial regulatory program; and the creation of the drug substance or simple formulation of the new medication.

Rounds B or C usually involve large private institutional investors (anchor or capital venture groups, large pharmaceutical companies), who often consider A rounds too risky to invest in. The second and possibly third rounds of funding will help you move your product into GLP toxicology, pharmacology, regulatory contacts with the FDA, submissions of an investigational device application, and early clinical Phase I-II trials.

* Board of directors. After you have incorporated your company and all investors have consented to be part of the venture, it is time to form aboard. The selection of BOD members is important as they oversee the CEO and represent shareholders.

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