The successful translation of biological discoveries into commercial applications depends on a partnership with industry. Geoffrey Duyk, partner and managing director of TPG Biotech, explained why venture capitalists have been reducing their investments in biomedical companies that are developing products for which the risk is uncertain. He also outlined opportunities for overcoming barriers to the commercialization of research discoveries. Randy Scott, chair and chief executive officer of InVitae, described innovative business models that provide new ways to translate discoveries in basic science to personalized medicine.

THE HIGH COST OF UNCERTAINTY FOR VENTURE CAPITAL

Over the past decade, venture capital has been the “worst returning subsection within private equity,” said Duyk. One of the reasons for its poor performance may be that the development of a new product costs more and takes longer than it did in the past. As a result, even if the product is successful, the return on investment is less than it was a decade ago. “It’s no surprise that capital is leaving the market,” Duyk said.

Duyk and other investors have been rethinking how they invest money in health care. Spending on health care as a percentage of the gross domestic product (GDP) is much higher for the United States than for any other industrialized country, yet health outcomes in the United States are in many ways worse (see Figure 4-1). Improvement of the cost-effectiveness of the system therefore provides a potential opportunity. Duyk mentioned the inefficiencies in the health care system, including the problem of the nonalignment of incentives in medicine, in which treatment of a patient for diabetes prevention today will not produce its full return to the health care system for decades. “This is an area where there needs to be scholarship.… We have to figure out an economic model to align incentives so you can deal with preventive care,” Duyk said.

Many obstacles to bringing a product to market exist, and most of those obstacles are not technological, Duyk said. “I worry less about technological problems because I have more confidence in the ability of the system to solve them. I worry more about the [uncertainty from] the regulators, the public and financial markets, and the reimbursement,” Duyk said. Duyk also recounted the central problem that others mentioned earlier in the workshop, that the translational pathway has challenges because “the early stages of research have become faster, better, and cheaper, but everything else downstream has not really caught up … and unless we make concomitant investments in these areas, what we’re doing is accelerating ourselves to a bottleneck,” said Duyk. These uncertainties have “a huge impact on the cost of doing business,” he said. If preclinical processes were more predictable, drugs could fail faster and with fewer costs. This



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