Due Diligence of Early Stage Technologies: Achieving Rapid Product Development with Low R&D Costs

Increased understanding of human diseases at molecular and cellular levels is leading to development of novel life-science technologies. Such advancements typically pertain to discovery and manufacturing of novel human therapeutics, new modes of drug delivery, and novel diagnostic technologies. The majority of those technologies are developed by early stage biopharmaceutical companies that have a greater appetite for risk than do larger companies.



Early stage biopharmaceutical companies, however, have limited capital raised through personal sources, angel investors, venture capital, or government grants. So these companies usually focus on a single product or technology. As a result, their survival is contingent upon demonstrating successful product development within available capital.

A number of statistics have been cited about the survival and success rates of early stage biotechnology companies (1,2). Nearly all authors agree that the majority of those companies do not attain success and that poor management is a key reason for most failures (3,4,5). SMC Consulting Group (SMC) has identified critical management factors contributing to the failure of early stage biotechnology companies. Among these is insufficient early planning, specifically the following:

  • lack of a detailed target product profile
  • limited planning for product development from research through clinical manufacturing in early stages of development
  • limited financial potential or lower probability of success for a selected target disease area
  • limited differentiation of a target product from other products developed by competitors.

Without detailed target product profiles and predevelopment planning, early stage biotechnology companies spend valuable and limited time and resources nonproductively. SMC recommends that such companies perform comprehensive due diligence to develop target product profiles and plan their development processes before initiating research and development (R&D) activities.

Case Study of Early Due Diligence

SMC was approached by an early stage biotechnology company to perform due diligence on a proprietary drug manufacturing technology before initiating R&D activities. The client was developing a small-scale, emergency-response drug manufacturing system for producing biosimilars.

The alternative solution to the client’s technology is stockpiling the competitor’s drug product, so it was critical that the client’s technology have a clear benefit over that alternative. SMC determined that the proprietary-drug manufacturing system must provide flexibility to make products during emergencies with consistent quality while ensuring that production time, resources, and costs are comparable or competitive with the stockpiling option. As a result, SMC’s evaluation consisted of the following aspects:

  • Develop the framework of the manufacturing process for fast and low-cost production of drug products using the proprietary system.
  • Determine regulatory considerations applicable to the manufacturing of the biosimilar drug using the proprietary system.
  • Recommend potential targets of biosimilar drug products based on competitive analysis and client’s in-house expertise.

Developing a Framework of the Manufacturing Process: Three commonly used expression systems are used for producing proteins and peptides: bacteria, yeasts, and mammalian cells. Although mammalian cells are the most commonly used protein expression system for producing human therapeutics in the biotechnology industry, bacterial host systems offered specific advantages for the client’s technology. Bacterial expression systems aligned best with the client’s in-house expertise in developing engineered microorganisms. In addition, bacterial fermentation is a mature and well-established technology, allowing easier adaptability with the client’s drug manufacturing system. Finally, bacteria are suitable protein expression systems for fast speed of production while reducing cost of production. Based on this analysis, SMC recommended to the client to pursue the bacterial expression system for the portable drug manufacturing system.

Bacterial fermentation will result in impurities such as endotoxin, bacterial DNA, host-cell proteins, and fermentation medium components. Such impurities can influence a drug’s immunogenicity, safety, and efficacy, so they must be monitored and removed. SMC recommended purification strategies such as benzonase treatment and ion-exchange chromatography to remove those impurities at low set-up and operational costs. Such early process planning allowed the client to develop a framework of the manufacturing process for its proprietary manufacturing system.

Determining Applicable Regulatory Considerations: SMC provided the client the expected regulatory path for approval of the biosimilar drugs produced using the client’s proprietary drug manufacturing system. That path was based on the US Food and Drug Administration’s (FDA’s) 2012 draft guidelines for biosimilars (6,7,8). Identified regulatory requirements related to structural analysis, functional and impurity assays, and nonclinical and clinical studies. SMC also detailed the process and analytical validation requirements that must be performed to demonstrate process and product consistency using the client’s system. Early identification of the regulatory requirements for the proposed technology allowed the client to estimate development timelines and resource requirements.

Recommending Target Biosimilar Drug Candidates: SMC used a tiered screening process to recommend the target biosimilar drug candidates for production in the client’s drug manufacturing system. Based on recommendation to pursue a bacterial expression system, SMC focused on the protein drugs that do not require posttranslational modifications for therapeutic function. The list was narrowed to small-sized proteins or peptides that either can be secreted across the cell membrane or be refolded without encountering significant aggregation or purification costs.

The target drug candidates were chosen such that theyy met the following requirements: The corresponding indications have large patient populations; the existing brand-name drugs are near or past patent expiration; and the high expected productivity using the bacterial system and the relative cost savings for not stockpiling the drug offset the lack of economy of scale. Using that three-tiered approach, SMC recommended five biosimilar drug candidates for client’s consideration.

Through this predevelopment due diligence, the client was able to determine the resource requirements and timelines. The company built a project implementation plan and expects a high probability of success. SMC recommends a similar form of detailed predevelopment due diligence for other early stage biopharmaceutical companies.

Author Details
Siddhartha (Sid) Jain, PhD, PMP is a managing partner at SMC Consulting Group LLC, 404 Brunswick Drive, Troy, NY, 12180; sid.jain@smcstrategy.com; www.smcstrategy.com. The company is an organizational and operational strategy consulting firm that supports biopharmaceutical companies to increase operational efficiency, and reduce costs and product development timelines.


1.) Tsai, W, and Erickson, S. 2006. Early Stage Biotech Companies: Strategies for Survival and Growth, Biotechnol. Healthc. 3(3): 49-50, 52-53
2.) Gage, D. 2012. The Venture Capital Secret: 3 Out of 4 Start-Ups Fail. Wall Street J., 20 September 2012
3.) Foller, A. 2006. Leadership Management Needs in Evolving Biotech Companies. Nat. Biotechnol. 20:BE64-BE66
4.) Kolchinsky, P. 2004. The Entrepreneur’s Guide to a Biotech Startup, 4th ed. Evelexa BioResources
5.) Durai, A. 2006. Challenges in a Biotech Startup. Northwestern University. Evanston, IL. www.kellogg.northwestern.edu/biotech/faculty/articles/startupchallenges.pdf
6.) 2009. Biosimilars: Questions and Answers Regarding Implementation of the Biologics Price Competition and Innovation Act of 2009. US Food and Drug Administration www.fda.gov/downloads/Drugs/Guidances/UCM273001.pdf
7.) 2012. Scientific Considerations in Demonstrating Biosimilarity to a Reference Product. US Food and Drug Administration www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM291128.pdf
8.) 2012. Quality Considerations in Demonstrating Biosimilarity to a Reference Protein Product. US Food and Drug Administration www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM291134.pdf