Project Background

Diasome, a clinical-stage pharmaceutical company, has developed a delivery system called Hepatic Directed Vesicle (HDV) insulin. HDV platform directly targets hepatocyte cells to restore hepatic glucose and lipid control. This technology has been shown to restore hepatocyte metabolism and treat metabolic diseases, making it unique in the obesity treatment space.

Project Objective

We were tasked with developing a market entry & competitive positioning strategy for Diasome in the event of either the acquisition of Diasome or for their HDV technology to be licensed.

Project Approach

Based on independent research and conversations with Diasome management we determined the strategy would ultimately be similar for acquisition and licensure, then took the following approach to developing the appropriate strategy.

● Identify the key strategic choices and options for market entry.

● Analyze the competitive landscape (approved and pipeline drugs specifically indicated for obesity), and pinpoint key success factors based on mechanism of action (MoA), route of administration (RoA), efficacy, safety, and dosage frequency.

● Review recent out-licensing and acquisition transactions between early-stage biotech and large pharmaceutical companies to form a thesis on likely financial terms in either scenario.

● Analyze potential partner traits based on criteria such as financial terms, financial performance, and competencies in product development and commercialization.

● Synthesize and interpret information gathered from data to develop our strategy.

Key strategic choices

Our approach hinged on identifying key strategic choices for any candidate considering entry into the obesity market: entry vs non-entry, oral formulations vs injectable formulations, and GLP-1 receptor agonist (GLP-1 RA) formulations vs dual agonist formulations.

We then outlined 4 possible strategies to reach our goals:

1. Introduce an oral GLP-1 formulation to the Market.
2. Introduce an oral dual agonist formulation to the Market.
3. Introduce an injectable GLP-1 formulation to the Market.
4. Introduce an injectable dual agonist formulation to the Market.

Underlying Key Recommendations

The final recommendations made to Diasome regarding how they should enter and position themselves were segmented based on the key choices on MoA and RoA and Key Partner.

Mechanism of Action (MoA): GLP-1 receptor agonist (GLP-1 RA) formulations vs dual agonist formulations

1. 68% of potential anti-obesity drug consumers with weight loss goals ≥ 20lbs express interest in using an anti-obesity drug and are not doing so currently, making this segment ripe for cultivation.
2. As expected, as weight loss goals decrease so does interest with only about 50% willingness to try anti-obesity drugs in those with weight loss goals < 20 lbs.
3. GLP-1RAs are already failing to meet tomorrow’s expectations for efficacy as they trail the clinical efficacy of Phase II and III dual and triple agonist formulations. (Fig 1)
4. The anti-obesity drug pipeline is already diversifying away from GLP1 RAs for injectable formulations. We expect oral formulations to follow a similar pattern. (Fig 2)

Figure 1: Comparing Clinical Efficacy

Figure 2: The Anti-Obesity Drug

Pipeline

Route of Administration (RoA): Oral formulations vs injectable formulations

1. Consumers want a pill but with a caveat. They want the ease of administration injectables have, i.e. no fasting, can be taken with other meds, etc.
2. Anti-obesity pipeline still predominated by injectable options despite consumer desires for an efficacious oral. (Fig 3)

Figure 3: Route of Admin (RoA) vs Clinical Stage

Other Considerations: Comments on Dosage & Safety

1. Daily ≠ a dealbreaker – if an oral delivers on efficacy and is easy to fold into daily routines, daily admin won’t alter preferences for oral.
2. Though a pain point for users, clinical trials reveal that consumers are by and large willing to tolerate the usual side effects of a GLP-1 agonist.

Key Partner: Out-License or Acquisition

Out-Licensing: Diasome keeps ownership but gives limited rights for use; Brings immediate payments and royalties over a series of time; Leverages external resources, reduces risk, and focuses on core strengths.

● The average share of upfront total deal value between 2010 and 2020 was 11% for preclinical-stage biotech companies.

● The average total deal value between 2010 and 2020 was $175M for preclinical-stage biotech companies.

● The average disclosed royalty percentage as of 2020 was 16% for out-licensing deals.

● Recent deals (Lilly and OSI Pharmaceuticals; AstraZeneca and Eccogene) show potential for outsized deals, far exceeding these average values.

Acquisition: Means Diasome cedes ownership and transfers control completely; Involves a lump-sum payment or a mix of cash and stock; Integrates tech, talents, and pipelines, offering faster development but altering company dynamics.

● In analyzing recent acquisitions of early-stage (pre-clinical, Phase I, and Phase II) biotech companies operating in the metabolic disease category, we found that the mean EV/Revenue multiple was 29x and the median was 16.1x.

Recommendation

Of the 4 strategic options outlined, we realized choices 1 (oral GLP-1 RA) and 3 (injectable GLP-1 RA) were not viable strategies due to Diasome’s projected timeframe of 6-8 years, pipeline dynamics, and measures of efficacy when compared to emerging dual-agonist injectables. As such, we were left either with an injectable dual agonist formulation or an oral dual agonist formulation scenario. Our assessment is that Diasome would only provide a valuable contribution to the consumer if the company could leverage its HDV technology to enhance the oral option’s efficacy by increasing bioavailability to achieve weight loss efficacy levels competitive with today’s Phase II injectables – 22% placebo-adjusted weight loss at 48 weeks while maintaining or improving current safety levels and side effects.

If Diasome can execute this, they are positioned to succeed. They would unlock value creation and produce a competitive drug in the anti-obesity market. However, this recommendation relies on the oral formulation’s ability to deliver on the recommended standard of efficacy.

Final Thoughts

Overall, it was an extremely enriching and fulfilling learning opportunity for our group to collaborate with the Diasome team. We value the strategy-centric project that we worked on throughout the semester and hope our work was impactful in the process. Thank you to Professors Carri Chan, Peter Tollman, and Taylor Sewell for the constant guidance and support as well.

Contributors: Simone Counts, Tola Ebunlomo, Melissa Leo, Mary Ellen Morris-Delaney, Krusha Zota