How to Tokenize a Disease. – Jacob Shiach – Medium

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Drug development is expensive, inefficient, regulated, exploitative and deathly dependent on monopolies.

I propose here an organization and fundraising structure that has the potential to solve the incentive problems around drug development for smaller markets, while also giving more control and potential returns to those contributing both time, money, and energy to all stages of disease research and development.

Current process of Biotech development.

1.Basic Research. 
2. Develop a Disease Model. 
3. Develop a target. 
4. Develop list of potential compounds. 
5. Synthesize compounds
6. Develop a panel of in vitro assays
7. (In)Validate molecules on panel 
8. In Vivo Analysis of the best ones
9. Optimize lead candidates for production & drugginess
10. Patent Everything
11. Pre-Clinical development
12. Manufacture the compounds in drug form
13. Animal Testing 
14. IND Filing
15. Human Testing

This is hyper-simplified and I’d encourage everyone to read Principles of early drug discovery to learn more about the process.

What I’d like to emphasize is that this process is complex, expensive, and takes a long time. Combined, these factors have created an industry where it’s rare for a single party to take a product all the way from idea to market.

Instead, you have a variety of parties all hyper-specialized in one section of the pipeline. Researchers build the disease model, that get’s out-licensed to a small biotech to do discovery, they’ll contract with a CDMO to develop it, and then partner with a larger Pharmaceutical company on clinical testing, who will then handle sales and manufacturing, paying a royalty to everyone upstream.

The two primary reasons a drug fails to make it to market are:

  1. Scientific, for some reason or not the biology just doesn’t work as hypothesized (&),
  2. Economic, the venture fails to secure funding to progress it to the next step.

For the most part, this modular approach works at lowering the risks to a company associated with any one candidate. But increases the risk of any one candidate failing as it changes hands from partner to partner. This risk is compounded when the economic incentives are smaller such as with rare diseases.

If you’re a pharmaceutical company with the resources to take a limited number of candidates through trials are you going to pick:

  • Candidate A: with high odds of success, trials will cost $5M, covers a $25M/yr market, and take 4yrs (or),
  • Candidate B: with avg. odds of success, trials will cost $50M, covers a $2B/yr market, and take 7yrs.

Drug development costs are often quoted as $1B per drug that hits the market; the reality is the majority of the cost is in clinical testing and accounting for failed trials. [Sidenote: It’s a very real possibility that a percentage of failed trials are a direct result of the incentives being more in line with economic bets over scientific support].

Where as the cost to develop a candidate is roughly the same no matter your market size. Clinical testing is proportional to the size of your trial, which is determined by the size of the patient population your drug is targeting. If you’re trying to treat high blood pressure in everyone, that will require a trial with 3,000+ but if only 3,000 people have the disease you’re targeting, your costs will be an order of magnitude less.

Cost = Research + Development + (Clinical Trial x Size of Trial)
Return = Price * Size of Market
ROI = Return / Cost

And while placing smaller bets with better odds seems like the right play for getting more diseases treated. Most biotech returns are in placing large bets on outsized risk for the potential of a big payout. So the biggest cost for a biotech developing a drug for a smaller market is the opportunity cost.

In order to get drugs that have lower or even break even economics developed, we will need to either find efficiencies or improve the incentives around fundraising.

Create a Decentralized Autonomous Drug Development Organization aka Science Guild

I propose creating a Science Guild (DAO) made up of those with the skills and experience necessary to organize requests for proposals (RFPs) relating to the various stages of biotech development. And a token that represents ownership of the disease IP and long term royalty stream.

Phases

  1. DAO Creation
  2. Initial Disease Offering & Exchange Creation
  3. Proposal-based Development
  4. Royalty

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