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Academic drug discovery centers adapt to shifts in funding sources

Universities are pushing their novel molecules into clinical trials

by Lisa M. Jarvis
March 27, 2017 | A version of this story appeared in Volume 95, Issue 13


Photo of VCNDD researcher working in the lab.
Credit: VCNDD
VCNDD researchers were able to push their first internally developed compound into the clinic.

Craig Lindsley flew out to Tulsa in November 2012 to give a talk about the research in his labs at the Vanderbilt Center for Neuroscience Drug Discovery (VCNDD) in Nashville. His host was William K. Warren Jr., a businessperson and philanthropist who had endowed the medicinal chemist’s chair at Vanderbilt University.

Lindsley walked his audience through what was then a six-year effort to develop compounds that address the cognitive challenges and tough-to-treat symptoms of schizophrenia. When he wrapped up his talk, he opened the floor for questions. What happened next changed the course of VCNDD.

“Bill stood up and said, ‘I have some questions for you,’ ” Lindsley recalls. “What would you do if I gave you a million dollars?”

“What about $5 million?”

“What about $10 million?”

Warren wasn’t throwing around theoretical money. His foundation was prepared to make a major investment in VCNDD’s efforts to move a drug candidate that could treat both schizophrenia and Alzheimer’s disease into clinical trials.

A year and a half later, the first installment of what would become a $5 million investment in the schizophrenia program was in the bank. Since then, VCNDD’s relationship with the Warren Foundation has been critical in shaping its approach to developing drugs for neuroscience.

At one time wedded to licensing out discoveries to big pharma companies, which in turn would do the heavy lifting to develop them into drugs, VCNDD is now interested in pushing molecules into early human studies itself. Lindsley and his colleagues hope that positive early data in humans attract partners that are more committed to getting their molecules to patients—and are also more willing to pay handsomely for them.

VCNDD is not the only U.S. academic drug discovery center undergoing an evolution.

Many such centers were formed five to 10 years ago amid a government-supported push for more “translational” research that converts basic science into products. Grants from the National Institutes of Health, for example, allowed several universities to establish libraries of small molecules and install expensive facilities for screening them. But a lot of that funding has dried up, and universities are shifting their models as they realize that additional money isn’t so easy to find.

Indeed, directors of prominent U.S. academic drug discovery centers say generating funding tops their list of worries. Their tactics include moving beyond drug discovery and into development, relying more heavily on philanthropic support, and combining efforts with other centers. Although they are taking a variety of approaches, every one of them is scrambling to develop a stable funding stream.

The beginning


Academic discoveries have long been a foundation for new drugs, but the lion’s share of the work of turning basic research into a product historically took place in industry. That pattern has changed in the past decade as drug discovery centers have proliferated to help academic scientists push their ideas further toward a drug.

In the early days, those centers could readily tap the funding veins of pharmaceutical firms. Those relationships took a variety of forms: pacts related to a single drug target, licensing agreements for early-stage molecules, and broad deals that supported translational research at multiple labs in exchange for the rights to discoveries.

But some of those funding sources have dwindled. “The large, hundred-million-dollar, five-year, first-rights partnerships are probably a thing of the past,” says Peter G. Schultz, head of the California Institute for Biomedical Research (Calibr), a translational research nonprofit that struck a multiyear deal with Merck & Co. in 2012.

That shift has forced academic centers to scramble to find near-term support for their efforts. Schultz, for example, acknowledges that in order for Calibr to succeed, he needs to show progress towards achieving a sustainable funding stream within the next two to three years.

But Schultz also says centers like his can benefit in the long-term from a different model. By retaining the rights to molecules developed internally and licensing them out when they’re more mature, academic centers can capture more value than what earlier, broader pacts brought in.

Moreover, those older pacts left universities perpetually hooked on pharmaceutical industry support for translational research. “The pharma agreements require you to spend the money; you don’t build an endowment,” Schultz observes.

And looking beyond drug company funding can, paradoxically, improve the chances that a promising molecule reaches patients.

VCNDD had, in the past decade, secured multiple big pharma partnerships to develop drug candidates for neurological diseases including Parkinson’s and schizophrenia. But with the ink on those deals barely dry, some drug companies began to abandon neuroscience. Compounds that were the culmination of years of basic and translational research were suddenly returned to VCNDD. Among them was the compound, given back by AstraZeneca, that the Warren Foundation later funded.

And even in therapeutic areas such as oncology, for which industry investment is steady, the constant churn at big pharma can leave academic partners in the cold. “You can have a few years of conversations, and then everybody changes jobs,” says Stephen Frye, director of the Center for Integrative Chemical Biology & Drug Discovery at the University of North Carolina, Chapel Hill.

Overcoming the turnover


When VCNDD’s director, Jeffrey Conn, started the center in 2003, he intended to stick to what he thought made sense in an academic lab: developing “tool” compounds that allow researchers to explore novel disease targets ignored by industry. The center developed intellectual property but largely licensed out molecules before optimizing them for human studies. “My vision was that we would probably never go into full drug discovery,” Conn recalls.

But as big pharma exited neuroscience, Conn began to revise that vision. The rationale was that if VCNDD could develop compelling human data for its compounds, fickle drug firms would be moved to license them—and stick with them through any future organizational overhauls.

Conn’s shift in thinking coincided with Lindsley’s fateful talk at the Warren Foundation. At the time, AstraZeneca had just returned the rights to the schizophrenia/Alzheimer’s program, and the academic team was unsure how to keep it alive. Since then, the foundation has given VCNDD $8.5 million to support three programs, including the $5 million that funded the work needed to get the drug ready for human studies. The resulting data were good enough that the Alzheimer’s Association provided grants to pay for human safety studies.

Late last year, the Food & Drug Administration gave VCNDD the green light to start early-stage trials in schizophrenia and Alzheimer’s. Conn believes it will be the first time an academic center puts a neuroscience drug into the clinic without drug industry help.

Conn hopes to replicate that feat with other compounds in the VCNDD pipeline, an effort that will rely heavily on philanthropy from individuals, family foundations, and patient groups. Already, a well-known family in Nashville has provided critical support for a Parkinson’s program.

Meanwhile, VCNDD is also eyeing a new frontier: forming a company. Although academic researchers have for decades spun off their inventions into companies, Conn and his team had always resisted.

“We’ve all been involved with companies or have friends and colleagues who have started companies with traditional venture investments,” he says. “We see the pressure being so tremendous that it doesn’t allow the kind of deep science that is needed for a successful program.”

But as the Vanderbilt scientists push their molecules along, spinning them off into a biotech start-up that can raise venture capital makes more and more sense, Conn says. Compared with a big pharma firm with constantly shifting research priorities, a small company would give a project a better chance to succeed.



VCNDD is not the only academic drug discovery center forging into drug development. Calibr, once focused purely on finding novel compounds, is now intent on putting some of those molecules into the clinic.

That shift coincides with Calibr’s recent strategic alliance with Scripps Research Institute, where Schultz is now chief executive officer. The collaboration was a response to stark financial realities at Scripps. But it also provides the basic researchers at Scripps the opportunity to more easily turn their ideas into drug candidates. Schultz hopes such connections generate sustainable sources of funding for both institutes.

Whereas VCNDD is focused on neuroscience, Calibr is working in areas as varied as oncology, fibrosis, and neglected diseases such as malaria and tuberculosis. Two of the first molecules to enter the clinic—a tuberculosis drug and a treatment for childhood diarrhea—stem from a partnership with the Bill & Melinda Gates Foundation. The next likely clinical candidates are a regenerative therapy for osteoarthritis, an antifibrotic, and immuno-oncology biologics for cancer.

Embarking on clinical trials for such a broad swath of disease seems daunting, but Schultz waves off concerns. “Quite frankly, many small biotechs do it, so why can’t an academic center do it?” he asks.

He points to his experience in the 2000s building the Genomics Institute of the Novartis Research Foundation. “Because we had significant funding from Novartis, we could afford to make mistakes, correct those mistakes, and really build drug discovery capabilities and show they worked,” Schultz says. “We had a billion-dollar education in how to do drug discovery.”

Already, Calibr has hired a clinical team and engaged consultants to help design human tests of its discoveries. The first two drugs are poised to start clinical trials this year, and eight more candidates are in the queue, Schultz says. But continuing to fund those projects will be a different challenge.

Scripps and Calibr are in the process of establishing a philanthropic fund to support the clinical development of a portfolio of molecules. Although Schultz declines to disclose his dollar goal for the fund, he acknowledges that an academic drug discovery center needs to raise “a substantial amount of money.”

Faith in pharma


VCNDD and Calibr may have abandoned a strategy that relies on funding from big pharma, but Michael A. Foley, head of New York City’s Tri-Institutional Therapeutics Discovery Institute (Tri-I TDI), believes relationships with companies can still be fruitful.

Tri-I TDI was established in October 2013 to create drugs out of science flowing from three local institutions: Memorial Sloan Kettering Cancer Center, Rockefeller University, and Weill Cornell Medicine. Its stability was cemented by $20 million in gifts from two generous donors and a partnership with Japan’s Takeda Pharmaceutical that adds drug development expertise.

Foley sees the Tri-I TDI model as a potentially important advance in how early-stage drug discovery is done. Thanks to collaborations with 50-plus academic labs at the three partner institutions and the help of more than a dozen Takeda medicinal chemists who work on Tri-I TDI projects, the nonprofit is extremely capital efficient, he says.

But Tri-I TDI still needs to show it can generate a steady flow of drug candidates. Labs have been fully operational for two years, and Tri-I TDI expects to “graduate” four projects to partner companies this year. Foley says the institute needs to consistently produce 11 projects per year “or this isn’t worth the effort. We have to have the same output as pharma to be relevant.”

Other institutions are watching Tri-I TDI’s multi-institution collaboration closely to see whether they can replicate it, albeit on a smaller scale. Vincent Groppi, director of the University of Michigan’s Center for the Discovery of New Medicines (CDNM), established in 2013, has been studying the success of both Tri-I TDI and QB3, a research and commercialization nonprofit that spans multiple University of California campuses.

CDNM’s efforts are modest compared with those of the other institutes: The center provides seed funding and project support as researchers tap into core facilities at the University of Michigan for structural biology, medicinal chemistry, genomics, and pharmacokinetics. But Groppi sees CDNM’s model as holding promise for smaller institutes that grapple with funding. CDNM and nearby Michigan State University and Wayne State University will hold a drug discovery summit this fall.

Common worries


Smaller academic centers might not share the lofty goals of Tri-I TDI or Calibr, but directors of those institutes have the same worries about sustainability. They point out that academic labs face a higher bar than their commercial counterparts because they have a responsibility not just to pump out drug candidates but also to develop science related to drug targets that industry deems too risky.


When Frye left GlaxoSmithKline in 2007 to start UNC’s Center for Integrative Chemical Biology & Drug Discovery, his goal was to develop expertise in oncology drug discovery and the chemical biology of chromatin regulation. But his mantra is that academics should not be in areas in which big pharma companies are already active.

“If it’s a target that’s relevant enough for Merck, Pfizer, and GlaxoSmithKline to be interested in it, we shouldn’t be working on it,” Frye says. The projects at the UNC center aren’t chosen for market potential but for the impact that a tool compound’s development could have on a therapeutic area. “Our projects are chosen to be risky,” Frye says.

But risky projects take time. Although UNC’s center has created useful tool compounds and turned an immuno-oncology drug candidate into a small company, it has yet to secure a big company license or other funding stream that would give it long-term stability. “I had hoped by this time we’d have some revenue,” Frye concedes. “I still hope for sustainability of the center.”

Regardless of the model they deploy, academic center directors say their work is important enough that the broader drug discovery ecosystem should be concerned about the institutes’ stability.

“I think there’s still a great role for academics to play in the early phase of drug discovery,” Frye says. “It’s a question of whether industry wants to actively support it. Is NIH going to support it? We’re all trying to mash together funding from many sources.”

With the cost of developing a new drug ballooning to billions of dollars, advocates for academic drug discovery point to a need to find more efficient paths to new products. Rising costs are “not going away any time soon,” Foley says. “It’s time that people get serious, and the major academic centers are the most likely avenue for a differentiated cost structure for drug discovery.”

VCNDD’s Conn sees more a more fundamental reason to support academic drug discovery. The centers “develop new tools that allow us to ask questions that would otherwise not be asked,” he says. “It’s good for basic science, and it’s good for translational science.” 


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