The Challenge of Making Money from Biomarkers
This article was originally published in Start Up
VCs won't go near traditional diagnostics. But some are starting to bet on biomarkers that expedite drug R&D and commercialization. Only one problem: they've yet to come up with the right business model
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Biomarker diagnostics are the linchpin of personalized medicine. But building a successful business around such tests is anything but straightforward, given the complexities associated with both their development and commercialization. Today's molecular diagnostic companies need to think carefully before they choose a "go it alone" strategy when developing a particular test. It may make more sense to forge a partnership with another diagnostic company or a drug developer with the goal of sharing costs and relative risks.
Amidst a slew of disappointing IPOs, the moderate success of Genomic Health's IPO signals investor interest in a new diagnostics model: a combination product/service business -- technologically agnostic -- focused on coming up with an answer to a specific yes/no question that will either lead to or discourage an expensive therapy by a specialty physician audience. Several other start-ups are following the same model.
Biomarkers are being used now across the whole pharmaceutical value chain, but it's unlikely we'll see a surge in the number of VC-backed biomarker discovery start-ups until the business models are proven.