In 2023 we posted our thoughts on how to calculate the potential lifesaving impact of biotech venture capital (https://bit.ly/3z4mL0o) – and we promised to expand on the topic. Unfortunately, or rather fortunately, we got busy making investments in DioGenX, Kynexis and Resalis, with little time for other studies.
But we’re back on the topic – when business risk reduction can be linked to a monetary value change – rNPV – then why not link the clinical risk reduction as a novel therapy moves from preclinical development to market with an increasing probability of saving additional life years. We refer to this as Risk Adjusted Life Years Saved or RALYS.
The outcome of this work led to some unexpected observations. A good example is Forendo Pharma. We invested in 2019 and exited in 2021 when the company was acquired by Organon. Forendo develops a treatment for endometriosis, an extremely painful and debilitating disease impacting 1 in 10 women! Our investment hypothesis was based on developing a life-changing treatment for these women, and RALYS was at the time not a consideration. However, currently the main therapy is contraceptives, and lesions lead to reduced fertility in otherwise healthy women. A new, effective treatment would therefore not only relieve the physical and psychological burden of the disease, but also open the possibility to build families. This culminates in 16M additional life years if approved, and 1.6M when considering the residual developmental risk from the current stage, phase 2.
We were equally surprised to find that oncology lies on the other end of the scale. While cancer claims many lives every year, and most of us have lost friends and/or family to it, this is not reflected in RALYS – for two reasons: 1) drug development is becoming more targeted, therefore addressing narrower patient populations 2) with few exceptions, novel cancer therapies provide incremental improvements to survival – often measured in months rather than years.
The majority of our investments are in preclinical stage companies, and within oncology the indication is rarely fixed at this. Therefore, for assets from, for example Rigontec which we exited in 2017, we assessed the RALYS across numerous recent approvals and paradigm changing therapies. We found that oncology an asset averages 70,500 RALYS if approved for two indications. From our perspective, this clearly does not reflect the unmet need, but rather the need for groundbreaking innovations.
Importantly, we are not suggesting RALYS as the new guiding light in our investment strategy. Rather, it can add an interesting supplementary investment criterion and complimentary perspective. Finally, it allows us to quantitatively follow the potential benefit for the patients as our portfolio companies progress and it complements the general financial reporting to our investors.
What level of correlation would you expect between high RALYS impact and high return to venture capital? – if any?